As development
professionals we are
asked to raise funds and
build relationships with
donors. We do this and
then some. We create
strategies, work with
boards, cultivate a
presence in the
community, and many
other things.
One of the areas
where we fall short is
measuring results.
I know we have reports
of total giving,
expenses and net income.
We also have direct
response firms that have
taught us how to track a
direct mail appeal,
newsletters, and other
mailings.
But I am not sure we
are as good at analyzing
a strategy and
determining the ROI for
each strategy. The
ROI is the Return On
Investment. For every
dollar we invest, how
many dollars come in?
While there are many
formulas, ratios, and
other measurements to
consider, I would like
to offer some basic
targets for our
development strategies.
I will also try to give
some examples to support
my claims.
I will be using my
Development Strategic
Planning by
Relationships model for
measuring purposes.
(After all, it is MY
eNewsletter :-) )
Let’s start at the
bottom of the donor
pyramid with New Donors.
These are first time
donors brought in
through acquisition
strategies. Some
acquisition strategies
use rental lists of
names and send a direct
mail appeal, placing an
ad in a newspaper or
other newspaper type
ads, first time
attendance at an event,
or from a sign up at a
speaking engagement.
As you plan ROI for
New Donor acquisition
you should project a 1:1
ratio. In other words,
you should plan to break
even when you add a new
donor. It is expensive
to find a new donor.
Years ago a ministry
could make a profit on
new donor acquisition.
Today it is best to plan
on not losing money,
rather than making it,
one of your strategies.
The next category up the
pyramid is Impulse
Donors. These donors do
not plan when or how
much they will give. The
strategies used with
them are direct mail
appeals, newsletters,
and special events. Due
to the randomness and
expense of both mailings
and special events, you
should project your ROI
to be from 1:2 to 1:4.
Some special events
(galas, etc.) have 50%
fundraising costs.
Direct mail expenses
range from 25% to 30%,
thus giving you a 1:3 or
1:4 ratio. So in the
best-case scenario, when
you send out a direct
mail appeal, for every
dollar you spend you
hope to bring in 4.
The Core Donors (monthly
partners) is the next
level moving up the
donor pyramid. If a
well-executed program
has donors giving
monthly through EFT,
credit card, and
website, the expenses
are low and the pledge
fulfillment is very
high. (100% in fact!) If
you are still sending
monthly reminders by
mail every month, your
expenses are a bit
higher and pledge
fulfillment a bit lower.
Still, the ROI for Core
Donor programs should be
from 1:10 to 1:50.
This is due to the
systems driven aspect of
these faithful donors
who do not need any
frills or fancy
correspondence.
The final category,
Major Donors, has the
best ROI of all. As you
may know, you spend more
money on a major donor.
You might take them to
lunch, buy them a book,
or even spend more on
printed communication
for them. But even with
those expenses the ROI
should be anywhere from
1:50 to 1:200. And
you can go even higher
when going beyond annual
gifts for current
ministry needs (i.e.
campaigns).
When you look at a
comprehensive,
integrated development
strategy, you can see
that if you do not have
strategies for all four
relationship groups your
ROI can be very
imbalanced and present a
poor fundraising
percentage.
Organizations who have
depended only on direct
mail and special events
find higher fundraising
percentages which donors
now look at more often
than in the past.
Knowing your ROI as a
development leader for
your ministry is
critical. It is also a
great way to bring
development strategy and
analysis into the
picture for overall
strategic planning. The
best way for the other
leaders in the ministry
to understand the role
of their donors is to
demonstrate that we can
analyze our development
strategies and present
accurate measurements as
our contribution to the
overall stability of the
ministry.
Begin to learn your
development ROI and you
will find it will be an
added tool for your
ministry leadership!
Till next time,
John
Dr. John R. Frank, CFRE
