Donor engagement is shaping up to be the nonprofit challenge of the decade. Donors have been through a lot in recent years, and the dramatic changes in the world around them have caused many to revise their giving habits. This situation has made the outlook for nonprofit funding cloudier than ever. To continue doing good works in this environment, cash-strapped nonprofits need to keep pace with donors’ changing sentiments, circumstances and communication preferences. That’s where donor management comes in. Below is a toolkit of leading donor management practices to meet the challenge.
What Is Donor Management?
Donor management helps nonprofits cultivate relationships with donors by providing better information about donors’ giving histories, identities, motivations and other attributes. Managing donors involves collecting, analyzing and segmenting data about the current and potential supporters of a nonprofit’s work, then using those insights to attract new donors and steward relationships with current supporters.
In recent years, nonprofit development teams have been streamlining and otherwise improving donor management with software tailored to their needs. For instance, constituent relationship management (CRM) systems help teams segment donors for targeted outreach. Nonprofit CRMs are similar to the customer relationship management (also known as CRM) systems used by commercial businesses.
Key Takeaways
- Donor management sustains the lifeblood of revenue that nonprofits need to succeed in their work.
- In turn, the success of donor management can rise and fall on a nonprofit’s ability to collect and segment data for targeted use in communications and fundraising.
- Constituent relationship management (CRM) systems represent the leading edge of donor management capabilities today.
Nonprofit Donor Management Explained
Nonprofit development teams work toward four top-level donor management objectives:
- Acquire new donors.
- Retain current donors.
- Recapture lapsed donors.
- Increase the lifetime value of donors.
These objectives apply across the spectrum from individual donors to large, grant-making foundations, albeit in different ways. In all cases, they require nonprofit development teams to cultivate interactive, personalized relationships based on the teams’ knowledge of current and potential donors. Nonprofits put a special emphasis on donor retention because it typically costs less to achieve than donor acquisition — and delivers greater lifetime value.
Importance of Donor Management for Nonprofits
Nonprofit experts have an edgy saying that highlights the importance of donor management: “Donors are not ATMs.” Instead, development teams need to personalize outreach to and relationships with supporters, but it’s an uphill battle. By some estimates, 80% of first-time donors to a charity drop off after making only one gift, and donor attrition appears to be getting worse. In the wake of the pandemic, the Fundraising Effectiveness Project (FEP) reported a 5% decline in overall donor retention in the U.S. in 2022, following a 7% decrease in 2021.
Successful nonprofits prioritize retaining donors, in part because acquiring new donors is more expensive than holding on to current ones. That’s not the only reason, though. Over time, repeat donors can deliver compounding revenue as they recommit year after year at marginal development costs, increase their contributions, and even become ambassadors for a nonprofit’s cause. The upshot: A 10% improvement in a nonprofit’s donor retention level can increase the lifetime value of its fundraising base by 50% or more, according to noted academic Adrien Sargeant.
Donor Management Best Practices
How does a nonprofit stop donor attrition, increase current donors’ giving, acquire new donors and reengage those who’ve lapsed? Tall orders like these require strategic planning and execution of leading practices, including the following:
Segment donors.
Segmentation helps target donor solicitation, re-solicitation and other communications. It divides a donor base into groups defined by attributes, such as giving habits, interests and demographics. Donor segmentation can range from the transactional to the highly personal, the latter of which experts recommend for better results. Under one model, called Relationship Fundraising 3.0, a more personalized approach has been shown to dramatically increase giving while enhancing levels of supporter satisfaction. The many ways to segment donor populations for more targeted outreach include:
- Transactional: Segments in this category might include repeat, monthly, lapsed or major donors.
- Demographic: Generational differences can include everything from level of giving and type of cause supported to the individual’s tendency to make longer- or shorter-term commitments — not to mention preferences for online versus old-school communications. Beyond identifying who’s Gen Z and who’s a Boomer, other demographics to consider might be gender, race, ethnicity, education and geographic location.
- Personal: Understanding and speaking to a donor’s self-identity as a proud local citizen or a music lover, for instance, could boost a nonprofit’s appeal for support of a downtown concert hall. This degree of personalization goes well beyond the basics of using prospects’ names in email campaigns.
Track donor data and keep it updated.
The data used to segment donors might come from focus groups, surveys, a purchased list or a nonprofit’s own records within its CRM system or on its spreadsheets. Any interaction between nonprofits and potential or current donors — from website visits to solicitation responses to attendance at an annual gala — can generate data that should be captured and applied to fundraising and donor stewardship.
At the same time, a donor’s capacity to give or affinity to various causes will probably change over time — as might their basic contact information. Database maintenance can keep outreach efforts on target while minimizing the chances of annoying donors with duplicate or irrelevant appeals, among other missteps. Studies have shown that providing more satisfactory service to constituents can be as important to a donor’s loyalty as their commitment to a particular cause.
Use technology.
In a recent survey by Amazon Web Services (AWS), nonprofits cited three primary reasons for using digital technology: expand fundraising and outreach efforts, increase engagement with constituents and improve efficiencies/reduce costs.
CRM software represents the leading edge in the evolution of donor management software; it’s used to store, segment, track, automate and personalize donor information and outreach. A CRM system consists of a donor database of information — such as contact details, individual profiles and giving history — as well as other donor management capabilities to track relationships, automate communications and deliver reports. CRM systems can also integrate with other tools, such as donor prospecting databases, online donation pages and accounting software, to identify opportunities, capture contributor interactions and process donations.
Yet, some nonprofits struggle to comply with the up-front requirements for transitioning from their established ways of working manually on error-prone spreadsheets and reentering data across multiple, fragmented systems. Lacking the budget and skills for digital transformation, nearly 30% of fundraising and development departments still primarily store data in spreadsheets, according to a survey by NTEN, a nonprofit IT training group. The AWS survey showed nonprofits falling along a spectrum, from just talking about digital transformation to transforming certain departments to embracing digital transformation across their organization.
Personalize communications.
Email is a top tool for nonprofits for several reasons. Most people use email, and they check their inboxes regularly. Additionally, performance metrics for nonprofit email marketing are stronger than for most other sectors, with an average open rate of 26.6%. So far, so good. But without personalization, those opened emails may just fall flat.
Fortunately, email also lends itself to personalized communications in ways that channels like social media, digital advertising or direct mail cannot. Segmented donor lists provide the means for more targeted, low-cost distribution of fundraising emails and other communications tailored to different prospects by age, location, giving history, personal motivations and other characteristics. Content can be written for specific donor segments or in response to particular activities, such as volunteer engagements. From there, modern email tools let nonprofits autofill even more personal information, starting with names but also including details like a donation amount in a thank you letter, for example, or the name of a campaign the recipient supported.
Keep donors up to date.
Email newsletters can provide actual and would-be donors with the kind of information they care about most, especially anecdotal and statistical information demonstrating the good that a nonprofit is doing with donor funds. How often newsletters go out varies by type of nonprofit. Nonprofits addressing poverty and hunger sent an average of six newsletters in 2022, for example, while media watchdogs sent 28, according to M+R, a nonprofit consultancy.
Email newsletters make up a key part of a communications toolkit that also includes direct mail, digital advertising, social media, text messaging, websites and other types of emails, such as one-off messages reporting on significant developments. Each tool plays a different role in keeping donors up to date; for example, email might be reserved for major updates, while social media can keep a conversation going with more casual posts about daily activities.
Don’t stop asking for donations.
Fundraisers often put a lot of effort into making the initial ask for support and then simply wait and hope for the best. According to one analysis, though, follow-up represents 75% of the development process. Follow-up can mean sending a thank you for a meeting, incorporating new information, or perhaps a special invitation to meet beneficiaries. Even if a potential donor’s immediate answer is no, their priorities may change over time; in this case, follow-up could simply involve asking to stay in touch and sending occasional updates. Tracking each developmental step can set the stage for future success by recording a prospect’s details, related research, pre-ask conversations, responses to request and any follow-up.
Some fundraisers are overly hesitant about asking in the first place, experts say, or they worry about asking too often. But the reality is that it usually takes more than one touchpoint — some say more than 10 — before a donor decides to give. Every nonprofit should test out its communications cadence. For example, some experts recommend at least four direct mail appeals a year, one monthly email and unlimited social posting (keeping in mind that emails aren’t always opened and should make it easy to unsubscribe). Repetition can help nonprofits stay on donors’ radar and, ideally, catch them at the right moment.
It’s key to communicate compelling information in any appeal, reassuring donors that they’re making a good investment. Monitoring responses is also important because it may expose a need to adjust cadence to avoid triggering donor fatigue.
Use data to find opportunities.
The annual “Philanthropy 50” makes for interesting reading about multimillion- and billion-dollar donors, but this list may not represent the most practical donor research. Donor prospecting mines data on current and potential supporters using a combination of tools and activities. A first search should be made in a nonprofit’s own CRM system or other donor database to uncover existing supporters who could be giving at higher levels. Other data sources include:
- Online foundation directories and grant search engines: These can help search for grant-makers and grant opportunities.
- Donor databases: To research individuals who might potentially become major donors, nonprofits can buy databases culled from public records to produce indicators of an individual’s net worth, giving history and current involvement with causes and communities.
- Email and direct mail lists: Many lists are available for purchase, targeted by geography, nonprofit sector and other types of segmentation.
- Unstructured data: Monitoring social media can help with both small- and big-dollar donors. Followers on Facebook could be brought into an organization’s family of donors, for instance. Or, identifying one of their board member’s LinkedIn connections might help development teams encourage board-level fundraising in high-net-worth networks.
Get donors involved beyond donations.
Going beyond communications and fundraising appeals, nonprofits can engage donors directly in their work as volunteers. Volunteers contribute their time and skills to helping nonprofits perform activities, such as teaching English as a second language. Many volunteers show up because they have a donor relationship with the nonprofit. Others become donors as a result of their volunteering.
Nonprofits surveyed by the Do Good Institute at the University of Maryland said that using volunteers helps them increase the number of beneficiaries served and frees up staff to do other work. Four in 10 also value volunteer programs because volunteers commit as donors.
Tracking volunteers and the hours they serve becomes important for reasons beyond their giving habits. Some organizations receive funding based on volunteer hours. Even if they don’t, nonprofits can use the data to better understand real program costs (including pro bono), keep volunteers engaged with motivational messaging or recognize when a volunteer program might not be working out.
Evaluate strategies and adjust.
Nonprofits need to sustain relationships with many types of donors and revenue streams: individuals (online, in person or via direct mail), foundations and corporations (highly tailored communications and program development), government funders (competitive processes) and revenue from services (for example, fees for adoption at an animal shelter). Individuals provide most funds, but the mix varies depending on nonprofit type.
Several metrics can measure the effectiveness of donor management strategies across different types of donors and levels of giving, according to FEP. Basic measures include donor retention rates for relatively new donors, repeat donors and overall; the number of donors gained or lost; the increase or decrease in funds raised; cost per donation; and the total growth in number of donors. CRM dashboards deliver this kind of information on an ongoing basis, so nonprofits can evaluate progress and make timely adjustments in their donor management strategies and practices.
Benefits of Effective Donor Management
Donor management can be the gift that keeps on giving, not only in terms of improved donor acquisition and retention but also better decision-making with regard to overall fundraising strategy. These and other benefits are described below.
Increased donor retention: It bears repeating that donor retention delivers greater value to a nonprofit than donor acquisition. By some estimates, acquiring donors can cost roughly 10 times more than retaining existing donors. But there’s more. Cultivating strong relationships delivers greater predictability for organizational planning and sustainability. High donor retention delivers reputational benefits and word-of-mouth publicity. And, most major donors start their nonprofit relationships as repeat donors giving smaller amounts.
Donor retention requires donor management. In addition to tracking contact and relationship details, CRM systems and other donor management tools can segment donors according to their personas, communities and causes to target ongoing communications and outreach.
Improved fundraising efficiency: Fundraising isn’t free. For example, a survey by the M+R consultancy shows that nonprofits spend an average of $3.41 on digital advertising to acquire a single new lead or potential donor. CRM systems and other donor management tools can make fundraising more cost effective by:
- Segmenting prospects by wealth, location or relationships with peer organizations.
- Targeting and monitoring digital advertising campaigns.
- Personalizing emails by name, location, persona or other attributes.
- Automating email distribution by segment, schedule or other triggers.
- Integrating with accounting software to track donations.
Increased donor engagement: As donor management enables development teams to communicate with donors on more intimate terms by segmenting personas, targeting prospects and personalizing messages, it opens the gateway to donor engagement. Deeper engagement comes with invitations to fundraising events, requests for volunteers and tailored giving opportunities that match donor profiles to specific projects.
CRM solutions can provide indicators of a donor’s potential to engage more deeply by monitoring interactions, ranging from opened emails to the so-called “recency, frequency and monetary value” of their donations. Development teams shouldn’t overlook the opportunities that can be found right there in their databases for existing donors to step up to new levels of engagement and giving.
Enhanced donor experience: Donors want, first and foremost, to know that any nonprofit they support is making a difference. So transparent reporting on program activities and resulting effects can deliver the highest satisfaction levels among supporters.
At the same time, the customer service aspects of donor management cannot be ignored, as academics have identified this area as a top driver of loyalty. CRM systems can store individual supporters’ communications preferences, for example, and de-duplicate contacts so that donors are not delivered multiple copies of the same pitch.
Better decision-making: Donor management data feeds back into a nonprofit’s fundraising and stewardship strategies. If the donor retention rate is too low, for example, the development team may want to consider a recurring giving program. Or, if the average gift size is low, the team could consider tactics that focus more on major gifts or publish specific giving levels. Dashboards provide development teams with various views of their performance based on data types, such as repeat giving rate and average gift size, among others.
How to Build a Donor Management Strategy
Data fuels donor management, and any donor management strategy rests on an organization’s technology choices for storing and managing that data. Development teams can strategize based on donor data, while also making explicit plans to incorporate more and better data for strengthening relationships with donors.
Components of a Donor Management Strategy
Identify your organization’s donor management goals and objectives.
As in any project or business plan, goal setting not only focuses a team’s work but also sets the stage for understanding when progress is or isn’t being made. A nonprofit’s goals might include donor retention, higher levels of giving or enhanced donor experience. Objectives along the way to these goals might include improvements in communicating impact or facilitating online donations. The road map to achieving the organization’s goals and objectives might involve steps along a timeline, such as holding an event or getting qualified for employers’ matching gift programs.
Understand your donor base.
To understand would-be donors, a nonprofit’s development team might look outside of its organization, purchasing prospect lists broken out by wealth or philanthropic activity. Looking inside the organization’s own database, however, might be more lucrative and less costly, since retaining donors costs less and delivers higher lifetime value than focusing primarily on donor acquisition.
Develop a communications plan.
All donor management strategies should involve detailed, interactive communications plans. Once the target audience is defined and goals are set, specific activities with timelines should include:
- Establish/update brand messaging and create compelling content.
- Conduct outreach via email, text, digital advertising, social media, direct mail or other channels.
- Establish/strengthen the organization’s web presence, including donation buttons, feedback forms and other interactive elements.
- Set in-person meeting schedules.
- Organize events.
- Capture donor data from all interactions occurring in the organization’s CRM system.
- Embed success metrics within each activity to review and revise communications throughout the year.
Engage with donors.
“Interactive” is the operative word when it comes to donor management. Bearing in mind that “donors are not ATMs,” development teams can make the most of any donor interaction by capturing data about their supporters to shape campaigns, target communications and follow up. At the same time, they can make it easy for donors to provide input and feedback online or in person.
Provide donor recognition and appreciation.
It takes planning to show adequate donor appreciation. Nonprofits should follow up on all interactions with donors — donations, meetings, event attendance, phone calls — with an immediate note of thanks, preferably automated and combined with compelling messaging about the project or program being supported. This not only engenders well-being in a donor but also keeps the conversation going. Public donor recognition delivers multiple benefits, both in improving a donor relationship and in elevating a nonprofit’s cause and consideration among a donor’s peers.
Build relationships with donors.
Donor relationships build over time, but not simply as the cumulative result of generic interactions. Specific activities, based on such attributes as level of giving and length of engagement with an organization, should be slated during a donor life cycle. For example, “recognition tiers” might start with an appreciative email for any donation and become more effusive as dollar amounts increase. Organizations should set an escalating scale based on the level of donation for social media shout-outs, mentions in newsletters, plaques, personal meetings, visits with beneficiaries or gala events.
Measure and evaluate success.
Evaluating progress toward strategic donor management and fundraising goals can fuel team satisfaction, facilitate board and donor reporting, and enable necessary course corrections. To this end, organizations can collect and measure data on donor interactions (such as emails sent, opened, clicked through and acted upon), donation frequency, gift amounts and other key metrics.
Development teams using CRM systems and other donor management tools should routinely capture data from any interaction with their donors, from event attendance to email-open rates to volunteering. They could also reach out to survey donors about anything from communications preferences to level of interest in specific projects and programs. Online feedback forms and offline meetings present other opportunities to listen to donors. Experts say that nonprofits often overlook their potential to increase their own donors’ giving frequency or level.
How to Cultivate Donors
With a donor management strategy in place, including the best practices described above, nonprofit development teams should keep the following principles top of mind:
Engage with donors.
Nonprofits must elevate donor relations from the transactional (“What can you do for us?”) to the personal (“What do you care about?”). They should ensure that communications with supporters are interactive, whether online or during in-person meetings, and focused on actively listening to their donors and prospects.
Provide donor recognition and appreciation.
It may be a truism, but the power of a simple “thank you” cannot be overstated. And nonprofits cannot leave this critical aspect of donor relations to chance. They should plan ahead for donor appreciation and recognition, from an automated “thank you” at a certain level of giving to a full-fledged public relations push for major donations.
Build relationships with donors.
Nonprofit organizations shouldn’t expect relationships to bloom just because of the good work that is being done with their money. They need to plan intelligently for relationship-building activities throughout the donor life cycle, whether in person or online, using data about their profiles and activities to trigger various forms of outreach.
Provide donor opportunities to get involved.
The benefits of volunteerism go well beyond operational benefits to a nonprofit, such as relieving staff burdens, reducing costs or expanding services. Volunteers often become some of the most committed donors to the nonprofits where they work.
Listen to donor feedback.
Most nonprofits have compelling stories to tell, but if they don’t listen to donor feedback, they may fail to impress. Understanding donors helps a nonprofit’s story resonate with prospects and supporters by tapping into their motivations and personas. Capturing donor feedback also enables development teams to improve donor satisfaction, a critical determinant of donor loyalty.
Provide impact reports.
Impact is the gold standard of donor metrics. Supporters want to know that their dollars are going to a good cause that actually makes a difference. Development teams need to work with program managers to mine compelling impact metrics and narratives to convey to donors.
Provide transparency.
Donors want to know that the organizations they fund are well managed for long-term sustainability. Given the restrictions that many supporters place on the funds they give, they also want to ensure that their dollars are being spent as they intended. In addition to regular donor reporting, many nonprofits post their annual IRS Form 990 nonprofit filing and other financial reports on their websites, employing rigorous accounting standards that are readily understood by all donors. Keep in mind that third-party aggregation sites, such as Candid/GuideStar and Charity Navigator, may also be publishing metrics on your organization based on IRS filings and other input.
How to Measure Donor Management Success
The goals laid out in a donor management strategy set the stage for measuring success, whether they involve acquiring new donors, retaining current supporters, increasing donors’ level of support or other aims. Here’s a breakdown of key donor management metrics that can help in planning, reporting and revising strategies.
Retention Rate
A nonprofit’s donor retention rate could well qualify as the single most important measurement of donor management success or failure. Retaining donors delivers more sustainable revenue at lower cost than continually acquiring new donors who churn. Yet typical donor retention rates are estimated at 35% to 45%. This is one reason many nonprofits steer donors toward monthly recurring donations in hopes of keeping the momentum going.
Donor Acquisition Cost
Donor acquisition costs more than donor retention. The Association of Fundraising Professionals has estimated that it can cost five times more to convert a prospect into a supporter than it costs to get a second donation from a current donor. For this and other reasons, nonprofits need to track costs per prospect lead, per donor acquisition and per total dollars raised, as well as other pertinent metrics.
Donation Frequency
Calculating donation frequency simply requires analyzing a particular donor by the number of gifts in a particular time period — or finding the average frequency across all donors. A metric like this can feed into decision-making on whether to increase the cadence of an organization’s communications, for example, or introduce a monthly sustaining membership program.
Average Donation Size
According to the Fundraising Report Card, a real-time benchmarking website, about 75% of donors give less than $100, but only about 5% of all donation revenue comes from this under-$100 donor category. Small and large donations both have a place in a nonprofit’s funding mix. Understanding the average donation size across different donor segments by means of a CRM system or other donor management tool can inform strategies aimed at getting bigger donations. One such strategy might be the publication of a list of specific donation levels and their merits.
Donor Lifetime Value
Knowing the average lifetime value of different donor segments can help focus fundraising spending and campaigns. The formula for donor lifetime value is derived by multiplying three averages: length of time as an active donor, average donation size and average frequency.
What Is Donor Management Software?
Donor management software provides a 360-degree view of current and prospective donors, tracks relationships with multiple donor types by segment, automates targeted communications, and produces actionable metrics and reports. CRM solutions represent the leading edge of nonprofit donor management software today, replacing manual, error-prone spreadsheets and including the capability to integrate with tools for accounting and other functions and databases related to fundraising.
What to Look for in Donor Management Software
CRM systems organize essential donor data to drive donor management, and they can also help automate outreach and provide integrated views across other departmental data, such as financials. CRM use cases range from automating simple thank-you emails to personalizing salutations or adding more directly relevant content in communications that donors receive.
Fundamental cloud networking capabilities, ease of integration with related applications, and dashboards providing a 360-degree view of donor profiles are among the baseline requirements nonprofits should seek in a CRM solution. In some cases, nonprofits can also ask for inclusion in vendors’ no-cost activation and pro bono support programs.
Manage Donor Communications and Relationships With Ease in NetSuite
NetSuite CRM has a strong track record in both the business and nonprofit worlds. For nonprofits, it helps manage interactions with current and potential donors while also integrating with tools, such as online fundraising applications, for ease of use. NetSuite CRM provides a seamless flow of information across the entire donor life cycle — starting with leads and continuing all the way through donations, renewals and beyond to deeper engagements and commitments.
Donor management is essential for nonprofits to raise the revenue they need to achieve their missions, putting data about prospects and donors to work in targeted communications and fundraising efforts. CRM systems can boost these efforts by providing nonprofits with a single platform to store, organize, segment and automate donor data and outreach.
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Nonprofit Donor Management FAQs
How do nonprofits manage donations?
One effective way for a nonprofit to manage donations is to link its constituent relationship management (CRM) system with the online fundraising features on its website and the accounting software in its back office for automated, streamlined donation collection and processing.
What is donor management?
Donor management is a data-intensive strategy nonprofits use to raise revenue. It involves an ongoing effort to cultivate relationships with donors, using information about their giving histories, identities, motivations and other attributes. Nonprofit development teams collect, analyze and segment data about current and potential supporters in constituent relationship management (CRM) systems to support communications and fundraising campaigns.
How do nonprofits keep track of donations?
Constituent relationship management (CRM) systems represent the leading edge in technology for tracking donations, when integrated with a nonprofit’s accounting systems. CRM systems let nonprofit development teams leverage data about donations to communicate further with donors and deepen their commitment.
How do nonprofits get more donors?
Nonprofit development teams can purchase lists of donor prospects segmented by wealth, location, giving history and other attributes. While these can facilitate donor acquisition, experts say nonprofits can often derive a greater return on donor management and fundraising efforts by keeping current donors in the fold and engaging them more deeply to encourage higher giving levels.
