A 10% improvement in donor retention can increase the lifetime value of your donor database by as much as 200% (Professor Adrian Sargeant). But if you don’t know your donor retention rate, you can’t figure out how to increase it

Today’s blog was prompted by a Wall Street Journal article titled:  My plan to fix the world’s biggest problems authored by Bill Gates. Mr. Gates describes the power of measurement in improving outcomes.

Am I suggesting that donor retention is among the world’s biggest problems? No. But is certainly is a key fundraising metric. Why?

Loyal donors translate into sustainable revenue streams. Some of these donors will make major and/or planned gifts.  That is why modest increases in donor retention have a geometric impact on the lifetime value of your donor base. For more info, check out the research-based donor retention and loyalty section of the Study Fundraising website.

The Second Donation is Key

According to the Fundraising Effectiveness Project of the Association of Fundraising Professionals, donor retention in the US averages a dismal 41%.  If this were not bad enough, drill down a level and you’ll find that first-time donors retention is 27%.  That means 73% of the donors you worked so hard to rally around your mission depart after they make their first gift.

For this reason, MajorDonors.com coined the term:  Second Gift Ratio™.  This is the all-important yet simple calculation of the number of donors who made a first-time gift in year X who make a second gift within the next twelve months, stated as a percentage.  if 100 donors made a first-time gift last year and 45 of them made a second gift by the end of this year, then your Second Gift Ratio = 45/100 = .45 or 45%.

We focus on this number because here’s the good news:  Once a donor makes a second gift, the odds of the donor making a third gift skyrockets up to 70%! 

So calculate your Second Gift Ratio today and see where you stand.  No matter what the number, set your sights on increasing it by two or three percent over the next twelve months.  How?  By doing a better job thanking your donors and letting them know how you used their gift.