Very early in my career, I learned a valuable lesson from one of my first mentors. I worked for a national commercial credit firm at the time and my mentor taught me the value of return on investment (ROI). We were to pick up a $25 million portfolio at prime plus 3.5%. Sounds good until you learn that the portfolio average per account balance was less than $20 and it would cost more to service the portfolio than we would net.
In fundraising, I think some managers may become enamored with the size of their prospect base and the value of the wealth within those prospects without considering what it costs to develop that prospect and convert them to a donor. It’s wise to analyze what you are spending to accomplish your goals.
This is where predictive modeling can really help. Let’s say that you have 15,000 prospects coming from your host system as possible grateful patient candidates. Also, let’s assume that the total cost to mail these prospects would be about $14,500 with collateral development, processing costs, postage and other expenses. If your average donation within this type of work is $140, you can expect a net raise of about $27,500 or about $1.83 per outreach.
Using a predictive model would likely reduce your qualified prospects to about 25% of those 15,000 in your prospect list. This means that you would only conduct outreach to about 3,750 patient prospects. These are the targets that would likely give and there is a higher confidence that the direct mail piece will reach the interested party. Although some of the development costs (such as graphic and design) would not change, the total cost of this outreach would be less than half of a standard approach. Furthermore, since these are qualified prospects that will be interested in your message and respond faster with higher donations, the average donation historically increases as does the response rate. The net raise increases to about $35,000 or about $9.30 per outreach. You are contacting fewer prospects with higher values allowing you to significantly improve your ROI.
No doubt this year holds unexpected challenges with fundraising. Competition with other non-profits is at an all-time high and uncertainty with economic recovery looms. As your team considers new strategic ideas, make sure the numbers make sense with your outreach spend. The first step will be to identify those prospects worth chasing.
To learn more about what Brightway’s Giving Score can do for your prospecting, use our ROI calculator.