There's a single truth in fundraising that's worth repeating as often as necessary for people to understand — it costs less to retain an existing donor than it does to acquire new ones.
For some, this shift toward retaining donors over constantly searching for new donors is a difficult change to make. They're so convinced that more donors are necessary for increased giving that they focus too much on the number of donors and expensive outreach efforts instead of taking care of the donor network they already have. But first-time donors are unproven, and it's not clear whether they'll donate or even if they embrace your organization's goals.
On the other hand, repeat donors have already demonstrated their commitment to your nonprofit organization. They don't need to be convinced to give because they already do, and all you need to do is interest them in donating additional funds.
Existing donors, both lapsed donors active, are already engaged in a conversation with you, one that they're happy to participate in. You can leverage this existing relationship to boost their lifetime value and increase the percentage of donors giving at any moment. And handwritten thank you notes are a powerful ally in this effort. But before we can learn how we need to define some terms.
To retain donors more frequently, you first need to know your existing average donor retention rate. This fundamental metric reveals how many donors are continuing to donate year after year.
Here's the bad news first. The Fundraising Effectiveness Project, a joint effort of The Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute found that across the nonprofit sector, average donor retention rates have been dropping every year, down to 41.9% in 2021. That means that less than half of most donors give once and then never give again, a huge missed opportunity, to be sure.
However, the good news is if you can manage just a 10% increase in your donor retention rate, a 200% increase in your donors' lifetime value is possible.
It's also important to distinguish your donor retention rate from your donor attrition rate. The latter is the percentage of donors that leave your donor database each year. You certainly want this to drop, and it will naturally when you focus on retention, but we're looking to build a healthy donor retention rate for now.
Here's the formula you'll need to convert raw donor data to this useful metric:
(Number of repeat donors in a year) / (Total number of donors from the previous year)
So if you have 1,700 donors in 2020 and 800 of them donated again in 2021, the computation would be:
800 / 1700 = 47
In this case, your average donor retention rate is 47%. Now that we know how to computer donor retention, let's look at donor retention strategies to increase this number — specifically, handwritten thank you notes.
Average donation retention rates hover around 42%, as we mentioned earlier. However, that's among all donors. New donor retention rates, the rate at which brand new donors continue as future donors, is much lower, around 18%. By contrast, the retention rate for repeat donors, those that went beyond their first donation to make a second donation, climbs dramatically, hitting just over 60%. Thus, anything charitable organizations can do to secure a second donation will swing the odds of repeat business in their favor.
So what does this have to do with handwritten notes? They’re effective at eliciting future donations from existing supporters. The non-profit firm Donors Choose studied the ROI of their thankfulness campaigns and discovered an interesting pattern. When they split first-time donors into two groups and only mailed handwritten thank you notes to half, the group that received gratitude was 38% more likely to donate in the future.
This is because handwritten notes create what's known as a "visceral connection" with customers. In other words, it creates an emotional bond that goes beyond the simple act of doing business.
It's this emotional connection that you want to nurture with your donors as well, and handwritten thank you notes are the perfect way to do it. The bond handwritten cards form is doubly potent for nonprofit organizations because these organizations already create strong connections through shared priorities and ideologies. Adding an appreciation component draws existing donors even closer.
Handwritten thank you notes boost your donor retention rates by making your donors feel appreciated, needed, and part of something larger than themselves. But you don't need to handwrite cards yourself to make these gains. Companies like Simply Noted replace manual labor with state-of-the-art handwriting robots. You can link your organization's CRM to their servers to develop robust automation workflows that trigger convincing handwritten thank you notes whenever they're warranted. This might include moments when a new donor joins your ranks, when an existing donor donates again, and whenever you want to remind your donors how much they mean to you.
You get the invaluable benefit of handwritten notes without the time and manpower investment the practice usually entails. And the ROI is significant. So try automating your gratitude campaigns today and watch your donor retention rate soar!