If you work or volunteer for a charitable organization, you may not know that the median donor retention rate in 2013 was only 43%. That means only 43% of donors who made a gift in 2012 did so again in 2013.
According to an article in The Chronicle of Philanthropy, based on The 2014 Fundraising Effectiveness Project report, “For every $100 in new donations the 3,576 groups in the survey received in 2013, they lost an average $92 from supporters who failed to give again and others who contributed less than they had previously.”
And, even though the retention rate represents a slight increase over the previous year, it is still a big red flag for charities. It reinforces my saying:
No Marketing. No money. No mission.
Researchers said that as charities face pressure to keep their fundraising costs low, they are wary of spending the kind of money it takes to spur repeat donations. Many charities try to limit their fundraising costs to 5 percent or less of every dollar raised, they noted, even though keeping donors involved and expanding donations probably requires spending 30 cents or more of every dollar raised on staff members and other expenses involved in soliciting gifts and maintaining close relations with donors afterward.”
Here we go again! A philosophy based on scarcity.
This is a very old attitude based on many factors, one of which is The Overhead Myth. A majority of American donors (62%) believe the typical charity spends more than it should on overhead. (2001 data)
This data is reinforced by a 2014 study by the BBB Wise Giving Alliance:
Americans would verify their trust in a charity by looking at:
- 46% said finances;
- 20% cite ethics;
- 14% use name recognition of the charity; and
- 11% said results.
“The study reveals that Americans consider finances to be the most important indicator of trust, which is a misguided review of a nonprofit organization,” according to the BBB Wise Giving Alliance.
Wilson Levis of the Urban Institute and researcher Cathlene Williams, the two lead authors of the study, “worry that as nonprofits celebrate every dollar gain in annual giving, they ignore what their organizations could achieve by inspiring donor loyalty over the long term.”
Nonprofits must develop an investment mentality in order to sustain themselves, thrive, and grow to achieve their missions. This, to me, is a no-brainer. You reap what you put in. That applies to most things in life, not just fundraising marketing.
So, what will it take for your nonprofit to get past the old scarcity attitude and embrace investment in its mission?
N.B. I have created a mini-catalog that nonprofits can use with donors that helps dispel the Overhead Myth. Contact me and I’ll mail you a sample.
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