The Wizard Makes a Visit!

September 9, 2019

 

Imagine…you’re walking down a beautiful beach in Hawaii. As you walk and feel the water under foot, you think for a moment about how your fundraising efforts are going back home.

 

It’s not that they’re not doing ok. It’s that they’re just doing ok. Not only that, but as time goes by, it’s getting more and more difficult to grow your base and keep your retention rates up.

 

As if the above weren’t concerning enough, the cost to raise a dollar keeps getting more and more expensive.

 

With your eyes looking downward you notice that there’s a grizzled-looking old man sitting on a blanket looking out at the blue waters of the Pacific Ocean.

 

“How are you today?” says the wizard.  A bit shocked, you return the greeting.

 

Innocently, you ask, “Am I dreaming? What’s a wizard doing here?”

 

He replies to you that he’s come to “Increase your ROI on major initiatives by 10%. There are 3 ways I can do this:

  • By increasing gifts per year by 10%;

  • By increasing your average gift by 10%; or

  • By increasing your retention rates.”

 

The wizard then says that you may only choose one of these three.

 

Which would you choose? If you said retention rate, you’re absolutely right, because over time, retention rates compound.

Think about it in terms of this baseline scenario:

  • Fundraising average retention rates for first-time donors of 30% and 60% for donors who have given for 3 years or more;

  • Gifts that come via acquisition at a rate of $20 with a 20% increase in average gifts yearly;

  • 1.5 gifts per year/per donor.

 

If, in this scenario, you start with 100,000 donors (wouldn’t that be nice!) you will bring in over $3,110,817 over 5 years. With the proposed 10% increase in average gifts or gifts per year, you would bring in over $300,000. Nice.

 

However, after the five years, you have 3,888 donors. If you increase retention by 10%, you would have 6,262 donors at the end of five years and they would bring in over $800,000 over the baseline mentioned and over $500,000 more than the other scenarios we presented.

 

Here's the problem, though. There isn’t any wizard and he certainly isn’t sunning himself on a sunny Hawaiian beach.

 

If you want results such as those above, the solution is simple: you must invest in retention. By listening to your donors and personalizing your communications to them, you can make the leap to 10% retention easily enough.

 

Another eye-opening way of looking at this: if you can reduce the number of donors you lose after they’ve given you a first gift or a renewed one, the difference would be even more amazing!

 

Do you have a donor retention plan for both first and recurring donors? Should we talk?? I’m ready when you are.   

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