Fundraisers play an essential role in developing and nurturing donor relationships. A healthy relationship with your donors can lead to more positive donor engagement and interactions with your nonprofit’s campaigns and programs. As such, it is vital to know how to calculate and track the metrics that measure your donor engagement performance.
This article outlines metrics that nonprofits can use to assess the success of their donor engagement strategies and activities. By the end of this article, you’ll be able to measure the following metrics:
- Donor Acquisition Rate
- Donor Churn Rate
- Recurring Donors Growth Rate
- Gift Frequency Rate
- Second Gift Variance
Before we discuss each metric, let’s look at why it is so important to measure your nonprofit’s donor engagement performance.
Why Nonprofits Measure Donor Engagement
Quite simply, you can’t improve your donor relationships if you don’t know what you’re improving on. To maximize your fundraising campaigns and programs, you need to identify and track donor engagement metrics. As you do that, you’ll become more informed and equipped to experiment with creative donor engagement strategies and get better results.
The following are three key reasons nonprofits measure donor engagement:
1. Save Money Otherwise Spent on Donor Acquisition
Research has shown that acquiring a new donor costs ten times more than it does to retain an existing one. This is primarily because, to find a prospect who’s likely to give to your organization, you have to perform research on and send outreach to hundreds or thousands of prospects. Alternatively, donors who’ve previously given take considerably less effort to identify and solicit from.
2. Retain More Donors
Nonprofits only retain about 18% of their first-time donors from year to year. This level of turnover puts an enormous responsibility on fundraisers to keep donors engaged in the organization’s mission so they can solicit a second gift. This additional engagement is incredibly important. Nonprofits actually retain 51.83% of repeat donors.
3. Improve Donor Communications
Identifying engaged donors presents an excellent opportunity to segment those donors and make a targeted appeal. For example, donors who’ve made two or more gifts in the last six months are more likely to commit to monthly giving than those who haven’t. By segmenting these donors and sending them a targeted monthly giving request, you can more effectively prioritize outreach and hopefully increase recurring donations.
5 Metrics for Evaluating Your Nonprofit’s Donor Engagement Performance
By measuring the right donor metrics, you can examine the effectiveness of your donor engagement strategies and assess the health of your donor relationships. Let’s explore the 5 key donor engagement metrics you need to consider:
1. Donor Acquisition Rate
Donor acquisition rate is the percentage of your total donors first acquired within a specified period (monthly, quarterly, annually, etc.).
2. Donor Churn Rate
Donor churn rate calculates the percentage of donors who haven’t given to your organization again for more than a year. Ultimately, donor churn is an indicator of how successful your donor stewardship and engagement initiatives are. For example, if the churn rate decreases as you implement new donor stewardship initiatives, your efforts are likely working.
One thing to note: Don’t include donors who gave for the first time in the current year when performing this calculation. By counting these first-timers, you’d end up with an inaccurately low churn rate.
3. Recurring Donors Growth Rate
Recurring donors are necessary for nonprofits; they provide organizations with an influx of revenue over predictable and unpredictable periods. This helps nonprofits to make revenue forecasts necessary for organizational decision-making confidently.
Additionally, recurring donors are typically your most engaged donors, as they’ve committed to monthly, quarterly, or annual giving. Seeing an increase in recurring donors means that your donor engagement activities have successfully motivated donors to go one step further in their donor journey.
Formula For Calculating Monthly Recurring Donor Growth Rate
([Rec. Donors Added This Month – Rec. Donors Added Last Month ] Rec. Donors Added Last Month)) x 100 = Monthly Recurring Donors Growth Rate
([10 Rec. Donors Added This Month – 8 Rec. Donors Added Last Month ] ÷ 8 Rec. Donors Added Last Month)) x 100 = Monthly Recurring Donors Growth Rate
Fundraisers should use this metric as a way to understand if their recurring donation appeals are successful. For example, if there’s a consistent increase in monthly recurring donors added, it’s likely because a new appeal mechanism has been successful.
If you’re going to track and report on your nonprofit’s recurring donor growth every month, make sure to compare this month’s performance to the same month last year. You should consider doing this to account for changes that may be attributed to the specific time of year rather than specific appeal strategies.
4. Gift Frequency Rate
Another measure of engagement is the frequency with which donors give. Engagement techniques that prompt more giving over a standard period will improve organizational revenue and potentially promote faster advancement through the stages of the donor lifecycle.
Gift frequency rate measures the average amount of gifts given by a donor within a specified period. To calculate gift frequency rate, select a random sample that’s no less than 10% of your donor list and no less than 100 donors in total. Next, calculate the number of gifts the sample has given within a specified period. It’s best to measure this metric annually and compare the results to previous years.
Fundraisers can use this metric to evaluate the effectiveness of their solicitation strategies in promoting donations more frequently. Understanding gift frequency can also allow fundraisers to understand the maximum amount of appeals they can perform before they see diminishing returns.
More specifically, once fundraisers notice that, past a point, the number of appeals they send out doesn’t significantly increase overall donations, they will better understand the line between an adequate amount of solicitations and an annoying amount of solicitations.
5. Second Gift Variance
Observing the change in gift amount from a first donation to a second donation is a great way to understand how engaged a donor has become following a first gift. Second gift variance is calculated by selecting a sample of repeat donors who first gave within the same period. Next, add up the total amount of their first gifts and second gifts made.
Formula for Calculating Second Gift Variance
(Number of Donations Made by Sample ÷ Sample Size) = Gift Frequency Rate
([Total Amount of Second Time Donations – Total Amount of First Time Donations] ÷ Total Amount of Second Time Donations) x 100 = Second Gift Variance
([$12,000 – $8,000] ÷ $12,000) x 100 = Second Gift Variance
Second gift variance measures how successful you are at increasing donor contributions over time. If you determine your nonprofit organization’s benchmark for this metric, you can begin to experiment with appeals and see if they have any effect on the value of second gifts. Keep in mind that this formula can be repurposed to measure third, fourth, or even fifth gifts.
Build Better Donor Relationships with KIT
If you want to build a long-term relationship with your donors, you need to understand what they want, how they want it, and when. KIT can help you learn more about your donors and predict their next move.
With the 5 donor engagement metrics discussed in this article, you can assess the quality of your donor relationships, communications, and outreach activities. Most importantly, you can make the necessary adjustments to improve your strategies, win more donors’ trust and raise money more effectively.