New FEP Supplement Finds Donor Retention Continuing to Slide
Despite a net increase in revenue and donors, the Fundraising Effectiveness Project’s (FEP) 2016 Donor Retention Supplement found that overall donor retention continued its nine-year slide and now rests at 46.1 percent.
The supplement, written by Ben Miller, is based on detailed giving data from 7,840 organizations included in the original 2016 FEP report. These organizations contained additional points, such as giving level, NTEE code and age, to help the FEP dig deeper into the data and provide new perspective.
While net revenue increased by 5.3 percent alongside a two percent net increase in donors, overall donor retention dropped from 46.6 percent in 2014 to 46.1 percent in 2015. This continues a steady decrease that started in 2008 when overall donor retention was at 50.0 percent.
The 46 percent retention rate means that, on average, 54 percent of the donors giving in one year need to be replenished through acquisition of new donors or the recapture of lapsed donors, just for organizations to break even. For the organizations reviewed for the supplement, on average, for every lapsed donor recaptured by a charity, four new donors were acquired by a charity.
“While the Supplement shows just a little change from year to year, the bottom line is that we are still seeing very disappointing retention rates across the board,” said Jason Lee, interim president and CEO of the Association of Fundraising Professionals (AFP). “Organizations need to be investing resources—financial and human—into analyzing their donor retention rates and focusing on areas where they can improve quickly. The FEP and the tools on its website like the Fundraising Fitness Test can help with that.”
Retention by Sector, Size, Age
Sectors experiencing the highest retention rates in 2015 were Religion, Environment, and Arts, Culture, and Humanities, as compared to those experiencing the least: Human Services, Societal Benefit, and Health.
Organizations with less than $100,000 in revenue retain 36 percent of their donors on average. Once a nonprofit makes more than $1,500,000, the average retention plateaus at 47 percent. As revenue reaches $5,000,000 or more, retention rates average 45 percent.
In addition to the size of an organization, the age of an organization plays a part in the ability to grow and retain donors. Organizations that were less than five years old had the lowest average retention at 40 percent, whereas the organizations that had been in operation for more than 30 years had an average retention of 46 percent. This may be attributed to the length of time the older organizations have had to build trust and develop more meaningful relationships with their donors.
Older organizations grew their donor files between 5 and 6 percent and had retention rates between 42 and 46 percent for 2015. By comparison, younger, less established, organizations grew by 33 percent, but retained only 40 percent of their donors. Organizations less than five years old may have not fully realized conversion and the lifetime value of newly acquired donors due to the shorter time frame.
New and Returning Donors
The supplement also breaks out retention rates for new donor and returning donors. The average new donor retention rate since 2008 is 25.8 percent. That rate has been steadily declining since 2008, averaging a reduction of -3.4 percent year over year.
In contrast, the returning or repeat donor retention rate has averaged 64.8 percent since 2008. However, even during that time, the rate has been declining an average of -1.68 percent year over year.
“The contrast in retention rates between new and returning donors should end any argument about the value of keeping donors engaged with our organizations,” said Elizabeth Boris, institute fellow at the Center on Nonprofits and Philanthropy at the Urban Institute. “Across every subsector, no matter the size or age of a nonprofit, donors who have given previously are so much more likely to give again. If we want to increase giving levels dramatically and transform philanthropy and our ability to create social impact, donor engagement must become a critical skill for fundraisers and charities.”
Retention increases as giving levels increase for both new and returning donors. The average new donor retention rate for donors giving under $100 is only 17.5%, percent compared to 48.5 percent for those giving above $250. Returning donors giving less than $100 had an average retention of 52.25 percent over the last seven years, as compared to those giving $250 and above, who demonstrated an average of 76 percent.
Using the FEP
The supplement contains a calculation for determining the revenue generated by an increase of one percent of retention. This will give organizations a good rule of thumb for the expense they are willing to allocate toward increasing that retention.
In addition, the Fundraising Effectiveness Project has developed the downloadable Excel-based FEP Fundraising Fitness Test that allows nonprofits to measure and evaluate their fundraising programs against a set of over 100 performance indicators by five donor giving levels. In addition, seven GiG Reports provide concise, yet informative pictures of fundraising gains and losses-growth in giving and attrition – in a simple, reader-friendly format that executive staff and board members can understand. These tools and resources can be found at www.afpfep.org.
“Having been on board when the FEP was first developed, I am really pleased to see how this project has taken a life of its own,” said Dr. Lilya Wagner, director of Philanthropic Service for Institutions, an internal consulting group for a system of North American Seventh-day Adventist organizations. “However, we still have much work to do in terms of educating fundraising professionals and charities about the value of these tools. While the research shows that donor retention rates are not good, the good news is that the FEP is a tool to help us know where to put our emphasis, our resources, our efforts—for greater fundraising return. And I truly hope that our bosses will understand and accept the FEP in the same spirit—that we need to know this data and recognize where to improve so we can be more productive.”
About the Supplement and the FEP
The full supplement can be found at the FEP website: www.afpfep.org. An infographic with some of the key information from the supplement can be found here.
The Fundraising Effectiveness Project, developed by the Association of Fundraising Professionals and the Urban Institute in conjunction with donor software providers, measures gains and losses in gift amounts and in the number of donors among participating charitable organizations.
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Since 1960, the Association of Fundraising Professionals (AFP) has inspired global change—helping nonprofits and charities and supporting fundraising efforts that have generated more than $1 trillion. AFP advances effective and ethical philanthropy by providing advocacy, research, education, mentoring, collaboration and technology opportunities for the world’s largest network of professional fundraisers. AFP’s nearly 30,000 members raise more than $100 billion annually, equivalent to more than one-third of charitable giving in North America, with millions more generated around the world. For more information, go to www.afpnet.org.
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The Center on Nonprofits and Philanthropy at the Urban Institute conducts and disseminates research on the role and impact of nonprofit organizations and philanthropy. The Center also charts and analyzes trends in the operations and finances of U.S. charitable organizations with data developed and maintained by its National Center for Charitable Statistics (NCCS) and other sources. The Urban Institute is a nonprofit, nonpartisan economic and social policy research organization.