Certified Fund Raising Executive (CFRE) Practice Test

What is the most important calculation when evaluating a mailing to existing donors?

1. Cost of production

2. Return on investment

3. Donation per letter sent

4. Percentage of responses received

The correct answer is: Return on investment

When evaluating a mailing to existing donors, the return on investment (ROI) stands out as the most crucial calculation. ROI provides a direct measure of the financial effectiveness of the campaign by comparing the net profit generated from the mailing against the costs incurred to produce and send it. Essentially, it answers the fundamental question of whether the effort put into the mailing was worthwhile from a financial perspective. Understanding ROI helps organizations refine their fundraising strategies by revealing which efforts yield the highest returns, allowing for better allocation of resources in future campaigns. It also plays a key role in long-term planning and decision-making, helping to ensure that investments in donor communications lead to sustained or increased funding. While other calculations such as cost of production, donations per letter sent, and percentage of responses received provide valuable insights into specific aspects of the mailing's effectiveness, they do not encompass the complete picture of financial outcome that ROI offers. These measures may indicate operational efficiency or donor engagement levels, but without linking them to the financial return, they do not fully inform an organization’s overall fundraising strategy.