How do you measure whether a fundraising campaign is successful or not? Is it the return on investment (ROI), i.e., for every dollar invested how much came back in return? Is it the number/percentage of donors who responded? Or is it net revenue (the amount of money left after expenses)?
Let me give you some definitions and then let you draw your conclusion.
ROI: This measures the efficiency of the campaign, not necessarily the effectiveness. If you get a solid return on investment, let’s say 3/1 or better, you’ve produced a campaign that used the investment well. Obviously, different types of campaigns will be measured by a different ROI. A new donor acquisition campaign may have a 0.5/1 ROI as a measure of efficiency, whereas a major donor campaign may have a benchmark of 20/1.
Number/percentage of donors who respond: This measures the level of donor engagement. This can vary wildly depending on the type of campaign you run. Again, if it is a new donor acquisition campaign, a response rate of 0.75%-1.0% can be the norm. However, a mid-level donor campaign might have a response rate benchmark of 10% and a major donor campaign might be in the 20%+ range.
Net revenue: Net revenue measures the effectiveness of your campaign. As we often say, at the end of the day you can’t spend ROI, only net revenue. Whatever you have left at the end of a campaign to spend on your organizational mission is ultimately what matters.
Ok, so I tipped my hand. Yep, net revenue is the ultimate measure of success for a fundraising campaign. But it must be interpreted by the key indicators of ROI (efficiency) and the percentage of donors who respond (engagement).
Now, you may be thinking, “ROI is really the kingpin of the three.” Let me show why that’s not true.
First, I can artificially manipulate ROI. If I only sought support from my very best donors and never approached non-donors or one-time donors or occasional donors, I could by definition create a stronger ROI. But I would sacrifice net revenue… and the development of those more loosely affiliated donors.
Which brings me to my second reason ROI isn’t the right measurement of success. Let’s say I could spend $25,000 to generate $100,000. That’s a 4/1 ROI with net revenue of $75,000. But let’s say I could have spent $40,000 on that same campaign to drive $135,000 in revenue. That’s an ROI of 3.38/1, but net revenue of $95,000.
The first was more efficient, but not as effective. Where the second was less efficient but more effective. So which would you rather have? A higher ROI or more cash in the bank?
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