Avoiding The Lapsed Donor Cliff
Donor retention rates are measured by taking the population of donors from a given year and calculating the percentage of those donors who made a gift in the following year. For example, if you had 1,000 donors in year 1 and then 600 of those same donors made a gift in year 2, then your retention rate would be 60%.
While retention rates can vary widely from one institution to the next, the median retention rate for competitive colleges and universities in the U.S. is, in fact, around 60%. One of the reasons it’s important to track retention rates is because they serve as a barometer of donor satisfaction and help you assess the quality of your stewardship efforts. They’re also a primary driver of donor counts and participation rates.
Prior year donors (often referred to in annual giving circles as LYBUNTs) are more likely to renew than any other segment. What’s more, the likelihood that a donor will renew increases based on how recently they made their last gift. For example, a donor who made a gift 12 months ago is statistically more likely to give again than a donor who gave 36 months ago. Knowing this doesn’t guarantee that the donor who gave 12 months ago will renew, but it can help you think about your segments and prioritize your resources.
Inversely, the likelihood that a donor will give again declines with every year that the donor lapses – in other words, each year that s/he doesn’t make a gift. “The Cliff” (as it’s commonly referred to) is the point at which the odds of getting a lapsed donor to give again are lower than those of getting a non-donor (i.e., someone who has never given) to make a gift. For most institutions, this is usually at 4-5 years.
Lapsed donors, interestingly, are also more likely to upgrade (i.e., increase the amount of their gift) than any other segment. This is particularly true for donors who have made:
- multiple gifts in a single year before lapsing
- a gift of $1,000 or more in a year before lapsing
- gifts in 5 or more consecutive years before lapsing
So while it can be tempting to focus on your current and most recent donors, make sure that you don’t ignore your lapsed donors. They can be some of your best donors. Pay attention to their unique behaviors and giving patterns prior to their lapsing. Then build a segmentation strategy for your appeals and stewardship efforts that makes the most of your limited resources and, most importantly, keeps those past donors from going over The Cliff.
Want to learn more? CLICK HERE for AGN’s Webinar on Reactivating Lapsed Donors.