How to calculate ROI in a fundraising campaign
Chris Paver – 22 March 2021
When we’re assessing the effectiveness of a fundraising campaign it’s easy to get distracted by the total dollar amount raised. Fingers crossed that it’s a nice big number. But until we also start looking at the costs of the fundraising effort and consider where we might otherwise have invested that money, we can’t actually judge the overall effectiveness of the campaign. If you spent $1.50 for every $1 raised, your fundraising efforts would appear to be going backwards.
In this article we’re going to discuss how Net Revenue and Campaign ROI are much better figures to track on a regular basis.
A few thoughts about ROI
Before we dive in, it’s important to note that even these measures have their limitations. That might seem like a strange way to start an article like this, but the simple fact is that no single metric will give you a complete picture of the success or otherwise of a fundraising program.
For example, campaign ROI does not take into account the potential lifetime value of donors, which is arguably more important when planning strategic investment decisions. Similarly, we should expect different ROIs from different types of fundraising campaigns. For a range of compelling perspectives on fundraising ROI, take a look at this article from The Guardian
For now, let’s proceed on the basis that tracking ROI will help measure the value we obtain from different fundraising activities and will help justify future fundraising investment as part of our broader strategy. Here’s how to go about it.
Calculating Fundraising Campaign ROI – It’s not rocket science
Step 1: Calculate your costs (i.e. your ‘investment’)
How should you calculate the costs of a particular fundraising campaign? This can be as complex as you want to make it. Do you include indirect costs like office rent, electricity and website maintenance and somehow try to apportion them across all your campaigns? We’d suggest that’s not necessary. Instead, focus on direct campaign costs like:
- The cost per call for a phone campaign
- The cost of print and postage for a mail campaign
- All of your event costs for a fundraising event
- Campaign creative and design costs
- Advertising and promotional costs
- An estimated cost for staff time spent on the campaign
Step 2: Calculate your return
Obviously for this step you simply want to measure the income generated from your campaign. Easy! However, a common mistake is not properly attributing income to a particular campaign. It’s very hard to measure your ‘return’ if you’re not keeping track of where your revenue comes from, so make sure every gift is attributed to one source or another.
A word about multi-channel campaigns
Measuring your return can get more difficult with multi-channel campaigns. For instance, if a donor is included in a direct mail campaign, but also receives emails, and then gives via the website, to which channel should you attribute the income? Things get complicated quickly.
If we zoom out and look at the campaign as a whole, this question doesn’t matter so much because the income is still connected to the overall effort. For our purposes today, this is sufficient. However, if you are interested in understanding the relative importance of each channel within a campaign things become more complex. The only real way to do this would be to run experiments such as by dropping certain channels from the campaign mix for certain donors and measuring the impact. However, given the complexity of this process, our clients will typically settle on a rule-of-thumb approach to apportion income between channels.
Step 3: The calculation
Some people like presenting ROI as a percentage and others as a ratio. At the end of the day it doesn’t matter too much as long as you are consistent. The formula is simple:
Using this formula, a Fundraising ROI of 100% means you raised twice as much as you spent.
Here’s an example. Let’s assume:
Amount raised / Return: $315,000
Amount spent / Costs: $127,000
[(315,000 – 127,000) / 127,000] x 100 = 148.03%
Congratulations! This was a great campaign where you more than doubled your investment.
Now let’s look at an example of a campaign that lost money (at least upfront). Let’s assume:
Amount raised / Return: $98,000
Amount spent / Costs: $127,000
[(98,000 – 127,000) / 127,000] x 100 = – 22.83%
What can I do to improve campaign ROI?
Of course, by now you know that if improving ROI is your goal you need to minimize your costs while increasing your returns.
One way to do this is by using better technology to make sure you’re talking to the right people in each campaign and not wasting your investment by calling or sending mail to too many people. With AI-driven predictive modelling, for instance, you can predict which people are the most likely to respond to your particular fundraising campaign and focus on speaking with them, which increases your returns. Here are some examples:
- Greenpeace increased ROI by 22.8% in a direct mail appeal using Dataro’s predictive scoring
- Parkinson’s UK increased net revenue by 23% using the same approach
There are a lot of ways that you can measure the value obtained from a fundraising effort. Of course, the ultimate goal is to make sure that your campaigns are raising as much money as possible to maximise your organisation’s impact.