The calculation that can chart your future

Here's a must-read article in Target Marketing magazine: Investing in the Future tell how CARE (a Merkle|Domain client) used the business calculation net present value to re-think some of its fundraising priorities.

For a nonprofit, net present value (NPV) is calculated this way:

• Total projected giving from a donor (or group of donors)
  
• Minus the cost of acquiring the donor
  
• Minus the ongoing cost of cultivating the donor
  

When you calculate NPV on groups of donors (based on the size of their acquisition gift) you'll discover some amazing things. The Target Marketing article focuses in on the way NPV helps you build smart donor reactivation programs. Some donors just aren't worth reactivating, while others are worth going to extra mile to do so.

But that's just the beginning. When you calculate NPV, I predict you'll find a couple other amazing facts:

• You're probably losing money on many of your low-end donors -- spending more to acquire and cultivate them than they'll give over their entire lifetime as donors.
  
• You're probably not maximizing donations from many of your middle to higher-end donors.
  

Many nonprofits have no idea what their donors are costing them. The success they're experiencing with their higher donors is masking the systematic failure of their investment with lower donors. Once you know this -- and can pinpoint where things go right and wrong, you can revolutionize your fundraising program. You can experience better overall response, better donor retention, higher return on investment -- and you can afford to empower your donors in exciting ways.

So get out your calculator and start figuring. NPV is what you want to know!

(See also Want big improvements, quick? Start looking at the long term.)

Technorati Tags: net present value, CARE

Comments

[a fundraiser]

Excellent. Thanks for drawing more attention to this great article. More organizations should be doing this immediately, but it does take some time - and a clean database. I'm going to link to this article in my next post.