For many organizations, the year of the pandemic was a banner year for fundraising – in uncertain times of great need donors gave generously.
Of course, we’d expect your faithful donors to respond. That’s what they do. What was less expected was the huge number of new donors that were acquired during the pandemic. I don’t think anyone could have forecasted the response of first-time donors. Many of the organizations for which we have conducted Strategic Growth Analyses have shown banner years for new donor acquisition.
While this is great news, we need to keep in mind this influx of new donors onto the files of nonprofit organizations will have a chilling effect on overall retention rates in this year. This decline in retention is not necessarily a reflection on poorer cultivation efforts. It has everything to with file composition.
| Year | Multi-Year Donors | Multi-Year Retention | Second Year Donors | Second Year Retention | Overall Donors | Overall Retention |
| 2020 | 1,000 | 70% | 400 | 35% | 1,400 | 60% |
| 2021 | 1,000 | 70% | 800 | 35% | 1,800 | 54% |
Take a look at the table above. We are showing two lifecycle groups of donors and their respective retention rates. Multi-Year Donors usually have the best retention. In our example we are keeping Multi-Year retention at 70% for both years, which is the typical metric for this lifecycle. Second Year Donors usually have the lowest retention rates and, in this example, we are keeping retention at 35% for both years.
The only difference in the two years is the number of Second Year Donors – which doubles. Again, for many organizations, their new donor acquisition has done just that. In our example, the number of donors in these two lifecycle groups increased from 1,400 to 1,800.
So, while retention rates for the lifecycles stayed the same for both years, we see that the Overall Retention declined from 60% to 54%.
The reason for the decline in Overall Retention is due to file composition. New Donors make up a much larger portion of the Overall Donor counts; when you do the weighted math, the Overall Retention falls. However, the number of active donors in 2021 actually increases.
(1,400 * 60%) < (1,800 * 54%)
All that this means is that when a key metric falls, it’s important not to panic (hands off of that panic button!). First, you need to dig a little deeper because sometimes the falling of some metrics may mean you are actually generating more revenue.