Kerri O'Neill, Senior Director  ●  2/15/2019

Understanding Donor Retention Rates: When Is It Time to Panic?

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Recently, a concerned client reached out to me about their retention rates.  They were advised, during a call with their leadership, that their area was noted to have the “lowest retention rate in the Territory” in the past fiscal year.  I agreed that their retention rates were down and said that didn’t surprise me.  Because I knew why their retention rates decreased.

When looking at your data, isolating metrics can be alarming.

For example, many clients focus on one specific metric, such as average gift.  You will sometimes hear, “You have had the lowest average gift in four years” from someone who is reviewing a data analysis report — but without any context on the goals you set for your organization.  Perhaps your organization is wanting to grow the number of active donors on your file (increase response rate). There is a direct correlation: When you have a high response rate, your average gift will decrease, and vice versa.

It’s the same thing that happens with retention metrics.  If you are not aware of what happened with donor lifecycles in previous years, you will not get an “accurate read” on results.  With the retention metric, overall retention rate is calculated by adding the available donors’ audience from three lifecycles, then dividing that total by the sum of the active donors in those same lifecycles.

These are the lifecycles we typically use:

  • 2nd Year from New: donors who were in the new donors lifecycle in the previous fiscal year.
  • Multi-Year: donors who have given a gift to The Salvation Army for 2+ consecutive years.
  • 2nd Year from Regained: donors who were lapsed donors in the previous fiscal year, but made a gift in that year.

In FY17 and FY18, many areas that The Salvation Army serves were impacted by hurricanes, tornadoes, and wildfires.  The Salvation Army is blessed by donors who give to disasters.  But in doing so, these gifts affect the data analytics.  Gifts made directly to disaster response landing pages, disaster mail appeals, or whitemail checks with the disaster name noted, are considered restricted and are removed from analytics — since these gifts are not applied to the annual budgets for The Salvation Army.  There are also gifts that are considered “disaster halo gifts.”  These gifts are made to unrestricted mail appeals, landing pages, and via whitemail — all without any indication that the gifts should be used for the disaster specifically, but they represent an increase in giving.  This makes the active donor pool swell for that year, which impacts the available donor audience for the following fiscal year.  In these audiences, you have donors that only give to disasters.  So in the following year, if you don’t have a disaster, your active donors will decrease!  Thus, affecting your retention rate.

Another issue that impacts your retention rate is if your organization decreases Acquisition or Reactivation efforts over the years.  If you decrease your Acquisition budget, you will feel that negative impact for the next two to five years, simply by not having enough audience in those lifecycles noted above.

Don’t make broad data conclusions without first looking at the details.

When comparing your results to other areas or other nonprofits, there are so many things to keep in mind.  How different are your missions?  How different are your donors?  Did you spend more in Acquisition or Reactivation than those you are comparing to?  What were that organization’s fiscal goals versus your organization’s goals?  Would a disaster impact the organization you are comparing yours to?  And so much more.

If you have any questions regarding your area’s retention rate, please don’t hesitate to reach out to your Account Director at TrueSense Marketing, or feel free to reach out to me directly

 

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