Value of New Donors Is Largely Offset by Loss of Previous Donors, Study Finds

The gains that charities see from new donors and increased gifts from previous donors is largely offset by supporters who stop giving or reduce their contributions, according to a new study.

The analysis looked at contributions by new donors, previous donors who gave more, and lapsed donors who started giving again. It compared those gains with losses in support year over year. It also counted changes in monthly giving amounts.

It found that for every $100 that the nonprofits gained in 2016, they lost $95 from supporters who had given in 2015 but not again last year — or who reduced the amount they gave monthly.

The study was conducted as part of the Fundraising Effectiveness Project, a partnership of the Urban Institute, the Association of Fundraising Professionals, and more than a dozen donor-software companies.

Charities are keen on watching the overall change in fundraising from year to year, the report said, but they often neglect to drill down and examine the gains and the losses that make up those totals — information that helps with planning and budgeting.

Data from more than 10,800 nonprofits were included in the analysis. Together, those nonprofits raised more than $9 billion total last year, a 3 percent increase over 2015. They also experienced a slight overall increase in the number of donors.

The review of data found that nonprofits retained only 45 percent of their donors from 2015 to 2016. The rate was around 50 percent in 2005 but has been below that mark over the past decade, said Erik Daubert, chair of the Growth in Giving Initiative, which oversees the Fundraising Effectiveness Project.

Mr. Daubert hypothesized that the low retention rate could be the result of several factors. One might be that more young donors are giving, and, unlike older donors, who tend to be loyal to specific nonprofits, younger people are loyal to a cause and give to different charities pursuing similar goals.

Increased online giving and the growth in fundraising events also make it more likely than ever that donors will “give to a cause once and never give again,” Mr. Daubert said.

Keeping Loyal Donors

The low retention rate is problematic, Mr. Daubert said, because it’s often cheaper for charities to keep current donors giving than it is to acquire new ones. “The good thing about old [donors] is that they also tend to upgrade over time and deepen their relationship with the organization over time — which leads to things like planned gifts and larger, major gifts,” he said.

The study’s results signal that nonprofits need to figure out how to communicate better with new donors, who are more likely to lapse, he said. “If you get new donors, you [should] try to spend a little extra time with them so they can connect with the organization in a meaningful way and increase the chance they’ll give again next year.”

If nonprofits don’t figure out ways to increase retention, he added, “there’s a real concern that philanthropy will become more transactional over time, and thus the big gifts that come so often with a real, deep relationship with a donor and an organization will be lost in the future.”