Rick Fitzgerald takes a look at donor retention. It’s not as sassy or sexy as its cousin, donor acquisition, but it’s definitely worth buying a drink or inviting to sit at your table.
Donor acquisition and donor retention can most easily be defined as Hunting or Gathering, and my Neanderthal self still leans toward being seen as a Hunter rather than a Gatherer.
But the data doesn’t lie, and once you review the facts below you too may be shifting your focus to becoming a basket weaving gatherer.
Why retention deserves more investment
This seems flawed thinking when you consider on average it costs five to seven times more to acquire a new donor than it does to retain an existing donor.
While there will always be a need to harvest new donors to alleviate donor churn and perpetuate the donor funnel, focusing on donors that are already familiar with your cause merits a larger slice of the pie at budgeting time.
Also, traditionally donor acquisition and donor retention have been separate teams with different focuses and expected objectives and outcomes. “Acquisition” looked after direct marketing, “retention” was purely donor loyalty, and each had very different communications and target audiences. In today’s ever evolving marketing world with extremely personalised communications now deliverable to each individual, the separation between the two may not be so valid.
Another consideration is that with increased sophistication and focus from acquisition, your donors are under increased pressure to choose which charities deserve their ongoing support. This, in turn, shows a need for greater donor management from the under-budgeted retention team.
A long-term loyal donor adds massive value to your charities revenue, with research suggesting 80% of a charity’s future coming from just 20% of their current donor database (the old 80/20 principle yet again).
So how and where do you find these golden 20%?
The most powerful indicator of how a donor will behave in the future is how, when and where they have donated in the past.
This information can be found, of course, within your own donor base, or through sharing donors with data co-operatives that have a donor’s past behaviour, not only with your organisation but across several charities.
The more information available on each individual donor, especially across multiple organisations, the higher chance of predicting when, with whom, and how much they are likely to donate in the future. With close to eight out of ten of your current donors giving to other causes and over half of those donors donating to as many as five separate charities, the wealth of historic information available on each donor is astounding.
Whilst personalisation opportunities to each individual ask have grown in sophistication over recent years, so too have data analytics and targeting.
No longer reliant on Recency (date of last donation), Frequency (number of donations), or Monetary (amount of last donation) analysis, retention teams are now using Regression modeling to predict donor behaviour on a broader scale.
Such models have taken donor retention from a position of not only knowing what their donors have done in the past, to understanding what their donors are now likely to do in the future.
Armed with this data, they now have greater insight, to send the right content, to the right donor, at the right time, at an individual level.
Data co-operatives can also assist retention with a range of flagging options to improve the insight you have into who your most valuable donors are and how and when you might approach them:
- Re-activation is where your lapsed donor file is flagged when they have donated elsewhere more recently. This highlights a cell of your lapsed donors that you may no longer have found value communicating with, that are now worth approaching again due to their activity elsewhere. Rather than becoming costly dormant or inactive donors, a percentage are retained as active.
- Upgrading donor value can be flagged where the donor’s average gift on your file is lower than the average gift for the same donor across other contributors. These donors can then be approached with a higher ask next campaign, thus increasing the lifetime value of your donor.
- Method of acquisition can even be flagged and add value to your donor retention.
Say you have acquired a raft of new donors though face-to-face campaigns but are having troubles engaging them through your regular mail communications.
Maybe you have acquired a large quantity of one-off donors through a disaster relief campaign that you would like to convert to regular givers.
Whilst it is likely uneconomical to mail all of the disaster donors, or to regularly mail non-responsive donors acquired through face to face, a co-op can flag cells amongst both that have been acquired elsewhere through direct mail or alternative channels. Again this isolates a more retainable cell amongst your own donors using the combined insights of their donor activity with others.
The information outlined in the above demonstrates the enormous value and opportunity that retention now represents in the overall marketing mix.
Through retaining donors longer, acquisition costs are not only reduced, but vital information on your most valuable donors is continually built, allowing greater opportunity to target similar individuals in future acquisition campaigns. By using retention to actually optimise the acquisition mix, a healthier, more complete donor communications program will follow.
Rick Fitzgerald is Client Services Director at Conexum (formerly Alliance Data Direct). Lives and works on the sunny north coast of NSW and has over ten years’ experience in data and analytics for fundraising.
* This article first appeared in Fundraising & Philanthropy Australasia