Friday, June 10, 2011

Math 101 for Non-Profits: The Core Formulas



1) Cost Per Acquisition (use this to figure out the average cost of a conversion):

Cost/Number of Conversions

2) Simple ROI (use this to calculate the profit on an investment):
(Revenue-Costs)/Costs

3) Median: Order your list of values (for example donation amounts) and find the middle value. This tells you that 50% of the distribution is below that number and 50% is above it.

For lists that are highly skewed (where a few very high/low values radically change the average), this will give you a better idea of the "true" expected value of an action - such as a donation.
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Formulas should be used first as a benchmark - to find where you are now in your marketing program. From there, the you can find where there are opportunities to improve and continue to use the formulas to chart progress.

It can go beyond internal...this type of data can be shared with the board (if you have one) and large donors to communicate marketing successes.

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