Donor stewardship: How to build relationships & retain donors

Nonprofits always need to thank their donors. This is true whether the gift is small, major, or a planned gift committed as a bequest in a will. However, thank-yous are just the first step in building a long, thoughtful, and engaged relationship with your donors.These relationships don’t stop after you get a gift. This is where donor stewardship begins.

What is donor stewardship?

Donor stewardship is the relationship-building process that occurs after a donor makes a gift. The main purpose of stewarding your donors is to inspire them to give again. Creating a connection with your donors will make them feel loyal to your nonprofit. And this, in turn, will help you fundraise in the future.

Your stewardship goals should revolve around forming a mutually-beneficial relationship. In this relationship, your nonprofit receives financial support for its mission and your donors feel good (among other benefits). To build this relationship, most nonprofits engage in stewardship practices, such as updating donors on the impact of their gifts, reporting on their philanthropic efforts, and creating frequent opportunities and activities for donors to get involved.

How stewardship impacts donor retention

Donor retention is a measure of how many of your donors continue to give to your organization after their first gift.

If your organization isn't inspiring new donors to give again, you’ll have a low donor retention rate. If you have many repeat donors, you’ll have a higher donor retention rate. Your donor retention rate matters because it can have a huge impact on the financial health of your organization.

The latest annual report from the Fundraising Effectiveness Project by AFP showed that every $100 fundraised in 2018 was offset by $93 in losses through gift attrition. And for every 100 donors gained, 105 donors were lost.

Retaining donors generally costs much less than acquiring new donors. And recurring donors give an average of 42% more than one-time donors. So reducing your number of lost donors (and dollars) is the most efficient and least expensive way to fundraise.

Plus, the more gifts your donors give, the more likely they are to give again. Blackbaud’s 2016 charitable giving report found that the average retention rate was 29% for first-time offline donors and 21% for first-time online donors. However, those retention rates more than doubled for repeat donors at 60% and 58%, respectively. This shows that once a donor has given more than once, it’s easier to keep them in the future.

So how do organizations boost their retention rates? They invest in effective donor stewardship techniques that engage donors long after their first gifts.

Most donors lapse for preventable reasons. These include poor communication, never getting thanked, thinking other nonprofits were more deserving, or forgetting they donated. If your organization is losing donors, dig into the reasons for it. Then, you can work to improve those areas through stewardship. Even small practices like regularly communicating with your donors can increase retention rates. And this will improve the overall health of your organization’s fundraising programs.

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The donor pyramid & levels of engagement

Before you can steward your donors, you need to understand the different levels of donor engagement and commitment. Many nonprofits do this by using a donor pyramid as a guide.

A donor pyramid is a visual representation of donor types. It generally assumes that fundraisers need to engage in stewardship that guides donors up the pyramid — one level at a time — and onto the next commitment. Most donor pyramids start with occasional donors, volunteers, and event participants at the bottom. After that comes annual and recurring donors, then major gift donors, then planned gift donors at the top. However, the donor pyramid is only a guiding concept.

Use it to think about your donor levels and where your stewardship is lacking the most. Then, you can figure out how to improve engagement at each level to encourage repeat gifts. Be aware that not every donor will start at the bottom and work their way up. Some monthly donors will never have the capacity to become major gift donors. For others, planned giving may be the best way for them to make their first gift. Bequests in a will don't affect your donors financially during their lifetimes. And even though planned giving is at the top of the pyramid, you don’t want to stop stewarding those donors. Bequest donors are great candidates for annual giving. In an analysis of charitable giving in 2014, planned giving expert Russell James found that they increase their average annual giving by more than $3,000 after making a bequest commitment.

A perfect organization would steward every donor at every level of gift. But most nonprofits — especially smaller ones — don’t have the resources to do that. Outlining your nonprofit’s particular donor pyramid can help you identify the donors you want to spend the most time and resources on. For example, you may want to focus on first-time, small-dollar donors to get your retention rates up and grow annual or planned giving lists. Instead of thinking about moving these donors up each level of the pyramid, try to think about moving them around it. Offer your donors many different opportunities and ways to get involved. Donor stewardship is more of a cyclical than linear process.

Donor stewardship in the donor cultivation cycle

The donor cultivation cycle, or fundraising cycle, has five main steps: identification, research and qualification, cultivation, solicitation, and stewardship. This process helps nonprofits identify and cultivate their supporters into first-time donors. Effective donor stewardship also keeps previous donors in the cycle, cultivating them until they are recurring donors.

Donor identification

The first step in the donor cultivation cycle is to identify new prospects. You could also identify previous or lapsed donors, who may give again. What you look for in your donors will depend on the type of gifts you're trying to fundraise. Planned giving donors may look very different than monthly donors. And monthly donors may look different than major donors.

However, an effective way to identify your prospects is to survey your current list of supporters as well as employees, volunteers, event participants, and previous donors. You could also segment this list into several buckets and tailor your surveys to their engagement level. These buckets might include existing donors, lost donors, and engaged supporters who haven't made donations yet.

Surveys are a great way to sort out who in your community is ready to give and what type of gift they may be interested in making. They’re also helpful for getting to know your supporters on a deeper level. You can ask about their relationship to your organization, their needs, their motivations, and their interests, as well as demographic and lifestyle questions that may show their capacity to give.

Just make sure that whenever you send a survey, you include a clear explanation of why it’s important.

Donor research & qualification

Once you've identified a list of potential new and repeat donors, you will have to do some research on them. In this step, you will try to determine their propensity, capacity, and motivation to give.

To do this, look at philanthropic indicators like past giving or organization involvement, wealth markers like homeownership, and motivational factors like their emotional connection to your cause. If they meet your criteria for all three, then you can qualify them for cultivation. For example, someone who has given to your organization for many years, owns a home, and has a deep connection with your cause would probably qualify as a planned giving prospect. The next step for that prospect would be to engage with them and cultivate the relationship.

Donor cultivation

The term ‘donor cultivation’ refers to both the whole fundraising cycle and the step in the cycle where nonprofits need to begin relationship-building.

In this step, your organization should offer various ways for prospects to engage. Your main goal should be to strengthen your organization's relationship with them. In this way, it's like stewardship. However, cultivation focuses on prospects (and lapsed donors) while stewardship focuses on donors.

Here are a few ideas to start cultivating your donors:

• Offer volunteering opportunities
• Check-in on your prospects by phone
• Invite them to a virtual event like a trivia night

Cultivation should continue until you feel that your relationship with the prospect is strong enough to make an ask. Each of your prospects will have a different timeline for when they’re ready to give. However, your cultivation step shouldn’t last forever: you need to move your prospects towards solicitation.

Donor solicitation

Solicitation is the process of asking your prospects or previous donors to make a gift. The best way to do this is to personalize the ask to them and what you know about their propensity, capacity, and motivation to give. Base the amount and the type of gift you ask for on your research, as well as what you’ve learned over the course of building a relationship with them.

If your prospects agree to make a gift, your organization needs to be prepared to accept it and thank them. This may be more involved for major gifts or planned gifts like charitable gift annuities.

Of course, not every prospect will say yes. If they tell you no, your job will be to figure out how to turn that ‘no’ into a ‘maybe’ or an ‘at another time.’ If you do this, you can return them to the cultivation phase and continue building the relationship.

Donor stewardship

The donor stewardship process should start right after a donor makes a gift. There are four main parts to it: acceptance, acknowledgment, recognition, and reporting. As mentioned above, the process for accepting a gift will depend on the amount and gift type. For many gifts, like online donations, this will happen automatically.

However, once accepted, your organization needs to quickly acknowledge and thank the donor. This can be through a letter, email, or phone call. You should generally use the same channel that they made the gift on (i.e. an online gift would usually warrant an email over a direct mail letter). Your thank-you's should be personal, sincere, and lay the foundation for a continued relationship. They should not include another ask.

The next part of the stewardship process is to recognize your donors. Again, this will depend on the type and amount of the gift. Different gifts will warrant different levels of stewardship and recognition. For example, you should thank donors for small, first-time donations of $10 and they should continue to hear from your organization. However, a major gift or a large planned gift may require more public recognition. Recognition could include inviting donors to join your giving or legacy societies, naming buildings/rooms/walls/plaques/etc, or inviting them to donor appreciation events where you mention them by name.

No matter the level of gift, a best practice for donor stewardship is to report on the impact that your donors’ gifts have on your mission. For larger gifts, you may want to give these donors a call. For others, make sure you send regular emails or even public updates on social media.

Like with the cultivation step, your goal should be to strengthen your relationship and continue engaging with the donor. To make sure this happens, your organization may want to define your donor stewardship program.

Creating a donor stewardship program

A donor stewardship program is how nonprofits outline their specific policies, systems, strategies, and processes for engaging with donors after they make a gift. The stewardship program your nonprofit puts in place should change and improve as you get feedback from donors. You may also want to determine which team in your organization carries out each step, as well as set a clear timeframe for communications.

We go into these ideas in more detail (with examples) in our article on how to make a donor stewardship plan.

Donor segmentation

As much as possible, try to personalize stewardship to each of your donors. One way to do this is to segment your donors by gift size, frequency, and type. For example, you could categorize by new, loyal, or major donors. You could also segment by communication preferences or demographics.

You would then set guidelines for how your organization should recognize and steward donors in each segment.

Communication strategies & schedules

Stewardship outreach should fit into your organization’s annual plans and communication schedule. If your nonprofit is hosting annual events, include your donors in them. And if you’re pushing major fundraising campaigns, make sure that your thank-you's don’t overlap with donation asks.

Your communications should be regular, targeted, and not overwhelming in frequency. Use language that focuses on what the donor has accomplished with their gift, rather than your organization. And make sure that your communications are relevant to the donor. For example, you may welcome new donors when you thank them versus acknowledging repeat donors for their continued years of support.

Opportunities for engagement & feedback

Similar to when you’re cultivating prospects and donors, stewardship should provide opportunities for engagement and feedback. This is how you build relationships and deepen connections. Engagement could include moments or events for public recognition as well as volunteer opportunities. And you could gather feedback by hosting town halls or sending surveys.

This engagement process should continue until they are ready to give again or make another kind of gift.

Ready to kick start your planned giving stewardship? FreeWill can help.

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