I secured my first annual fund challenge gift in 1994. The very generous donor and his wife, agreed to match every new and increased gift to our campaign up to $25,000. It worked brilliantly, and we far exceeded the challenge. It set our campaign onto a path of significant growth for years to come. By all accounts, it was a success.
Twenty years later, I find that annual fund challenges are still effective and are widely used across the sector. Generous individual, corporate and foundation donors continue to leverage their gifts to inspire other donors to step forward for the first time. On the surface, this is still very, very good.
It strikes me as interesting however, that the buzz topic in the non-profit sector is donor retention not acquisition.
Industry leaders like Cygnus Applied Research, Blackbaud, the Association of Fundraising Professionals, Bloomerang and many others have studied the retention concept. The consensus is that nearly 3 out of every 4 first time donors will not renew their support to an organization. Furthermore, we know that it costs as much as 6-7 times more to acquire a new donor than to renew an existing donor. And yet, most challenge gifts are still focused on new donor acquisition.
I know that challenging an organization to simply renew its donors is not very sexy. Ultimately, challenge donors are trying to help their non-profit partners secure more funds, attract more donors to achieve greater impact.
But, I still wonder if we are challenging organizations to do the wrong thing.
What if the challenge came when all the gifts were tallied instead of during the solicitation period? What if the challenge was to the board and staff to steward their donors in such a way that the retention of first time donors grew from the national average of 27% to 40 or 50%. What if we challenged an organization to strengthen their communication with their donors and to clearly articulate the impact of the investments made in an intentional and compelling way.
Penelope Burk, president of Cygnus Applied Research, has told us for more than a decade that the single most important reason that donors choose not to renew their gifts is because they do not understand the impact their dollars had. In other words, organizations do not clearly tell their donors how their gifts made a difference, so nearly 75% of all first time donors invest someplace else the next year.
This trend can be overcome, but it takes an intentional approach to excellent stewardship. I would argue that donors should challenge their organizations to achieve this level of stewardship instead of acquiring new donors. The impact would be staggering.
In fact, Adrian Sargent, author and long-time fundraising professor at Indiana and Plymouth Universities, said, “A 10% increase in donor retention can increase the lifetime value of your donor database by 200%.” Wow! Talk about a pretty amazing return on investment.
Please don’t get me wrong, I truly appreciate the spirit of the generous challenge donors in our sector. I simply ask the question, are we challenging organizations to do the right things? I’d love to hear what you think.