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Why Donor Acquisition Should Be Your Top Priority Right Now!

By: Billy Sharma, nonprofit direct marketing consultant, and author. 

Nonprofits are constantly losing donors like a slow drying up tap that is drip, drip, dripping away donors.

Here are some facts:

1. Charitable giving is in decline

The AFP reported that the total number of donors dropped by 4.5% from 2017 to 2018.

sumac-donor-acquisition

  • Donor acquisition to an organization, dropped by 7.3% from 2017;
  • Newly retained donors, those who have given a second time to an organization, dropped by 14.9%;
  • Recaptured donors, those who stopped giving to an organization but returned and gave again to the same organization in 2018, dropped 1.6%; and
  • Repeat retained donors, who have been giving to the same organization for at least three years, increased by just 0.2%.

Over the last 10 years, donor and gift or dollar retention rates have consistently been weak — averaging below 50 percent.

How Is Donor Retention Calculated?

Simply divide the number of returning donors by the total number of donors from year one.

Example:

A

B

C

Number of donors who gave a gift in Year 1

Number of donors from Year 1 who gave again in Year 2

Divide B by A

5,000

4,000

80

Donor Retention Rate 80%

2. All charities rely on charitable donations

85% of the roughly 85,000 charities in Canada reported under $500,000 in revenue in 2015. While Receipted Gifts (from individual and corporate donations) accounted for only 7% of the overall Canadian charitable sector revenue in 2015, small charities (revenues under $500,000) relied on Receipted Gifts for 43% of their total revenue.

Every $100 Gained is Offset By $96 In Losses Through Gift Attrition according to The Non-Profit Recurring Giving Benchmark .

donor-acquisition-top-priority

Yes, you read that right.

This is often referred to in the nonprofit industry as the leaky-bucket-syndrome, and that is why the need to work really hard at acquiring new donors while retaining current donors.

What happens when you stop acquiring new donors?

Case in point: When the American Cancer Society (ACS) decided to pause their direct mail donor acquisition program amidst an organizational restructuring, between January 2013 and June 2014.

This was the outcome:

  • Donor acquisition dropped by 11%
  • Donor acquisition revenue dropped by $11.3 million in the first year
  • The five-year impact on income was: $29.5 million loss in revenue
  • Even the ACS Relay for Life raised $25 million less than the previous year.
  • That’s not all. The ACS usually gets more than $51 million in planned gifts from direct-mail donors. It will take years for the future loss of planned gifts to run its course.

As ACS discovered the hard way, that direct mail is a crucial source of longer-term income and can seriously affect – in good and bad ways – the overall sustainability of their fundraising program. Not to mention a decline in their donor file that began to collapse.

In the past almost 41 million pieces of mail were being sent each year by the ACS. The lesson to be learned is that rather than reducing direct mail programs because they are no longer raising enough money, the challenge for fundraisers going forward is to reduce the costs of direct mail to generate the highest net revenue.

3. New and recurring donors are the Pillars for sustaining a nonprofit organization

New and recurring donors can be up to 4x more valuable than a one-time donor. For most organizations, pursuing strategies for reducing donor churn and dollar losses is a less expensive strategy for increasing net gains.

Read How a Monthly Giving Program Helps in Times of Crisis & Why Every Non-profit Needs a Monthly Giving Program


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