Understanding the Reasons for Nonprofit Donor Churn

December 5, 2019 Mukundan Sivaraj

When nonprofits want to pinpoint where their donors are leaving, they often look at the last thing that happened to their donor as the tipping point that got them to stop donating. It could have been another nonprofit operating in the same space that presented itself as more “worthy” or it could have been a lack of personalization in their communications in calling or text-based campaigns.

However, the truth is often more complicated than that.

Understanding Donor Behavior

To understand why donors stop giving to a nonprofit, we need to understand why they gave in the first place.

Let’s look at:

What motivates donors to give to your charity?

The truth is that your fundraising appeal, talking about how many people you are helping holds less weight than other factors like a donor’s personal perception about donating to your cause.

What they really want to hear from your appeal is what they are accomplishing by donating to your charity.

In a report by the U.K.-based Centre for Charitable Giving and Philanthropy titled “How Donors Choose Charities,” they conclude that:

This conclusion is drawn from research in which they identify the most common reasons that donors give. Some of these reasons are outside of your nonprofit’s sphere of influence, especially when it comes to bringing donors back for a repeat donation. For example:

  • A donor’s passions, tastes, and preferences acquired as a result of each donor’s individual experiences
  • A donor’s personal or professional background, which influences their choice of beneficiaries

But there are key reasons that donors make an initial gift that your nonprofit can work on, namely:

  • A donor’s perception of your charity’s competence, that is, the efficiency with which you use their money.
  • A donor’s desire to have a personal impact on a cause through their contribution, such that their donation is not “drowned out” by other donors

These donors donate to your charity with the expectation that:

  1. You use your funds efficiently
  2. The money they donate actually creates an impact for your cause

If those are the metrics they used to measure the worthiness of your charity for their money, then failing to meet those expectations after the first donation is bound to create a drop-off in donors.

How do you fix that? Let’s look at why donors stop giving.

 

What stops donors from giving again?

It’s uncommon that a donor stops giving to a charity because of a single bad interaction. Donor churn happens because of a series of events over time.

Let’s take an example of a donor journey:

  1. Pre-Churn: A donor gives to your charity with the expectation of making an impact. If your fundraising appeal mentioned collecting funds to help 4,000 homeless people, the donor expects to know how their contribution helped.
  2. Root Cause: The thank you email they receive is not personalized, does not mention the impact of their gift and simply has the receipt for their donation.
  3. Final Trigger: The next communication they receive is not an impact report but another ask. The donor has no insight into how they have helped the cause, triggering them to leave.
  4. Post-Churn: Without any indication that this donor has stopped supporting your charity, you continue to send them communications. The root cause of them leaving is never addressed. This reinforces their decision not to support your charity.

At any stage of this process, you could have intervened to reinforce the donor’s trust in your charity – for example, sending a personalized thank you letter or tracking how you are spending funds and communicating that to the donor.

Here are the most common reasons a donor stops giving to a charity:They think the charity didn’t need them.

  • They were never thanked for their donation.
  • They received no information on how their money was used.
  • They don’t remember giving to your charity.
  • They can no longer afford to donate.

How to Understand Why YOUR Donors Leave

So, you now have a list of common reasons why donors stop giving. But why are your donors leaving?

Without that information, you can’t put strategies in place that will get you results.

 

What the data you have can’t tell you

The data you get when a donor fills in a form for their first donation is not enough to pinpoint the reasons for donor churn.

Getting actionable data requires you to dig deeper. This data comes from donor complaints, compliments, recommendations, and feedback. Just like asking for donors to give, you need to be proactive when requesting donors for feedback.

 

Asking your donors for feedback

Here is the process you can use to identify and rectify the reasons your donors leave. Note that these steps assume that you are using a CRM or donor database to manage your data.

Identify your donors

There are two ways to go about collecting feedback from your donors:

  • You can ask new or existing donors

This is the subset of newly acquired donors or donors who have been giving in frequent intervals that can be pulled from your donor database.

  • You can reach out to lapsed donors

To do this, you will need to define a lapsed donor for your organization. It could be someone who has not given in the last 12 months, or it could be a donor who has recently opted out of a monthly giving program.

Nonprofits use these terms to label their lapsed donors:

LYBUNT refers to the donors who have given Last Year But Unfortunately Not This. These are the donors who gave in the preceding year but not in the current calendar year.

SYBUNT refers to the donors who have given Some Year But Unfortunately Not This. These are the donors who gave in any preceding year but not in the current year.


Segment your feedback surveys

The type of feedback you ask for from each of these donor segments should vary. There is always a question of how far you should go when segmenting communications with your donors.

The answer is: As far as you can.

If you have data on your donor’s communication preferences, use it. If you don’t have their communication preferences, but you do have demographic data on your donors, you can use that to make an educated guess on their preferred channel.

One segmentation that is an absolute must for your surveys is differentiating based on donor type. For a survey, here are the donor types you should take note of and how you should frame your survey:

  1. New (first-time) donors
  2. Recurring donors
  3. Lapsed (churned) donors
  • New Donors
    For newer donors, try to keep your survey brief:
    • Ask them about their donation experience (Let them give you a rating on a scale).
    • As an extension to this question, ask them about the barriers they encountered while donating.
    • Ask them how they found out about your nonprofit.
    • Ask for feedback on the quality of your contact immediately after they donated.

Other questions that can help inform your donor communications plan include:

    • Ask them their preferred channel of communication.
    • Ask them their preferred frequency of communications.
  • Recurring Donors
    • Ask them how much of an impact they think their donation makes.
    • Ask them about their level of satisfaction with how their donations are being used.
    • Ask them about their satisfaction with your impact reports.
    • Ask them about the causes the interest them (If your nonprofit has multiple).
  • Lapsed Donors
    • Ask them why they stopped giving
    • Ask them what you could have done better.

Services like SurveyMonkey and Typeform make it easy to create feedback surveys for your organization.

Example: Here’s a donor survey sent out by Lakeland Volunteers in Medicine with questions that provoke actionable answers:

Not only do surveys give you valuable feedback from your donors that you can use to inform your donor retention strategy, they are also a form of communication that help you keep your donors engaged.

Donor surveys:

  • Keep donors invested in your cause
  • Show donors that you value their opinion
  • Allow donors to communicate any frustrations they have

Once you have collected feedback from donors, you will need to sift through it manually to identify the root causes of your donor churn.

How do you motivate donors to give again?

Here are some things you can do to address the common reasons that donors leave:

Why donors leave What it indicates What you can do
They think the charity didn’t need them. You didn’t communicate the impact of their donation well enough. Show them who is being helped with their funds or even allow them to choose what cause to support.
They were never thanked for their donation. You didn’t thank them, or thank them through the right channel. Identify their preferred communication channel and make sure they are sent a thank you message.
They received no information on how their money is used. You weren’t transparent enough on the spending of funds. Track where donations are being spent and send an update to donors.
They don’t remember giving to your charity. You didn’t reach out to them often enough to keep your organization on their mind. Send periodic, multi-channel communications to donors.
They can no longer afford to donate. If you have a minimum donation amount, it might be too high. If not, there’s not much you can do about that.

 

 

The main reasons for donor churn are different for every nonprofit, but there are some general strategies that can improve your overall retention rate:

 

Gather your data 

The most important step before actually putting any strategies in place is always calculating your donor retention rate.

Why?

Because that will serve as your baseline statistic.

With your donor retention rate, you can:

  • Determine how much of a problem donor retention actually is for your organization so that you can allocate resources accordingly.
  • Compare it with your future donor retention rate to measure the effectiveness of the strategies you implement.

In addition to calculating your donor retention rate, segment donors through your CRM:

 

Adopt a Multi-Channel Strategy

Corporations have found the secret to retaining customers, and there are a lot of ideas that nonprofits can borrow from them. Multi-channel communication is one.

For example, Netflix has a whopping retention rate of 91%. They have achieved that through the sheer amount of communication that they facilitate with their subscribers.

Through emails and push-notifications, they continuously demonstrate the value of a subscription to their service to their subscribers by sending segmented, considerate messages.

If nonprofits could adopt that mindset and focus on communicating the impact of a donor’s contributions to a cause, through multiple channels, they can drastically improve their retention rates.

In a study by Network For Good, they helped nonprofits adopt a multi-channel communication strategy for a three month period in 2016. What they observed was that nonprofits that increased the number of channels they used to engage donors had a higher retention rate year-on-year.

In addition, nonprofits that used two or more different types of communications had a higher donation total and a higher average donation amount.

 

Send Acknowledgements and follow-ups

This is the advice that is most often repeated when the topic of donor retention strategies come up. What are the hurdles that nonprofits face when actually implementing it?

The lack of data

You need to track information on your donors, their donations, and where those donations are being used in order to send out meaningful communications to your donors.

The lack of effort

Setting up segmentations and automations for all your follow-up communications takes effort. Calling up donors to thank them takes even more effort. But the dividends you get from making that effort are worth it:

The Network for Good study concluded that:

  • 41% of donors would donate again if they received personalized communication on the impact of their support.
  • 39% said they would give again if they received an email or text communication stating their impact.
  • 34% said they would give again if they received a swift thank you for their donation.

This goes to show the impact that even a rudimentary thank you can have on reducing donor churn.

 

Invest in donor service

Simply making it easier for your donors to give you feedback, suggestions, or complain can drastically improve your retention rates.

A report by Donor Voice on stopping donor churn talks about how actively soliciting feedback, fixing bad experiences, and improving good ones can improve relationships with donors, and lead them to a repeat donation.

 

Invest in new tools

The cost of overhead is the bane of many a nonprofit. A misconception that most donors and some nonprofits have is: “The more money you invest in fundraising, the less money you have for a cause”.

Donors want to believe that one hundred percent of their donation goes directly towards helping people. But that simply can’t be done.

Dan Pallotta gives a fascinating TED talk in which he speaks about this misconception in detail.

If investing in a robust CRM or in tools that help you communicate across multiple channels like emails, text messages or phone calls can help you raise more money from donors, it’s natural that more money goes towards your cause.

The trick is to communicate the benefits of investing in overhead to your donors.

In Conclusion

It is almost never a single, isolated incident that causes donors to stop giving, but a combination of factors which could start during the first interaction with your donors.

Finding these factors and implementing strategies to retain your donors requires proactive communication in the form of surveys to collect feedback from your donors.

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