Why Your Donor Retention Rate Is Falling—and How to Turn It Around

Nonprofit organizations work diligently to acquire new donors – through hosting events, building community, and educating donors about their mission. These activities help drive initial donations but securing long-term support requires a deliberate strategy. In this post, we will explore the importance of donor retention – including benchmark statistics, contributing factors to a declining donor retention rate, as well as tactics and strategies to boost donor retention.

What is the donor retention rate?

A nonprofit’s donor retention rate is a calculation that determines the number of donors that give to the organization year after year or other predetermined time period. To calculate your donor retention rate, first identify the time period you’d like to track – this could be yearly, quarterly, or even one campaign period to another. Next, identify those unique donors from the initial time period. Then, identify those donors who made another contribution in the next time period.

Use the following formula to calculate donor retention rate:

(number of returning donors/number of donors in the initial time period) x 100.

For example, let’s say you wanted to compare your 2024 Giving Tuesday campaign with your Giving Tuesday campaign in 2023. The number of returning donors was 2,000, and the initial donor set was 5,000.

(2,000/5,000) * 100 = 40%

You retained 40% of the donors that you acquired through your initial Giving Tuesday campaign.

How effective are nonprofits in retaining donors?

According to the latest Fundraising Effectiveness Project’s Quarterly Fundraising Report (Q4 2024), donor retention was down 2.6% over previous years. This indicates that the nonprofit industry struggles to develop effective engagement strategies that maintains donor participation year after year.

The report also shares the donor retention rate for new versus repeat donors. The donor retention rate for new donors was down 5.9% with 19.4% retained YTD. For repeat donors, the rate was down by 3% with 69.2% of repeat donors retained YTD.

What does this tell us? There is a tremendous opportunity for nonprofit organizations to develop engagement and stewardship plans specifically for first-time donors. With all the effort expelled to acquire a new donor, it is critical to maintain them as a donor so as to recoup the cost to acquire that donor.

Lastly, they reported upon the differences between donor segments. Micro ($1-$100), small ($101-$500), and midsized ($501-5k) donors suffered the greatest decline in retention rates with a 4.4%, 5%, and 3.8% decreases. Although these donor groups do not contribute at a major contribution level, it’s important to nurture these donors. With proper stewardship, micro donors may become small donors who become recurring donors. Midsize donors may make planned gifts that could amount to a significant contribution to your organization.

Why is tracking your donor retention rate important?

It is widely understood that it is more expensive to acquire a new donor versus retain an existing donor. By prioritizing donor retention, you spread the donor acquisition cost across the donor’s lifetime, increasing their overall lifetime value. Returning donors are familiar with your cause, and therefore, are more cost effective to retain. Ultimately, a strong, retained donor base will provide your organization stability and a predictable funding source.

In addition to the cost effectiveness of a retained donor base, this loyal base may also expand your network by introducing your organization to family, friends, or other supporters or collaborators. These introductions may generate new connections, donations, and support.

As your organization engages with this retained donor base, you learn more about these donors. These findings enable you to better steward your donors which will lead to more activity with your organization.

Ultimately, a strong donor retention rate is an indication of donor trust and loyalty. This increases your organization’s confidence in pursuing long-term planning, as this group will provide a steady drumbeat of support.

What contributes to a decreasing donor retention rate?

There are many factors that may contribute to a declining donor retention rate which make this metric challenging to influence. Nonetheless, it is still important to address any potential factors that may influence whether a donor will lapse.

Sending too few appeals

Stay top of mind with your donors by regularly sending appeals. With timely, meaningful communication, your donors won’t neglect to continue supporting your worthwhile cause.

Donor fatigue

Conversely, if you inundate your supporters with solicitations, you may overwhelm them. This may result in a complete dismissal of your donation request. To help avoid this, monitor the number of appeals made before a donation. By tracking this number, you may determine the ‘right’ number of asks.

Generic communication

Today’s donors expect personalized communication from the nonprofits they support. If your messaging speaks too broadly about your mission or fails to resonate with their personal interests, they may fail to make another gift.

Lack of follow-up

Post donation, donors want a sense of immediate gratification. Send an automated email not only with a tax receipt but also with a meaningful acknowledgment of their contribution.

Unclear understanding of impact

If your donor cannot visualize the impact of their donation, they may feel disconnected from your mission. Many donors may stop contributing to an organization altogether if their gift feels meaningless. Share impact reports and stories that showcase how  their donation maps to mission outcomes.

Financial status changes

Unfortunately, some of your donors may have a change in their financial status that may prohibit their ability to give. Offer these supporters the opportunity to support you in non-financial means such as volunteering. By continuing to engage with your cause, they will be more likely to donate again once they have the means.

How to increase your donor retention rate?

Although you may not be able to pinpoint the exact cause of a donor lapsing, there are several strategies you can set in place to help increase donor retention and draw your supporters closer to your cause.

New donor welcome series

The work has only just begun once you receive your donor’s first gift. Craft a new donor welcome email series that expresses gratitude for the gift and educates your donor surrounding your mission.

Personalized donor journeys

Utilizing the data your donors provide, place them in nurture sequences with messaging that reflects their interests. These journeys may consist of messaging in multiple communication channels that suit their preferences.

Story-telling

Giving is an emotional experience. Use the power of story-telling to share how donations make a positive impact in the lives of your constituents.

Authentic, personal engagement

Stand out in a sea of generic, mass communication by connecting with your donors on a human level. Send birthday cards or postcards with handwritten messages. Whenever you spot news that aligns with their cause interests, email them the article with a brief personal note. If a natural disaster strikes their area, reach out to check on their well-being. All these small gestures go a long way in forming real relationships with your donors.

Share an abundance of gratitude

Expressing gratitude to your donors is key to boosting retention: celebrate their support with dedicated thank-you events, spotlight their contributions regularly on your social media channels, and leave a lasting impression by installing a donor wall or gratitude mural in your headquarters.

Simplify the recurring giving process

One of the easiest ways to drive donor retention is to make the recurring giving process as seamless as possible. Use built-in tools and widgets within your online fundraising system to offer installment-based giving. At the point of donation, prompt donors to consider a recurring versus a one-time gift for maximum impact.

Conduct donor churn analysis

Be proactive in engaging with donors before they lapse. Generate LYBUNT (last year but unfortunately not this year) or SYBUNT (some years but unfortunately not this year) reports, and send these donors a personalized appeal. Your CRM system may allow you to tag individual donors as LYBUNT or SYBUNT for personal outreach.

Offer multiple ways to engage

To combat donor fatigue, intersperse non-donation based engagement opportunities among your appeals. Examples include invitations to register for upcoming volunteer opportunities, prompts to follow your organization on social media, asks to subscribe to your e-newsletter, or join a board committee.

Send donor surveys

Request feedback from your donors regarding their experience contributing to your organization. Gauge their interest in your cause areas and programs. Ask specific questions related to their preferences including preferred communication channel.

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Improving your donor retention rate is crucial for the long-term success and sustainability of your nonprofit. By prioritizing effective stewardship, meaningful communication, and building strong, authentic relationships, you can transform your donor base from a group of one-time supporters into a loyal, long-term community of advocates for your mission.