We all strive for better retention, unfortunately it can be one of the more complex measures in fundraising. Conceptually, it seems easy. If a donor gave in one year, did they donate the next year? This approach (we call it snapshot retention1) has been used widely across the sector, and it’s the calculation we’ve used for a while too. Unfortunately, we believe this approach is flawed for several reasons, and it’s time we start looking for a more accurate measure.
How is it flawed?
1. Donors have different recency when they start their retention year
We all know recency is a significant indicator of whether someone will make a gift again. If we think about donors being retained in 2020, we start by looking at all the donors who made gifts in 2019. Some of these donors gave in January, some in June, and some later in December. The donors giving in January 2019 will be almost lapsing before we even consider them as being retained in 2020. In contrast, the donors giving in December have only just made a gift and are much more likely to make a gift in the future than those almost lapsing. For charities that recruit later in the year or with high performing end of year campaigns, their retention will look better than those with a strong focus earlier in the calendar year.
Our resident data scientist has put together a helpful explainer over here on how this recency can affect retention rates.
2. Donors have different lengths of time to be retained
Using the timing examples mentioned earlier, if we think about the overall timeframe for a donor to be considered ‘retained’, our donor that last gave in January 2019 may not donate again until December 2020. This means this donor has an effective retention window of 23 months. Our other donor that gave in December 2019, if they donated in December 2020, they have an effective retention window of 12 months. This creates two issues for us. Firstly, the 23-month window doesn’t reflect a reasonable timeframe for retaining a donor. Secondly, the different sized retention windows make imbalanced calculations depending on when someone donated in a given year.
3. Some donors are negatively affected by the timing of their donation
If a donor typically donates at the end of the calendar year. In the first year, they give in December, and the next year they give in January (a real possibility for those charities that have a third smaller wave in January). This donor wouldn’t be counted as retained, even though they’ve given to the same campaign.
What’s the solution?
Fundraising Insights is focused on providing measures that are useful for the sector to compare apples with apples across participating members, and we’ve invested considerable time and brainpower to address the shortcomings of snapshot retention.
After much thought, discussion and consultation with fundraising peers, we’ve landed on a calculation that looks at retention over 13 months. Why 13 months instead of 12 months? If we limit things to 12 months, we risk limiting opportunities for donors that give once a year to the same campaign each year. Ultimately it could be a few days or weeks after they donated the previous year, but it was still to the same campaign (e.g. A donor gives to the Tax campaign in May one year and then June the following year). This addresses issues with minor changes in donation timing; it also helps combat the challenges charities encounter with lodgement timings that may change from year to year.
The chart below demonstrates the growing retention rate as the retention window grows from 1 month to 42 months. A proportion of donors have minor variations in their donation timing year to year; we observe a boost in retention for month 12 and 13, not just month 12. This increase is why we’ve decided to use a 13-month retention rate for Fundraising Insights.
The 13-month retention rate looks forward in time, considers the people who made a gift, and calculates what proportion also went on to make a gift within 13 months. It allows us to overcome the three issues previously mentioned.
- The recency issue is overcome because recency is zero when we start calculating if another gift is made within 13 months.
- All donors are considered retained if they make another gift within 13 months; if not, they have lapsed.
- Using 13 months, a donor who made their last gift in December 2019 would be counted as retained if their next gift was in January 2021, which overcomes the transition from one calendar year to another.
13-month retention also helps facilitate our desire to provide insights twice a year; once on a calendar year cycle and once on a financial year cycle
If you’d like retention that is comparable regardless of how your donors are weighted across the year while considering the challenges of getting campaigns to market on time, register today for the 2022 round of Fundraising Insights.
We call it snapshot retention because it takes a ‘snapshot’ of the donors at the moment before the year they’re being retained in.↩︎