I was confused by all the formulas and ratios, and was never sure which numbers were more important than the others. Cost Per Piece, Cost to Raise a Dollar, Return On Investment, Average Gift, all of these and at least six other metrics kept me in a state of anxious ignorance. I was never sure where I needed to start my calculations.

Now I know, and I thought I’d pass on to you what I discovered in what I suppose I could call an epiphany.

I discovered that, to track the effectiveness of any direct mail campaign, all you need to start with are four numbers. Once you know what these four numbers are, you can perform every calculation you need to measure your costs, revenue and return.

These four numbers are the only ones you need to measure on every campaign. They’re the only four numbers you need to obtain when comparing recent campaigns with those from long ago.

The numbers are simply these:

1. Number of letters you mail.
2. Number of gifts you receive.
3. Amount of money you spend to mail the letters.
4. Amount of money you receive as gifts.

These numbers are known in the trade by various terms. I refer to them as:

1. Pieces Mailed
2. Total Gifts
3. Total Cost
4. Gross Income

I recall these four numbers by remembering that two deal with mail and two deal with money. The first two numbers deal with what you mail and with what comes back in the mail. And the second two numbers deal with what you spend and with what you earn.

Only when you know these four simple numbers can you run the calculations you need to make sense of your direct mail fundraising results. Need to know your cost to raise a dollar? Divide your mailing cost (number 3 above) by your income (number 4 above). Need to know your average gift? Divide your income (number 4 above) by the number of gifts received (number 2 above).

If you need help making sense of direct mail fundraising math, download the Direct Mail Fundraising ROI Calculator or read Direct Mail Fundraising Arithmetic Demystified.

© 2006 Alan Sharpe. Reprinted with permission.