Average Gift & Response Rate

We want to drill down on the two datapoints that make the previous direct mail posting a nice, easy formula. The first is average gift size. The second is response rate.

AVERAGE GIFT

Finding your average gift is easy: look at your most recent year-end direct mail. Add together all the money raised from that mailer and divide by the number of gifts made. This is a rough estimate.

But, you know how you always get a $5,000 gift from a donor who met with your CEO two weeks before and just dropped her check in your direct mail envelope? That gift probably isn't representative of your direct mail program. Sometimes, it's easy to know which gifts to exclude, but often, it's not.

When you know which really big and really small gifts to exclude, just do that.

When you don't, do this:

• Find your average gift by adding up all the revenue raised and dividing by the number of gifts. This is your average gift.
  
• Next, figure out the standard deviation (an Excel formula will do this for you).
  
• Then, start at your average gift and add your standard deviation to your average. Add it again. Stop. Exclude any gifts above that amount.
  
• Then, take your average and subtract your standard deviation from the average. Subtract it again. Stop. Exclude any gifts below that amount.
  

These extra steps stabilize your average gift by removing that $5,000 gift and that $1 gift from the mix. It gives you an average of the most common contributions you receive (roughly 95% of all donations).

RESPONSE RATE

Response rate is the total number of donors who gave to your year-end appeal divided by the total number of people who received your year-end appeal.

If you're new to your organization, use industry standards as proxies to estimate your response rate.

For instance, a prospect or acquisition mailing has a .7% response rate (or 7 people out of every 1,000 mailed will give).

For a loyal donor mailing, 2% is a typical response rate (or 2 out of every 100 mailed will give).

If your mailing is a mix of donors and prospects, use 1.5% as a response rate.

We'll dig deeper with more sophisticated forecasting tools in a future article, but these proxies will get you started.