Studies show that once you motivate a donor to give a second time, they’re much more likely to keep giving than a first-time donor. The average retention rate of a repeat donor is actually 33% higher than a first-time donor! What’s more, NextAfter reports that recurring donors can be up to four times more valuable than one-time donors!
Recurring donors provide nonprofits with the financial stability to pursue their mission sustainably and make long-term decisions; this is why donor stewardship is so important!
Stewardship practices also give a deeper meaning to your donor’s contributions, developing the bond of trust shared between them and your organization. With a well-thought-out stewardship plan, you can show donors they’re an invaluable part of your organization and predict when they’re likely to give again.
In this article, I’ll unpack four steps for building the perfect donor stewardship plan. Here’s what I’ll cover:
How Well Do You Know Your Donors?
Fundraising KIT provides you with essential contact insights such as the best way and time of year to reach out to each donor. With such insights and predictions, you can understand your donor behavior and steward them accordingly.
What is Donor Stewardship?
Donor stewardship is the process of effectively communicating the impact of a donor’s gift and demonstrating genuine gratitude. Additionally, stewardship is a way for fundraisers to maintain the bond of trust shared between themselves, the donor, and the community they’re serving.
Stewardship isn’t something a fundraiser starts and finishes but rather an ongoing cycle of activities that motivates donors to continue or increase their commitment. The stewardship cycle has five distinct stages:
- Acquisition: To begin any stewardship cycle, you need to be able to accept gifts. Whether you’re receiving an online gift, cash at an event, or a cheque from a major donor, you need an easy and reliable method to accept donations. The easiest way to ensure that gifts are managed correctly is by getting a CRM that automatically keeps track of gifts at all levels and their conditions. CRMs are a must-have for any fundraiser looking to save time and resources.
- Acknowledgment: Once a gift has been received, it’s crucial to show the donor that it has been cataloged and used in the way they intended. This stage of the cycle is also where you’d provide the donor with their gift receipt. Moreover, you should do this in a way that communicates your appreciation for their gift. Setting up automated receipting and “thank you” messages is a simple way to check all the boxes for acknowledgment. However, keep in mind that major gift acknowledgment will likely require more than a simple follow-up email.
- Recognition: This stage of the cycle requires you to understand what your donor’s expectations are. Recognition typically means going beyond a private thank you message and performing larger gestures such as applying naming rights to a building, drafting a handwritten “thank you” card, or even posting on Twitter. To pick what’s right, think about what best symbolizes your organization’s appreciation for your donor’s contribution.
- Communication: Donors want to see the impact of their gifts. Because of their commitment and passion, they want to know that their money is being put to good use and they’re making a difference. Each donor will require a different level of communication, such as subscribing to a newsletter, receiving personal impact reports, reading case studies, or scrolling through your social media page. Consider having various communication methods to account for the different ways your donors will want to hear from you.
- Cultivation: When a donor feels appreciated and confident in their gift’s impact, the bond between them and your nonprofit deepens. At this point, you must begin to work on your next gift. This is where the cycle restarts and where you can build on the relationship you’ve formed by asking for a larger contribution.
Keep in mind that the donor stewardship cycle can take many months and shouldn’t be rushed.
4 Steps to Creating a Perfect Donor Stewardship Plan
1. Segment Your Donors
Donor segmentation is the process of categorizing your donors based on particular characteristics. For stewardship, segmentation involves grouping donors based on the value of their gifts.
However, segmentation should primarily be used as a general guide to organizing different levels of stewardship activities. Many fundraisers create a donor pyramid to represent different giving levels and create a stewardship plan for how donors should transition to higher giving levels. Your pyramid can have as many levels as you want, but I’d recommend starting with four simple segments:
Non-Donor Contributors: These are individuals who’ve volunteered or supported your organization in some way but are yet to give. For this segment, you can continue sharing information about your organization’s impact. This can be done effectively by prompting these individuals to sign up for your organization’s newsletter, so you can continue to share impact stories and make digital fundraising appeals when appropriate.
New Donors: Once you have a first-time donor, it’s crucial to retain them. Ensure that each new donor is entered into an automated cycle that provides them with a “thank you” message, receipt, and some form of recognition, so they’re ready to take the next step up to the next level.
Repeat Mid-level Donors: Other than your major donors, your repeat donors and mid-level donors will provide the most value to your organization. While newer donors warrant an automated and efficient form of stewardship, your mid-level donors may need more attention to get to the next giving level. For many donors, this may mean having one-on-one conversations about the impact of their previous gifts and the potential impact they could have if they increased their contributions. An increase could look like giving a more significant amount monthly, making an annual major gift, or asking some of their affluent friends to give. Reach out to each donor to find out how they want to continue their support.
Major Donors: Most of your stewardship activities should be focused on your major donors. Although it may feel like you’re neglecting other donors, your major donors will likely provide the majority of your organization’s funding, and considerable time must be put in to maintain and increase their support. In fact, the Pareto Principle, a popular concept in the nonprofit sector, states that 80% of your organizational revenue is likely to come from 20% of your donors if you’re securing major gifts and bequests properly. This breakdown shows how important it is to sit down with your major donors and co-create a vision for your organization’s future. Try to identify exactly what your major donors want, such as naming rights, a board seat, or developing a new program. While you don’t want a few donors dictating your mission, you want their help expanding it.
2. Pick the Right Techniques
Because each donor is unique, they’ll require a particular form of stewardship that appropriately shows your nonprofit’s appreciation. However, it can be challenging to decide what’s appropriate for each individual.
So, I’ve outlined some of the uniting principles of stewardship and some standard techniques to draw on.
Principles of Donor Stewardship
Your donor stewardship principles are the key themes you should instill in your stewardship activities. Let’s take a look at the three major principles:
- Timeliness: Stewardship should respond promptly to current events to demonstrate that a donor is at the top of mind when it matters the most. For example, receipts and “thank you” messages should be sent out within 24 hours of a gift to show that a donor’s contribution is valuable to you. Likewise, newsletters should recap current events that donors will find most compelling.
- Storytelling: Within the majority of your stewardship activities, there should be an element of storytelling. Although writing a story may seem daunting, all you need to do is describe how your organization and its stakeholders have changed for the better because of the donor’s contributions. Try to focus on stories that donors will identify with to truly communicate the impact of their gifts.
- Preparedness: Ensure you have an organized timeline for your stewardship practices. Having a stewardship plan will help you prepare your communications long before you have to send them, allowing your stewardship to be timely. On the website Free Will, Simone Kovacs outlined an example of a stewardship matrix that will help you organize different types of stewardship activities along a yearly timeline. Be proactive, not reactive!
Donor Stewardship Tools for Nonprofits
Your stewardship tools are the methods you use to show your appreciation. I’ve listed some of the most popular tools:
- Welcome letter
- Thank you email or call
- Annual report
- Donor anniversary card
- Gala invitation
- Tax receipt
- Volunteer opportunity
- Personal impact report
- Update on gift use
- Video message
- Case study
- Donor society invitation
- Peer-to-peer leader invitation
- Spotlight in your newsletter
- Birthday card
- Naming rights
- A plaque
- Board seat
3. Reach Out at The Right Time
When you’re following up with a donation receipt or sending a happy birthday message, it will be obvious when to reach out to your donors. However, when cultivating another gift, at the tail end of the stewardship cycle, the timing isn’t as obvious.
To figure out the perfect time to make the next ask, you need to keep several factors in mind, like a donor’s preferred time of year to give and the typical frequency of their giving. Unfortunately, using these factors to get your timing right can involve mental math that fundraisers don’t have time for.
Make the Right Ask at the Right Time
With Fundraising KIT’s suite of data-driven tools, you’ll have the information you need to always make an ask at the right time.
For example, Fundraising KIT’s time of year analysis provides you with the months of the year your contact are most likely to donate in. What’s more, with Fundraising KIT’s Smart Ask feature, you’ll ask for the right amount each time. By analyzing your donor’s giving history and capacity, Fundraising KIT tells you the perfect amount to ask for so you get the most out of your donors.
4. Evaluate and Evolve
Once you’ve implemented some of the principles, techniques, and tools I’ve mentioned, you’ll need to know if what you’re doing is working. To understand the effectiveness of your stewardship, calculate your donor retention rate.
This metric reveals how many of your donors you’re likely to keep from one period to the next. It is a reasonably accurate representation of the effectiveness of your stewardship.
Here’s how to calculate your donor retention rate:
(# of donors who gave last year ÷ # of last year’s donors who gave this year) * 100 = Donor Retention Rate
This is generally an annually measured metric. Fundraising Report Card has calculated the Donor Retention Rate benchmark for all nonprofits to be 34.07%. If you find you’re lagging behind this benchmark, experiment with other stewardship strategies and tools to improve.
Talk to a fundraising expert today to learn more about how Fundraising KIT can quickly and easily help your nonprofit raise more for your cause.
Whether you’re sending out handwritten letters, engraving a plaque, or texting a donor, effective stewardship will increase your nonprofit organization’s financial sustainability and deepen the bond you share with your donors.
Use this guide to outline a stewardship plan that’s authentic to your organization, and don’t forget to tell each donor how thankful you are for their help in making the world a better place.
Nonprofit Research Analyst at Fundraising KIT
When Jack isn’t cheering for the Raptors or watching an 80s action movie, he’s studying the social sector and producing content for nonprofit professionals. As a Nonprofit Research Analyst at KIT, an AI-powered insights and reporting toolkit, he is especially passionate about helping fundraisers save time and raise more money for their cause.