Fundraising Lessons from a Bagel Shop! Why Donor Retention is the key to your current and future success!

Your Presenter Jon Biedermann Vice President, Fundraising Products Division 19 Years at SofterWare, 22 years Nonprofit Experience Helped Create DonorPerfect Online in 2001 Board Member The Giving Institute/Giving USA Foundation Warrington Youth Baseball (VP, Head Coach) Video Golfers for Underdogs (VP, Yes- Really!) Board Consultant for Camp for All Kids, Woody’s Circle of Care Father of 4 beautiful children, husband of a very patient and forgiving wife, and cat-herder for 2 neurotic cats.

 Why is Fundraising like Running a Restaurant?  All About Retention  Definition  Retention Rate / Attrition Rate / Life Time Value  National Stats / Fundraising Effectiveness Project  Your Stats – How DonorPerfect can Help  Life Time Value and Why it Matters  Group Exercise – You make the Call!  Summary  Q&A Agenda

What is Retention? Retention rate is the ratio of the number of retained customers to the number at risk of not being retained. Customers who bought this time period and the previous time period All Customers who bought the previous time period

Retention Rates National Restaurant Chains (The number of people who ate in a restaurant in the last month, divided by the number of people who ate in the same restaurant in the last 6 months)

Why is Retention Important? Since customers in all businesses never last forever, retaining existing customers is critical to growing the business. A business with a retention rate of 80% and acquiring new customers at a rate of 20% per year will remain flat. That same business with a retention rate of 90% and acquiring the same 20% in new customers will grow 10% per year, and the business will double in about 7 years.

Why is Retention Important?

How does this apply to Non-Profits?

How Does This Apply to Non-Profits? Annual Donor Retention is a percentage calculated as those who donated in the last 12 months AND donated in months 13-24, divided by the number of ALL donors who donated in months The inverse (1 – Retention rate), is the Attrition Rate.

How does this apply to Non-Profits? Example: Non Profit ABC Org. had: 500 active donors in 2013, 450 active donors in In 2013, 200 of these also gave in were new donors. 250 donors gave in 2012, but not in Retention Rate = 200/( ) = 44% Attrition Rate = 56%

Why Does This Matter to Non-Profits? Typically, a 20% increase in net Donor Retention can double the Life Time Value of a donor.

Why Does This Matter to Non-Profits? Life Time of an Average Donor = 1 / (1 – Retention Rate) Or 1 / Attrition Rate Example: Retention Rate = 60% Attrition Rate = 1/(1-.6) = 40% Life Time = 1 /.4 = 2.5 years

Why Does This Matter to Non-Profits? Life Time Value (LTV) = Life Time * Average Annual Donations Example: Retention Rate = 60% Attrition Rate = 40% Life Time = 1 / 40% = 2.5 years Average Annual Donations = $ LTV = 2.5 * $ = $1,125.00

Why Does This Matter to Non-Profits? Increase the Retention Rate by 20%, and the LTV doubles. Example: Retention Rate = 80% Attrition Rate = 20% Life Time = 1 / 20% = 5 years Average Annual Donation = $ LTV = 5 * $ = $2, Or double the retention rate of 60%!

Increasing LTV is critical to grow your Non Profit!

National Stats / Fundraising Effectiveness Project Started in 2006 Measures over 3000 non profits. Retention Rate has gone from 50% to just over 40% in 5 years Economic Factors More Special Event/Small Donation Fundraising

What’s YOUR Retention Rate?? It’s probably lower than you think.  Can be measured in DonorPerfect and other good fundraising software. DonorPerfect’s Comprehensive Financial Report includes Retention, Attrition Rate, and Revenue per Donor.

What’s YOUR Retention Rate??

How Do You Improve Retention Rate? The MILLION dollar question…

How Do You Improve Retention Rate? One Way: Focus on getting your single Gift Donors to donate a second gift. Why? Because Repeat Donor retention, on average, is 70%, or 65% higher than the average retention rate of 40% Therefore, for every single gift donor you get to donate a second time, their LTV increases by 135%, more than DOUBLE!!! (1/.7 = 1.42 years vs. 1/.3 = 3.33 years!!!)

How Do You Improve Retention Rate? Take the increase in LTV value of these newly acquired donors, and multiply by 10%-20% Why? Because that is the amount of money you can INVEST to ‘acquire’ these repeat donors, and still generate incremental revenue.

How Do You Improve Retention Rate? More Communication with donors – 53% of all donors who left say they left an organization because of poor communication. 16% Due to Death 36% to More Deserving Causes More Timely Acknowledgements 3 Days is best, 1 week minimum. More frequency – Thank 3 times for every ask.

Group Exercises Discuss and answer these questions: What is the Retention Rate in the scenario? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift? Other ways to improve donor retention?

Summary Donor Retention and Attrition (1 – Retention rate) should be measured and watched. All things measured improve! LifeTime of a donor = 1 / (1 – Retention Rate) LifeTime Value (LTV) = LifeTime * Average Annual Giving per Donor Think in terms of LTV increases/decreases when making acquisition/renewal decisions based on costs

Questions??????

Group Exercises University of Everywhere In 2012, you raised $12 MM from 15,000 donors. In 2013, you raised $14 MM from 16,000 donors, of which 8000 people gave in What is the retention rate of donors in 2012? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift if the retention rate for donors who give more than 2+ times is 70%? Other ways to improve donor retention?

Group Exercises Animal Shelter of Humane County In 2012, you raised $1.2 MM from 4,000 donors. In 2013, you raised $1.4 MM from 4,200 donors, of which 2000 donors gave in What is the retention rate of donors in 2012? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift if the retention rate for donors who give more than 2+ times is 70%? Other ways to improve donor retention?

Group Exercises The Preventative Cancer Walk Foundation In 2012, you raised $1.2 MM from 6,000 donors. In 2013, you raised $1.4 MM from 7,000 donors, of which 2100 donors gave in What is the retention rate of donors in 2012? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift if the retention rate for donors who give more than 2+ times is 70%? Other ways to improve donor retention?

Group Exercises The Library Foundation of the Private Jet Owners Assoc. In 2012, you raised $1.2 MM from 1,000 donors. In 2013, you raised $1.4 MM from 1,200 donors, of which 800 donors gave in What is the retention rate of donors in 2012? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift if the retention rate for donors who give more than 2+ times is 70%? Other ways to improve donor retention?

Group Exercises The Foundation to Save Foundations In 2012, you raised $1.2 MM from 500 donors. In 2013, you raised $1.4 MM from 550 donors, of which 150 donors gave in What is the retention rate of donors in 2012? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift if the retention rate for donors who give more than 2+ times is 70%? Other ways to improve donor retention?

Group Exercises Build the Park Foundation In 2012, you raised $1.2 MM from 8,000 donors. In 2013, you raised $1.4 MM from 10,000 donors, of which 3500 donors gave in What is the retention rate of donors in 2012? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift if the retention rate for donors who give more than 2+ times is 70%? Other ways to improve donor retention?

Group Exercises The National Association of Church Associations In 2012, you raised $1.2 MM from 1,500 donors. In 2013, you raised $1.4 MM from 2,000 donors, of which 750 donors gave in What is the retention rate of donors in 2012? What is the Life Time, in years (Lifetime = 1 / (1 – Retention Rate)? What is the LTV (LTV = Lifetime * Average Annual Giving per Donor)? What can you spend to get a donor to give a second gift if the retention rate for donors who give more than 2+ times is 70%? Other ways to improve donor retention?