Why holding on to loyal donors is not the right advice for every nonprofit
As humanitarian funding shrinks, conventional fundraising wisdom says to hold on to loyal donors. But new research shows that the value of a donor depends on how a nonprofit is set up. For many organizations, winning new donors matters more than keeping loyal ones.
The research published in Production and Operations Management suggests that the traditional advice to hold onto loyal donors may not be universally applicable for all nonprofits. The study, coauthored by Eric Quintane, Gloria Urrea, and Sebastián Villa, analyzed 20 years of grant data from over 3,300 humanitarian nonprofits and 1,255 institutional donors.
The researchers found that focused nonprofits, which concentrate on a single service, benefit more from acquiring new donors compared to stable donors. This is because their narrow scope makes them vulnerable to shifts in donor priorities. On the other hand, diversified nonprofits, which operate multiple programs, rely on stable donors to keep their coordination costs low.
The study emphasizes that the value of a donor depends on the nonprofit's operational strategy, with focused organizations needing new donors to mitigate risks and diversified organizations relying on stable donors to maintain operational efficiency.
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