Giving USA: Donors Disappear. How Do We Solve Retention?
In fundraising, we have an abundance of information, analysis, and opinions. New reports, stats, and findings can sometimes be forgotten as quickly as they’re released. However, the release of the Giving USA 2023 Annual Report pierced through the noise and puts fundraising leadership front and center with the alarming reality: donors aren’t simply declining, they’re disappearing.
Giving USA tells us that overall giving is down $17B, a drop of 10.5% when adjusted for inflation. What’s happening is a trend fundraising leaders have been getting used to over the last decade and a half – giving from individual donors is on the decline. But what’s unique about this year’s numbers is that they show us that individual giving fell off a new cliff, down 13.4% in a single year.
Mid-Size Donors Disappear
Which donors are we talking about exactly? Mid-size donors are disappearing at an alarming rate. While you may be inclined to think, “At least major donors aren’t going away.” But, that's exactly what's happening. The truth is that when mid-size donors disappear, the major gift pipeline dries up – causing enormous problems for nonprofits in the coming years.
How did we get here? We don’t have to look far to understand the picture. Since COVID, we’ve seen what economists call a “K-Shaped Recovery.” What this means is that while some parts of the economy experience strong growth, others suffer. In lay terms, the rich are getting richer and the poor are getting poorer.
As a result, fundraising shops are spending more time working to cultivate and solicit major donors, even attracting mega-donors. Some call this practice “big game hunting,” not exactly a donor-centric term. And, it comes at a significant cost. Building the major gift pipeline from mid-level donors often gets put to the wayside. Fewer and fewer mid-level donors receive the necessary cultivation needed to become lifelong donors and ultimately major donors.
Many were not surprised that individual giving dropped 13.4% in a single year. The Fundraising Effectiveness Project reports that donor retention has dropped to an all-time low of 42.6%, a metric that’s been tracked since the 1950s. Retention has a direct correlation with building a pipeline from mid-level donors.
Using this 42.6% retention rate, donor attrition paints a scary picture. For example, if you were to acquire 1,000 this year, only 32 donors will remain from that group in five years. Your mid-size donors have all but disappeared. If retention is so low, it makes perfect sense that Giving USA’s findings are so alarming.
Chris Pritcher, CEO of RKD Group explained why retention is ringing such an alarm to Paul Clolery of TheNonProfitTimes.
“Not enough people are being moved to contribute – because our practices perpetuate talking at them, not talking with them or listening to them. As a sector, we have to change. We must work harder than ever to innovate and deepen relationships with donors, no matter how much they give.” - Chris Pritcher, CEO, RKD Group
The question becomes – How do we solve retention?
Solving Donor Retention with Multi-Year Giving Strategies
The best way to retain donors is to begin relationships with multi-year pledge agreements. When a donor is successfully retained into a second consecutive year of giving, the retention rate skyrockets to between 80-90%. And, as it has often been said in fundraising when you can earn a donor’s trust and they give consecutively for five years, the likelihood that the donor will become a lifelong donor increases greatly.
This is precisely where the major gift pipeline is built – in donor retention. While not all donors will become traditional major donors, many will commit to the one major gift of their life via planned giving.
However, formalized multi-year giving agreements are only reserved for the top .5% of donors and up to 10% if pledges are included. Think of all of the donor segments that you solicit with one-on-one communication and relationships. The vast majority of these folks support your cause but do not give enough (yet) to be considered for multi-year commitments. If you were able to engage and shepherd every gift and every donor to close the way you would a major gift, not only would you have more engaged donors, but you’d have more donors locked into multi-year commitments, and the pipeline to prove it.
Scaling Gift Agreements and Pledges
Nonprofit leaders will agree that multi-year gift commitments are good for the donor experience, frontline fundraisers, and building a sustainable pipeline for the nonprofit itself. But, the majority of nonprofits simply can’t scale the gift agreement and pledge processes. Historically, these processes take an inordinate amount of resources to follow up on pledge commitments and send pledge reminders, in addition to soliciting, creating, and generating the agreements in the first place.
Givzey exists to help nonprofit organizations bring this process of cultivation and professionalization to donors at every level – inspiring them to commit to multi-year commitments and reverse the trend of attrition.
Learn more about how Givzey empowers frontline fundraisers to rebuild the missing middle by solving retention, even at the very beginning of a relationship with a donor.