I worked as Director of Development for a national charity that held a lavish fundraising banquet each year. The staff, from the executive director down to the receptionist, including the development staff, thought this banquet was the organization's most successful fundraiser.
Shortly after being hired, I conducted a comprehensive development audit that measured the profitability of the organization's fundraising methods, including this annual banquet. I added up the cost of the venue, catering, table and chair rental, lighting, sound, speaker honorarium, invitation printing, postage and every other related cost and subtracted this number from the gross income.
What a surprise we got!
What looked like a successful fundraiser was actually the organization's least-effective fundraiser. In 1999, they spent 89¢ to raise one dollar. They didn't realize that their “best fundraiser” was a financial flop, year after year. Why? Because they always published and celebrated the gross income generated by the event and never looked at the net income.
Two is better than one
You see, the problem with direct mail fundraising arithmetic is this—you need to understand and use more than just one measurement. You don't buy a bunch of bananas based on price alone. You wouldn't choose a lifelong mate based on looks alone (at least I hope you wouldn't). And you shouldn't measure your direct mail fundraising success by one ratio or formula alone.
Consider, for example, the most well-known number in direct mail fundraising—the response rate. Everyone knows that generating a high response rate is a good thing and that generating a low response rate is a bad thing. That's why one of the first questions that prospective clients ask my firm is usually this: “What kind of response rate will your direct mail fundraising packages generate for us?”
That's a good question.
But the answer I give, if I simply quote an average response rate, will mislead. It will mislead because high response rates do not necessarily mean profitable results. And neither do low response rates necessarily mean poor results.
* I could craft a direct mail package that generates a 20% response rate but an average gift of only $2. Not good. You'd lose money.
* I could craft a package that generates a response rate of only half of one percent but generates an average gift of $2,000. That's better. Probably.
Look beyond today's numbers
You need to look beyond each campaign, looking back to previous results and looking forward to anticipated results. After all, you could be satisfied today with a direct mail program that generates an average gift of $35 but never realize that over half of your donors give you just one gift and never give again. Your average gift doesn't tell you the whole story any more than your response rate tells you the whole story.
You can avoid their mistake—and plenty of other mistakes—by learning the most common ways to measure your success, and then using as many of them as you require to arrive at an accurate picture of your accomplishments. The knowledge is in your numbers. All you need to do is uncover it—and use it to your advantage in carrying out your mission.
