I hate ROI. Not in and of itself but mainly how it’s been applied to fundraising for nonprofits. Organizations that operate on scarce resources absolutely need to focus on efficiency, effectiveness and delivering great results. But I think we often get it slightly wrong.
And because of this, we end up in some of the predicaments we find ourselves in. High turnover rates of fundraisers. Low donor retention rates. The ‘mid-level’ donor gap. This hyper focus on ROI and cost per dollar raised may actually be counter-productive.
Here’s what I mean. There are two ways to increase Return on Investment:
Increase the return
Reduce the investment
Increasing the return is hard, takes effort and often requires increasing the investment. This adds risk and puts even more pressure on the return. Think about acquiring donors and how expensive, risky and costly that can be.
Reducing the investment is easy. You just do what you always do but less. Or with cheaper alternatives. Think about direct mail. Don’t A/B test. No full bleeds. Variable copy only on one side. Fewer segments. Cut out some donors. Replace with emails instead.
In and of themselves, these ideas aren’t bad. I even recommend cutting some donors off your list if they haven’t given in a while and you’ve tried, really tried, to bring them back. But more often than not, trying to increase the ROI by reducing the investment is a losing game.
Let’s play a little game. Would you rather…
spend $50,000 to raise $200,000 for your cause or
$10,000 to raise $100,000 for your cause?
If you want the best ROI you should choose B as it has a return of 10 times the investment, or $0.10 cost per dollar raised, compared to 4 times return and $0.25 cost per dollar raised in option A. Pretty straightforward right?
Now let me ask the same question this way:
Would you rather…
raise $150,000 for your cause or
raise $90,000 for your cause?
No calculator needed here. This is the same question only framed in terms of the net gain (total return MINUS investment) of option A and B instead of the efficiency.
So with the ROI focused frame of mind, you would choose the more ‘efficient’ option, 2.5 times more efficient to be exact, and in doing so, leave $60,000 on the table. $60,000 valuable dollars that can help pay staff salaries, feed the sick, shelter the homeless, promote the arts or whatever your mission may be.
And we do this all the time in fundraising! One of the most common examples of this is swapping out mail, events and the telephone for email, digital and web. Look, I’m a Millennial, digital native, have helped start two ‘digital’ agencies and worked for two tech companies – I’m almost as digital as you can get. But this is often a huge mistake! Yes it’s cheaper to not do 4 mailings a year. Yes it’s cheaper to not do that event. Yes it’s cheaper to not call all those donors. And it might even be more ‘cost effective’ from an ROI stance but, more often than not, you are losing revenues, donors and invaluable touch points. That’s not good.
The opportunity for online, is in adding to, integrating with and extending your offline work. Send newsletters in email and print. Have the stories in your newsletter online in blog form or a story section. Allow people to RSVP, register, donate, invite friends and even fundraise for your event online. Have a dedicated landing page for your monthly giving upgrade phone campaign and send an email out as well so people can do it before, during or after your call themselves.
And when it comes to the offline world, and direct mail in particular, one of the best ways to improve net gains and ROI, in a good way, is through the use of data. Here’s three examples:
Collecting more emails – from online donations, eNewsletters, at events, etc. – and matching them up with your mailing list allows for more touch points and opportunities for your donors to respond. Get the mailed piece and go online. Get the email and respond to the mailed appeal. Click to donate via email or tear off response via appeal letter. Same campaign, similar giving experience, different channel.
3. Send More Specific Appeals.
Similar to not sending appeals to those people who aren’t interested, you can send more relevant, specific or focused appeals to people who are interested. Suggesting donations based on past giving is the most common example here but if you have many projects and areas of need, you can send specific appeals for people to support what they most care about. The end result is something that feels more authentic and makes it easier for the supporter to give.
As you finish the year off and begin planning for 2016, think about the ways in which your organization can maximize fundraising results but focus on the net returns and not simply ROI. Look at some easy ways you can better use your data to improve your fundraising and keep costs down without hurting the benefit to you, your cause and the people you serve. Good luck!