How to keep more donors for longer
All charities, NGOs, political parties, and membership organizations are focused on growth: signing up new regular donors, supporters, and new paid members.
All very good, but eventually, ‘Churn’ really eats away at your revenue stream
Getting new donors is always more expensive than keeping existing ones.
On average, it can take 18-24 months to recoup the money spent to attract first-time donors. Think of all the human and financial effort, all those conversations, media buys, campaigns and events involved in signing a new donor up. Keeping them is vital!
Imagine riding a bicycle with very slowly deflating tires - for the first few weeks, you don't notice much, but it gets worse after a couple of months. Then, finally, if you do nothing at all, you'll slowly grind to halt.
Churn can be a real drag over time.
The churn rate - also known as the rate of attrition - is the rate at which regular donors stop giving (or members leave). It is most commonly expressed as the percentage of subscribers who discontinue their subscriptions within a given period of time.
At it’s most simple:
(Donors at start of the month - Donors at the end of the month) / Donors at the start of the month = Monthly Churn Rate
Typically it is expressed as a percentage, for example:
(500-435) / 500 = 13%
Each month 13% of donors are being lost to ‘Churn’.
Like a leaking bucket, if left unchecked, Churn can silently kill your income stream over time. With a high churn rate, if you don't keep refilling the bucket with new donors at a higher pace than you lose them, your monthly revenue will eventually wind up at zero.
Imagine you had a monthly churn rate of 13%. It doesn't sound too bad, right?
But let’s look at the effect of this on 1000 donors giving $12 per month:
Month 1 = 1000 donors
Month 2 = 870 donors
Month 3 = 757 donors
Month 4 = 658 donors
Month 5 = 572 donors
Month 6 = 498 donors
Month 7 = 433 donors
Month 8 = 377 donors
Month 9 = 328 donors
Month 10 = 286 donors
Month 11 = 248 donors
Month 12 = 216 donors
Our revenue has dropped from $12,000 per month to a measly $2,592 per month over just 12 months. Pretty bad.
This is because, over time, churn compounds to make an outsize impact on your potential future revenue.
Because of the compounding effect of churn rates, even a seemly small improvement can have a tremendous impact on your bottom line.
For example, if we went from a churn rate of 13% (avg. credit card churn rate) down to 2.9% (avg. Direct Debit or ACH rate).
Let’s look at the effect of this on the same 1000 donors giving $12 per month:
Month 1 = 1000 donors
Month 2 = 971 donors
Month 2 = 969 donors
Month 3 = 941 donors
Month 4 = 913 donors
Month 5 = 886 donors
Month 6 = 861 donors
Month 7 = 836 donors
Month 8 = 811 donors
Month 9 = 788 donors
Month 10 = 765 donors
Month 11 = 743 donors
Month 12 = 722 donors
Our revenue has dropped from $12,000 per month down to $8,664 per month over 12 months.
After one year at a 2.9% churn rate vs. a 13% churn rate that’s a whopping 234% increase in monthly revenue.
Imagine the compound effects over five years or longer!
While there is no single fix to the problem of churn but there are (proven) ways to address different types.
Voluntary Churn is the act of donors actively initiating the end to their subscription. Maybe they don't understand your impact or want to support another cause. There are many ways you can address this; whilst many of these are pretty basic, they can significantly impact retention over time.
Storytelling and Communication
Let donors know about the outcomes their contribution is directly having. You wouldn't pay for something without knowing what you were getting, so why continue a monthly gift if you don't understand the impact of your giving?
It sounds self-evident, but people expect a thank you immediately (and often) when they give. So reach out to your donors at other critical times of the year, such as the holidays, birthdays, and key dates.
Community and Activities
Donors want to feel part of something bigger. Providing opportunities to be involved and meet your community, both face-to-face and online, is vital to building long-term support.
Speak to donors in a way that will resonate with them, segment information and send them the impact content they care about most.
This list is non-exhaustive; there are many more methods.
Involuntary Churn happens when a donor stops giving without intending actually to stop giving. For example, not updating billing information (expired cards) and soft declines when a credit card is maxed out. Or hard declines when a card is lost or stolen, or if the donor switches bank account.
Nothing is worse than losing good donors to failed payments!
Involuntary Churn can account for up to 40% of overall Churn, but, with good systems, it can arguably be more straightforward to fix (and measure) than voluntary Churn. This is where 'dunning' practices come in.
Dunning is what happens after a payment fails. What you do, exactly when and how, makes a huge difference.
First, offer donors Direct Debit or Bank Debit (such as ACH debit in the US)
Getting your regular donors on direct debit or bank debit is the easiest and quickest win for donor retention. It also costs typically less per transaction than credit or debit card payments.
Send Fewer, Better automated emails
Doing nothing when payments fail is not an option, but waiting and automating, the right moment to intervene: that's best practice.
Avoid 'Pre-Dunning' (and don't start)!
In the past, organisations sent warning emails to customers 30, 10, and 3 days before their card expired. These emails were called “pre-dunning.” Today this is no longer needed.
Ensure a frictionless update experience
When you need to ask for new payment details (credit card numbers or bank account details), ensure the experience is as seamless as possible.
Trust is vital. Because of phishing scams, more and more donors are wary of clicking on emails to update their credit card or bank account details. By branding your receipts and follow-ups, donors can be assured that they are coming from a trusted source. Make sure they match your style and guidelines.
Make sure emails actually get delivered
As most online campaigners know, email deliverability is a massive topic in itself. It boils down to knowing, for sure, people see your emails, and they are not getting flagged up as spam (or not delivered at all).
With transactional emails for failed payments this, is even more important!
Here are a few tips:
No matter how much automation you do, humans will occasionally need to be involved with a more personal touch.
Is a high-value donor at risk of churning but has not to responded to direct debit update requests? Consider stepping in by calling them and sending a personal email.
Follow up failed payments
People have lots to do: they go on holiday, wait on a reissued card, get distracted when catching a bus…and all they often need is a nudge.
Your Churn rate may not seem like a big concern at first, but over time, it will silently eat away at your income.
While you can't eliminate donor churn, there are proven ways to drastically reduce it using a combination of best-practise, smart automation and human intervention.
If you are looking for a solution that covers all these bases - we are here to help. Your organization is unique, so creating workflows to ensure donors keep giving should match how you work.
SmartRaise offers a proven toolkit to help regain control over donor churn. Using nudge automations and best-in-class user experience to recover failed payments and keep donors giving for longer.
To find out more, book a demo and see how SmartRaise can help you grow sustainable donation income.