ROI in Digital Fundraising and Online Giving

When it comes to return on investment for a nonprofit's online fundraising and donations program, there’s no hard-and-fast digital metric that serves as the gold standard … yet.

While some fundraisers have struck gold — generating 10 times their online investments in as little as three months — others just break even after three years of hard work.

It's important that nonprofits and their teams have some shared perspective and collective agreement.

Digital return
What is the value of an online donor? How about an online volunteer fundraiser?

We have seen the average size of an online donation rise over the past 10 years. Last year, the average online gift across all of Artez's clients (from the U.S., Canada, the U.K., Australia and the Netherlands), for example, was $68.

Now, in isolation, that doesn’t mean much. But what is interesting is the comparison of an average gift online to an average gift offline. Take, for example, a participant in a walk-a-thon. If she registers online and fundraises both offline and online (as the best fundraisers will do), it provides us with a great petri dish to examine. The fundraiser/solicitor is the same in both cases, as is the cause and the event.

But in almost every case, the average donation online will be twice as much as the average gift offline.

Why? It’s most likely the credit card effect: When someone is asked to fish out cash from his pocket, $20 seems like a lot. Putting that same amount on a personal credit card is nothing.

Add to that the high propensity for credit card-using, Web-surfing donors to select recurring or monthly giving, and you’re starting to see what gets digital fundraisers excited about the future.

How about the value of an online fundraiser? Take the online registrant for the walk-a-thon described above. Let’s say she sends 20 solicitation e-mails to her friends, family and colleagues. Let’s assume she has a high response rate — which we’re still seeing in 2008/2009 — of 60 percent. Let’s be conservative and give her social network an average gift size of $50.

Using that math, the value of that online fundraiser is 20 e-mails x 60 percent response x $50 = $600. And that’s just one campaign! What if you could recruit her to fundraise for multiple campaigns this year? What if you could retain her for a few years?

Digital investment
How much should you spend on your digital fundraising program in 2009? In 2010? I know you’d like me to give you a nice, round number … but you know that wouldn’t be realistic. It really does depend on your organization and its goals. What I can provide you with are some provocative questions you can take back to your team for a spirited debate.

Two of the most important questions: What percentage of your overall income will flow through digital channels, and what is your cost per dollar raised by channel? If your answer to the first question is 5 percent, you’re going to have a very different attitude toward digital budgets vs. if it's 50 percent. When digital fundraising starts to outperform other channels, perhaps it’s time for a shift in spending allocations.

To simplify matters, the primary categories of investment are people and tools.

People
Do you tend to outsource, or would you prefer to hire in-house?

This is an important question to confront as you consider the human resources that go into a good digital program. A quick Google search will demonstrate the abundance of service providers who will help you optimize your Web site, blog, podcast, e-mail campaign, etc.

What I’ve found is that there is an abundance of highly intelligent talent born after 1985 that is eager to change the world. Find those folks and get them on your team.

Tools
This is likely the area of greatest cost variance among the fundraising organizations I know.

To be clear, a basic set of tools would include Web site, e-mail, digital fundraising systems and database. Some organizations decide to build their own tools; others purchase or rent tools built by others. If you purchase tools, you’ll pay up front; if you rent, you’ll pay over time. There also is a growing divide between tools that run on computers managed by the organization and tools that run on computers managed elsewhere.

Any way you look at it, your digital ROI should beat every other direct channel at your disposal … hands down. In comparison to your phones, your mail and your canvassing, every dollar spent on digital should produce more dollars for your cause.

Why? Because the average gifts will be higher, and the cost to get each gift will be lower. As an added bonus, you’ll be saving many, many trees!

Philip King is the president and CEO of online fundraising solutions company Artez Interactive.