Accurately Calculating Donor Retention By Stuart M. Manewith
T
here has been a lot chatter recently on the topic of donor retention. In fact, not just recently. When I entered the hospital fundraising field in the 1990s, and was focused mostly on direct mail and telephone programs, donor retention was on our minds and was always a strategic priority. But, with all that conversation, I’ve seen very few articles that discuss how to actually calculate donor retention; and those that do, either don’t provide the details some healthcare fundraisers ask about or they don’t discuss ensuring accuracy and consistency in those calculations. It’s especially important that the donor retention calculations are solid from the beginning because so many healthcare foundations bring external supporter and transactional data into their main CRM systems from peripheral sources.
The Basics and Baselines Let’s start with some baselining—for the purpose of this article, donor retention is defined as the number of donors that donated in the past and that renew (donate again) from one time period to another, typically the from one year to the next. So for example, those donors who gave in 2018 and then donated again in 2019 were retained. Then you can calculate your donor retention rate by dividing the number of donors that renewed by the total number of donors that donated in the past. Donors This Period*
Donors Last Period (Baseline)
by understanding the denominator: the total number of donors in the past year. That becomes your retention baseline. Then, pull the subset of those donors that donated in the current period. Another mistake that leads to inaccurate donor retention calculations is (inadvertently) including donors in the numerator who were not part of the denominator. For retention calculations, it’s important that your total number of donors in the retention period includes only those that were also included in the baseline period. The most common “period” is a conventional 12-month year––whether that’s a calendar year or your hospital’s fiscal year or fundraising campaign year. Since most financial results reporting revolves around annual cycles, and since most donors’ donation habits also revolve around annual cycles (for tax purposes if nothing else), year-over-year (YoY) donor retention rates tend to be the most conventional metrics. That being said, donor retention can be calculated on any two (or more) time periods, but the calculations will only be as valid as the consistency that is applied. Below is an example of a YoY donor retention analysis using a non-standard fiscal year:
Donor Retention Rate
*Donors This Period, that were also Donors Last Period
However, those who are running these numbers often start by attempting to compile the numerator first, when the best practice is to start AHP Healthcare Philanthropy Journal|Winter 2021| 42
