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How to Assess Your Spending Using the Activity Based Cost Framework

Reeher uses a tool called the Activity Based Cost Framework to compare spending across three primary fundraising activity categories and an overhead category. This tool is designed to present a bird’s eye view of spending on fundraising activities regardless of the department of origin. This framework helps organizations improve their efficiency by indicating broadly where spending reallocation is needed. The categories are:

  • Donor Identification: The process of discovering receptive prospects. Donor identification encompasses Annual Fund activities as well as a portion of gift officer and development assistant activities. Costs are spread over every solicitable individual.
  • Benefit Delivery: The arms of the organization providing donors with information, connection and follow-through. Alumni Relations and Marketing and Communications departments fulfill this role. Costs are spread over every solicitable individual.
  • Value Maximization: The process of converting proven high-wealth relationships into long-term supporters. This includes gift officer and development assistant costs as they pertain to activities with Evergreen donors. Costs are measured on a per-assigned individual basis.
  • Overhead: Overhead includes Advancement Services, Development Administration and Advancement Management activities. Costs are spread over every solicitable individual.

Using the Activity Based Cost Framework helps you assess your spending and reallocate resources to see your best results. Proper spending in all areas contribute to a healthy fundraising program. However, Donor Identification activities are particularly important as they directly impact Pipeline donor growth.

Value Maximization

“Value Maximization” activities pertain to assigned Evergreen donors.

This elite cadre of donors should consume only a small percentage of total resources. At the same time, per-donor spending is high, since costs are spread over a very small and targeted group.

Benefit Delivery, Donor Identification, and Overhead

The costs of “Benefit Delivery”, “Donor Identification”, and “Overhead” are spread over the pool of every solicitable individual. Spending per-donor is low overall. Assessing your costs in these areas helps you ascertain what changes can be made to prioritize the activities which contribute to your pipeline growth.

Keeping Costs Level but Spending More on a Smaller Pool of Highly Qualified Donors

You can increase the value of your dollars spent on Pipeline donors, by focusing the largest share of your dollars on donors with the highest likelihood to donate. Reeher Community members spend an average of $28.57 on Donor Identification per solicitable individual. This is a very broad pool of individuals, some of whom are better prospective donors than others. Increase the effectiveness of your Donor Identification activities by segmenting your prospects based on their ability and likeliness to donate. Use high-quality, more expensive means of cultivating your select group of prospects to see better short-term donation results and the beginnings of a long-term donor pipeline. Prospects who are not likely to donate can still be a part of your outreach, but contact should be inexpensive and a limited percentage of your budget.

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