Out With the Status Quo, In With Strategy: A 3-Step Framework for Increasing Event ROI (PART 1 of 2)

Out With the Status Quo, In With Strategy: A 3-Step Framework for Increasing Event ROI (PART 1 of 2)
Winter 2016 by Heidi Thomson-Daly

Status Quo

We’ve heard it many times before:  “Hope is not a strategy”.  We all know it’s true.  Yet, when it comes to fundraising events, organizations all too often reproduce the same event they had the year before and hope it will raise more money. 

Now, in all fairness, a few things about the event are likely different.  For instance, the branding on the invitations, the main speaker, or the way registration is set up.  But the strategy behind the event is usually the same, or similar.  Much of the audience is the same.  The Table Captains are the same.  The sponsors are the same. The ticket price is the same.  The program formula is the same.  The solicitation method is the same.  And if it’s an auction, the items are pretty much the same too. 

When this happens, the revenue results are….you guessed it….also the same.  Maybe this shouldn’t be a surprise given the formula, but unfortunately it’s a common scenario. 

I know all too well how much work producing an event requires.  I’ve worked on over 50 of them across four different states.  Luncheons, breakfasts, galas, house parties, fun runs, auctions, award nights, anniversary dinners, even a flash mob.  You name it, I’ve done it. I’ve been at the office the night before a 7:30 a.m. breakfast printing nametags at midnight.  I’ve chased down more Table Captain guest lists than I can count.  I’ve led dozens of committees fixated on the proverbial napkin colors, assembled thousands of goody bags, coached event speakers as young as 5, and triaged every kind of event emergency there is. 

Because I know how much work it is, I know it is not enough to do that same amount of work year after year only to yield the same outcomes.   Doing so holds the organization back in countless ways. It greatly impedes direct mail, major gifts, campaigns and other fundraising success.  It impacts the organization’s reputation.  It’s frustrating, and leads to staff and volunteer burnout.

So, how can you avoid this pitfall and ensure your organization’s events are strategic, high-performing vehicles that grow year after year and advance your long-term development goals? 

Ultimately there is no way around it:  to increase an event’s ROI (return-on-investment) and raise more money, you need to make strategic changes.  So how do you determine what needs to be changed?  With a 3-step framework:  Evaluate, Set Goals, Build Strategy.  Welcome to the starting line.

Step One:  Evaluate Your Event

Start by evaluating your events return-on-investment over the past three to five years.  Pull the data and take a hard look at the numbers.  You may already be looking at some metrics like gross revenue and average gift, but here are five other numbers that are critical to measuring event performance.

#1 Net revenue:  Many organizations make the mistake of only looking at the gross revenue raised to measure their success, when the net revenue raised is so much more important.  To do this, subtract the total amount of your direct event expenses from your gross revenue. While there are varied rules of thumb for event cost guidelines, I strongly recommend direct expenses not exceed 25%, or $0.25 per $1.00 raised, gross.  If your net revenue raised has not significantly increased for two or more years, it is definitely time for strategic changes.

#2 Net revenue per guest:  Now calculate your net revenue per guest by dividing the number of event attendees into the net revenue.  For example, if your net revenue is $105,000 and you had 375 people in attendance, your luncheon’s net revenue raised per guest is $280.  This is where I am often asked, “What should our net revenue per guest be?”  Well, unfortunately there is no one way to answer that, nor a straightforward formula to follow.  It depends on a variety of factors, including the type of event, the size and how long you’ve had it.  However, in every case, in order to improve the overall ROI for your event, the net revenue per guest needs to increase each year, and not at glacial speed.

#3 Guest Participation Rate:  At the heart of any event there needs to be a compelling program with a strong case for support, one that galvanizes philanthropic support for the mission right then and there.  One way to measure the effectiveness of an event’s program is to examine the guest participation rate, or the percent of households in the room that chose to make a gift (and inversely, chose not to make a gift). 

There are several angles to consider.  First, look at the number of prospective new donor households in the room.  How many of them made a first-time gift?  Ideally it’s 85 – 100%.  Then look at the number of current donors in the room.  How many of them made a gift, and what percent of them increased their gift from last time? 

Note:  the reason to base this on donor households is due to how common it is for couples to attend and give together.  This is especially true for evening events.  A great example is a gala with 600 guests and a raise-the-paddle component.  If you have 100 individuals and 250 couples in attendance, it translates to roughly 350 unique donor households.  In this case, the maximum number of raise-the-paddle gifts you could expect would be around 350, not 600.  This is a very important consideration when it comes to building event revenue projections as well.

#4 Common Gift Size: Knowing the average gift size at your event is important to know, but because an average can be thrown off by a handful of large gifts, looking at the most common gift size is actually more important.   Was it $50 or $250 or $1000?  If you promoted a minimum gift or promoted a giving circle that day, how many households gave at that level?  How many gave less, or more?  The answers will illuminate whether you are attracting your target audience, the power and clarity of the solicitation, and/or how inspiring your event program was.

#5 New Donor Conversion Rate: As fundraisers we are ideally not in the business of only seeking the one-time gift.  Instead, our goal is to attract new donors, provide them with outstanding stewardship, and retaining as many of them as possible.  Most fundraising events are intended to be a method for donor acquisition.  In fact, for some organizations their event(s) are their sole strategy for bringing in new donors.  Which is why it is crucial to track the number of donors who have been converted from first-time donors at your event to repeat annual donors.  

In other words, how many people attended your event, made their first gift, and then continued to support you outside of the event?  For example, if 100 donors made their first gift at a luncheon in January 2015, what percent of them are still giving to you one year later?  If the answer is 35, then your donor conversion rate for that event is 35%.  Optimally you want to have retained a minimum of 60% a year out.  The donor conversion rate will illuminate how effective your post-event engagement and stewardship is. Furthermore, it is an indicator of whether your current event model is working to ultimately build your donor base.

Step Two:  Refine the Event’s Purpose and Set Clear, Measurable Goals

Once you’ve done a thorough evaluation of your event, you are now ready for step two: clearly outlining the purpose of your event and creating measurable goals

Before habitually diving into event logistics, assemble your team and answer the following:  What exactly is the purpose of this event?  What are we really trying to achieve?   Where are we stuck and what needs improvement? More specifically:

  • Is this event your primary donor acquisition strategy?  If so, how many new donors do you need to acquire through this event, and at what level?  Set a goal.
     
  • Do you need to increase philanthropy from corporate sponsors?  If so, how many new corporate supporters do you need to secure and at what levels?  Set a goal.
     
  • Do you need to increase awareness of your organization with a new audience?  Do you need to refresh your Table Captains?  If so, how big of an audience do you need to reach your goal?  How many new Table Captains do you need to make that happen?  Set a goal.
     
  • Do you need to increase the rate at which event donors are converted to repeat annual donors?  If so, what do you need that benchmark to be moving forward?  Set a goal.

Whether you are a throwing a house party for 50, a celebration dinner for 500, or a breakfast for 1000, ensure your organization wrestles with the questions that are unique to you.  The resulting purpose and measurable goals are an integral part of smart strategy development and essential prerequisites to action planning.  They will also serve as a guiding light for staff and volunteers alike, keeping everyone focused and headed in the same direction.  Such clarity upfront is critical to creating the conditions for a successful, high-performing event.

Stay tuned for Part 2 where I’ll lay out Step Three, a 4-pronged approach to building event strategy (i.e. a creative and structured action plan to reach your event goals).  In the meantime, go pull that data and schedule your goal-setting session!

Comments

Great way to think about events!

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