We Don’t Have a Retention Problem Part 2

We Don’t Have a Retention Problem Part 2

My last blog we talked about how we don’t have a retention problem, we have a generational communication problem. This blog is going to introduce a new retention metric that we believe is more relevant than donor retention. It’s REVENUE retention. It’s simply looking at how much revenue you retained from the previous year. Here’s the same client we discussed in my previous blog, but comparing donor retention and revenue retention. A mid 30 percent second year retention is pretty good. But look at revenue retention! It’s over 50%. And really, isn‘t that the most important metric? For this client, it means they are retaining the higher value donors. OK, obviously we want high retention. But if you are retaining over 50% of the revenue from your new donor class, you are doing great. So add this as a metric of things you should start to track.   Follow...
We Don’t Have a Retention Problem – Part 1

We Don’t Have a Retention Problem – Part 1

I can envision the comments now: “What do you mean ‘we have don’t have a retention problem?’ Our retention is plummeting faster than the NFL’s credibility as a useful nonprofit organization.” Oh I hear you. Retention, particularly among second year donors has been going south for a decade. But I don’t think it’s a retention problem. I think it’s a demographic communication problem. Check out this graph. It shows CY13 second year retention of donors acquired in CY12 by generation. Look at the retention rates of Builder’s – 49%! Talk about a throwback metric. This is the kind of retention rates we use to see back in the old days. So our current methods of fundraising, which are still relying on the B-52 era workhorse direct mail, are still very effective with Builders. However, the younger donor we acquire the lower the retention rate. The big question is whether this trend is a generational issue; a communication method issue; or a combination of both. The sad fact is that we are no longer acquiring Builders in large quantities any more. And as a larger portion of our new donor classes dip into these younger generations, the lower our retention rates will become. Now we can either blame these younger generations for not being as loyal as their parents. Or, we can adapt and communicate with them in a more relevant way to ignite their potential. Follow...
The Nonprofit Paradox

The Nonprofit Paradox

Anyone who has worked with nonprofit organizations will be familiar with this paradox. And it’s killing nonprofit organizations as we speak. A healthy donor database requires a significant investment in acquiring new donors each and every year to replace the inevitable lapsing of current donors. We all have seen the LTV on new donors. An investment in new donors generally breaks even sometime in year 2, and then those donors are profitable from year 3 onward. The problem is that nonprofit organizations are only focused on the current fiscal year. And when budgets are tight (and when aren’t they) the first place they cut the budget is new donor acquisition. And thus begins a descent into nonprofit hell. The lack of new donors causes a decline in file size. And the decline in file size causes a decline in revenue – which causes a decline in budget, which will cause a cut in new donor acquisition the next year. What happens at this point is the director of development leaves or is replaced. There is one way to combat this. Development directors need be financially incentivized for growing the organization’s multi-year donor file in their third year of their tenure. The organization needs to do this so that there is an incentive for someone fighting for the future of the organization. Without some incentive like this, the nonprofit paradox will continue to kill...
A heartfelt thank you can come from the most surprising places

A heartfelt thank you can come from the most surprising places

Penelope Burk’s research confirms there is nothing more important than the donor acknowledgement letter. “Our research confirms that a beautifully crafted acknowledgement letter, promptly received, is all that it takes to make donors want to give again,” stated Burk. But, if as a fundraiser, you are feeling, well a bit uninspired, and can’t get the creative juices flowing to craft that beautiful acknowledgement letter than I have a suggestion for you. Try hosting a thank you letter writing contest with all your coworkers (and even volunteers) and you might find that the most heartfelt thank you letter can come from the most surprising places. Sometimes it comes from those individuals delivering service for your organization or you might be surprised when someone in your finance department crafts a letter that moves you to tears. This idea came from our fundraising friends over at Mile High United Way. They kicked off the contest by providing staff members with an overview of Penelope’s “20 Characteristics of a Great Thank You Letter” in order to give letter writers some guidance. You can offer prizes for the best letters but of course the greatest reward is an acknowledgement letter that provokes donors to give again to your...