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Measuring ROI and Impact of Prospect Research
- 1. Fundraising Intelligence: Measuring Return on Investment and the Impact of Prospect Research with Sally Boucher and Faön Mahunik
- 3. Background in Higher Ed, the arts, and human services development
- 4. Fundraising & nonprofit management consultant
- 5. Primary author of Best Practices for Prospect Research in Higher Education Fundraising Report
- 6. Regular speaker with AFP, CASE, APRA, AHP, VA Fundraising Institute and others2
- 7. Faön Mahunik Director of Research Analytics at CCS Oversees firm’s internal data analysis & tailored constituent strategies Background in research and analytical experience in Higher Ed, development & fundraising Previous experience in private consulting firm 3
- 8. Agenda Introduction Prospect Research and the Impact on Fundraising Prospect Research and Prospect Management Metrics Additional Measurements Case Studies 4
- 9. The Non-profit Funding Model 5 Non-Profit Mission PUBLIC = Funder + Beneficiary
- 10. Return on Investment Return on Investment, or “ROI,” is a simple calculation: Net Revenue (Gross Revenue – Expense of Investment) Expense of Investment Return on Investment (ROI) = Expense of Investment Net Revenue Cost to Raise a Dollar(CRD) = 6
- 11. Return on Investment Annual Fund Mailing: Assumptions: 1,500 pieces to loyal donors Costs: Printing:$300 Mailing: $200 Total Cost = $500 Results: 20% response=300 gifts Average gift size = $8.33 Total Revenue = $2,500 ROI: $2500-$500 = 400% $500 CRD: $500 = $0.25 $2500-$500 7
- 12. Major Gifts for year-long period: Assumptions: 2 Full-time MGO’s Salaries average $90K/year All other expenses (travel, marketing, benefits, cultivation) = $100K Total Expenses: 190K Total Revenues: 30 gifts closed, average gift size $25K= $750K ROI: $750,000-$190,000 = 295% $190,000 CRD: $190,000__ = $0.34 $750,000-$190,000 Return on Investment 8
- 13. Cost to Raise a Dollar 9
- 14. Cost to Raise a Dollar 10
- 15. Return on Investment 11
- 16. Agenda Introduction Prospect Research and the Impact on Fundraising Prospect Research and Prospect Management Metrics Additional Measurements Case Studies 12
- 17. What is Prospect Research? Prospect Research helps to Identify new prospects with wealth and inclination to give Segment and prioritize existing donors Determine target ask amounts Provide important background information to development officers 13
- 21. Investing in Prospect Research Peer Screening Reviewing of prospect lists by individuals or groups Value: Uncovers relationships, details, and wealth Cost: No or Minimal Cost 17
- 22. Investing in Prospect Research Modeling and Analytics In-House or Outsourced modeling and data analytics Value: Can answer specific questions Cost: Varies (can be expensive) 18
- 23. Investing in Prospect Research Other Research Sources Internet, Media and Data Sources Value: Backbone of prospect research offices Costs: Free or Subscription Cost (varies) 19
- 26. Metrics Metrics Defined: “A business metric is any type of measurement used to gauge some quantifiable component of an organization’s performance” 22
- 27. Prospect Research & Prospect Management Goals 23
- 29. Number of Prospects Identified by Source
- 33. Number of Prospects Qualified by Source
- 34. Number of Prospects Qualified by Capacity Level
- 36. Prospect Research Metrics 29
- 38. Number of Prospects Moved to Cultivation
- 39. Number of Prospects Moved to Solicitation
- 40. Number of Gifts Closed
- 41. Length of Time in Stages
- 43. Prospect Management Metrics 32
- 44. Prospect Management Metrics Pipeline Efficiency 33
- 46. Agenda Introduction Prospect Research and the Impact on Fundraising Prospect Research and Prospect Management Metrics Additional Measurements Case Studies 35
- 47. Additional Measurements Are ROI and CRD the only measure of success? Rate of return % # of Solicitations/# of Gifts Received Average gift size Average cost per gift Fundraising costs/# of gifts Overall Cost % Fundraising costs/Total contributions Basic Benchmarking 36
- 48. Additional Measurements AFP’s 2010 Fundraising Effectiveness Survey Report Gain/Loss Ratio = current year gains/losses prior year total results $ gained/lost from New Donors $ gained/lost from Recaptured Donors $ gained/lost from Upgraded Donors $ from Donors who gave the same amount 37
- 49. Agenda Introduction Prospect Research and the Impact on Fundraising Prospect Research and Prospect Management Metrics Additional Measurements Case Studies 38
- 50. Case Studies 39 Barnard College Parents Fund Program 2010 ROI = 12,285% Christian Aid The Ambassadors Programme CRD = £.08 (~$.13)
- 51. Barnard College (ROI) The Barnard Parents Fund Launched in 2009 Increased relationship between Research and Parents Program Officer Wealth Screenings since 2003 – implementation process varied Prospect Research and Event Specific Research Barnard Hosted Events Parent Hosted Events 40
- 52. Barnard College (ROI) Identified Top Level Prospect for Parent’s Fund Council FY2010: 36 Parent/Families FY2011: 39 Parent/Families Identified Top Level Prospects to serve as Event Hosts 4 Events Hosted in FY2010 6 Events Hosted/Planned in FY2011 41
- 53. Barnard College (ROI) The ROI of The Barnard Parent Fund was 12,285% ROI = Net Revenue $589,724 Total Investment $4,800 Wealth Screening 269 parents (~$300) Barnard Hosted Events (Total Cost: $4,500) Parent Hosted Events (Total Cost: $0) 42
- 56. Christian Aid (CRD) The CRD of the Ambassadors Programme was £.08 (~$.13) CRD = Investment £5,620 Net Revenue £672,132 Wealth Screening (Total Cost: ~£620, $1,000) 10 Events (Total Cost: ~£1,000, $1,600) Staff Travel (Total Cost: ~£2,000, $3,200) 200 Brochure Mailings (Total Cost: ~£2,000, $3,200) 45
- 58. Sally Boucher Platinum Consultant, WealthEngine sboucher@wealthengine.com@WealthEnginewww.facebook.com/pages/WealthEngine/60059589198 Faön Mahunik Director of Research Analytics, CCS fmahunik@ccsfundraising.com @CCSAnalytics www.facebook.com/ccsfundraising Contact Us 47
Editor's Notes
- Let’s calculate the ROI and CRD for our major gifts program – Let’s assume we have 2 full time Major Gifts Officers, their salaries and all other expenses related to major gifts fundraising total $190,000, and that total revenues for the year were $750,000. Using these figures we can quickly calculate ROI and CRD and see that our ROI is 295% and cost to raise a dollar is 34 cents. So with these two examples, I hope I’ve given you a framework from which you can calculate ROI and CRD for any fundraising program or initiative.
- I want to take a minute to talk about what “reasonable” costs for fundraising might be. This slide shows “reasonable” costs for various fundraising activities, from direct mail to special events and planned giving. While this is somewhat dated – originally published by James Greenfield in 1996 -- it still provides some general guidelines for reasonable costs that are still accepted today. And it can be used to make comparisons between various activities. For instance, you can see that for acquisition mailings, you might expect to lose money, special events tend to be very expensive, and capital campaigns can be among the most low –cost, high-return fundraising investments.
- Another thing you’ll want to be aware of is that different industry types have different costs and methods and the cost to raise a dollar may be higher if you are an arts or education organization than if you are an environmental or healthcare organization. This bar chart is from a study from the Urban Institute at Indiana University back in 2004.One other thing that really affects your ROI/CRD calculation is the maturity of your fundraising program. If you’ve been doing it for a while, and have a good pipeline of gifts, brand recognition, and a loyal and large donor base, your costs are going to be lower than those who are just getting started, or are struggling to achieve name recognition.
- The last thing I want to share with you is a simple organizational budget and how you can use that to calculate your ROI and CRD across all your programs. This is just sample data so don’t get the idea that your data has to break out like this. As I hope I’ve made clear, there are a lot of considerations that affect reasonable costs so it can be dangerous to compare to other organizations that aren’t similar to yours. Bottom line, though, if this is not something you are looking at routinely, it should be.
- Asked by Deborah Reinhardt YoumansRecruited Deb DarlingSecret Weapon – Sameer KasargodThat’s a little bit about us, let’s find out a little about you:name, organization and experience with analytic techniques
- Asked by Deborah Reinhardt YoumansRecruited Deb DarlingSecret Weapon – Sameer KasargodThat’s a little bit about us, let’s find out a little about you:name, organization and experience with analytic techniques
- Now we want to move to talking about specific metrics you can track and report to gauge the value of your prospect research efforts. I want to define the word metrics, which is, “any type of measurement used to gauge some quantifiable component of an organization’s performance.”Good metrics have at least three components: They are relevant – meaning they fit with your organizational goals. You want to be sure you are measuring something that will show progress against a defined goal.The second aspect is that they are measurable - meaning you can collect the data you need to calculate the measureAnd lastly, good metrics are actionable – so if you discover that a metric is showing poor results – can you take corrective action?So let’s take a look at some good metrics for Prospect Research
- As I‘ve said, metrics need to be relevant – that is, tied to goals. So before we look at metrics we need to look at some specific goals an organization might have. These are some examples of goals that might make sense for some organizations in the areas of Prospect Identification, Prospect Research and Prospect Management. I mention these as a way to illustrate the importance of ensuring the metrics you are tracking are ones that are relevant to your goals. I also feel that it’s very important that goals are specific and quantifiable. As I move into this section on Metrics, I will use examples from some of these goals. But don’t get the idea that these goals are ones that are appropriate for every organization, or that you need to have these or similar goals for Prospect Research. They are just examples.
- I want to take it piece by piece – so first, let’s look at Prospect Identification Metrics. Looking at this goal, “Identify 200 new prospects for major gifts,” what are some possible metrics we could track and analyze to see if we are on target towards our goal?Number of prospects identified: that is certainly necessary, and may be all we need. But if we truly want to turn an analytical lens to our prospect identification activities, we could also fairly easily track prospects identified by source, and the time spent finding those prospects. Tracking those additional pieces of information will help our metrics be not only relevant and measurable, but also actionable.
- This table shows a sample Prospect Identification Report that tracks prospects identified by the source of the identification and also tracks time spent in the process. So you are now able to see which Research Sources are yielding the most prospects, and if it makes sense to continue to use those resources given the amount of time you are spending.For instance, you have identified 46 prospects by peer screening – maybe you have set up peer screening sessions, and spent a lot of time on this activity. So while you’ve identified 12% of your total prospects this way, it has taken 26% of the total time invested. Is it worth it? Well, I can’t really answer that until we track those 46 prospects through the fundraising cycle. If they qualify, are cultivated and make gifts – yes – it’s absolutely worth it. If they never get to the solicitation stage, or make gifts, then we would want to re-evaluate how much time we are spending at this activity. But for now, it looks like a time consuming, yet productive activity. Before we move on to the next set of metrics, I want to suggest that there are lots of ways to look at, and report, data and metrics. This table is one, and is the starting point, but
- We can look at our metrics in visual ways, and these might make the information we are reporting pop a little more for many of our audience. SO for example, on the left I’ve created a bar chart that shows in green the numbers of prospects identified from each source, and in gold the corresponding time spent. Looking at it this way, we can easily see that peer referral is taking a disproportionate amount of time. So sometimes the insights from your metrics and reports are easier to “get” when you display information graphically.Something else you may want to do is what I’ve shown on the right. Track your actual progress and results against your goals and compares it over several years. So you can see how you are doing this year compared to past performance.So let’s move on to our Prospect Research Goals and follow these prospects through qualification.
- So for our research goals, we want to qualify 70% of those prospects, and we need at least 30 prospects qualified at the $50,000 and above levels.What metrics do we need to look at?
- So here is a Prospect Qualification Report. We have added a lot of valuable information including the number of prospects qualified at each capacity level, additional time spent in the qualification process, and we have much more information to be able to evaluate our research sources and how effective they are for identifying prospects at each capacity level. You can see I’ve highlighted the total qualified at the $10,000 and above levels as well as the percent of those identified that are actually qualified – which in this example is 76% overall and does meet our goal.
- Looking at this infomration graphically, our stacked bar chart on the left shows the number of prospects qualified vs. non-qualified by each research source. Here you can see that most of those identified by peer referral are actually qualified, while many identified by wealthe screening are not qualified.On the right, you can see the pie chart, which shows us the number qualified at each capacity level. This quickly lets us see that we’ve also met our goal of qualifying at least 30 at the $50,000 and above levels.The next thing we want to do is track these prospects through the fundraising cycle, and see if these prospects actually end up supporting our organization.
- So now we are ready to look back at some of our Prospect Management goals. We want to ensure the people we qualify get assigned. If they don’t why not? And are we wasting our time qualifying prospects who aren’t assigned? And in the final analysis, we want the prospects we identify to be people who give to our organizations. So our goals would also include percentages for moving prospects into each stage of qualification.So some of the metrics we’ll need to determine if we are meeting our goals are listed here: Number of ….
- For our example, I have indicated the number of prospects that are moving from one stage in the fundraising pipeline to the next. These again are arbitrary numbers but are intended to give you a sense of the way to measure this in your own shop. So let’s look at what we can do with these numbers once we have captured them.
- This is our familiar report, which looks at those prospects we identified in our first exercise, and now tracks how many are moving on to subsequent stages. What percent are qualified, assigned, and eventually solicited and make a gift? For this report, we are able to show the number of prospects from each source identified that eventually works it’s way to a closed gift, indicated by the move into stewardship. In this example, it looks like the $5K report and data mining scores are the most successful at identifying prospects that move into the pipeline and result in closed gifts. We may want to rethink our use of magazine and newspaper subscriptions – again just based on this fictitious example. There are a couple of other things we would want to look at – for instance, what are the sizes of the gifts – before we made any decisions definitively.
- This graphic uses infomraiton from the prospect management report to show the number of prospects moving from stage to stage represented by the gold line. So we started with the 330 identified prospects and ultimately get 40 closed gifts. The green bars show the percentage of prospects that convert from the prior stage, so 76% of those identified become qualified, and 84% of those become assigned, etc. This a way of visually seeing if there are problem areas in your pipeline. For instance, in this example, I’d want to ask, “Why are only 35% of my prospects moving from cultivation to solicitation?” are they getting stuck there? If so, why? And how can I correct it?There’s not always just one answer – so don’t make any assumptions about the reasons, but this gives you the information you need to ask the right questions.
- This is the final management report I want to share with you, and it looks at individual gifts now, and pulls from our other reports to show what the source of the prospect identifiaction was, but we can also now calculate the amount of time it took to get the gift, assuming we are capturing the date we id’d the prospect and the date of each of the moves through our fundraising pipeline. We’re able to calculate the cultivation time, the number of contacts, and from this report we can really evaluate not only how effective our research is, but also how effective our cultivation and solicitation process is.I hope that these reports and the metrics they represent are something you can take away from this webinar and put to use, at least to some extent, in your own shops.
- Asked by Deborah Reinhardt YoumansRecruited Deb DarlingSecret Weapon – Sameer KasargodThat’s a little bit about us, let’s find out a little about you:name, organization and experience with analytic techniques
- Asked by Deborah Reinhardt YoumansRecruited Deb DarlingSecret Weapon – Sameer KasargodThat’s a little bit about us, let’s find out a little about you:name, organization and experience with analytic techniques
- Jeremy: Thank you,Faon and Sally, for your presentation. We’re going to address a few questions now. Please continue to type your questions into the Q&A box and we’ll try to answer as many as we can. Questions….ok and this will be our last question.