Overall Performance Metrics are Rubbish

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Your ‘healthy overall retention rate’ is a lie and you should feel bad about believing it. Well, probably.

Let’s start with this.

Take a look at the chart below and tell me if you’d rather be Organization Blue or Organization Orange?

The choice is obvious right? Orange is killing it…

WRONG! So, so, so wrong.

Now let’s look at projected revenue for the same orgs:

What the heck. How is this even possible? It’s not only very possible, I see it all the time.

In creating the scenario above, I made each performance metric for Org Blue and Org Orange exactly the same. Their retention by lifecycle – all at the same benchmark levels, their gift sizes and frequency – held constant. Everything about the two orgs is identical except for one thing: Orange is acquiring 10% fewer donors each year, while Blue is acquiring 10% more.

Why does that impact retention? Since Blue is adequately growing its file, it has a higher proportion of donors each year in transitional segments (second-year/reactivated). These two lifecycles have lower retention rates than long-term loyal donors. Meanwhile, donors in the active file for Orange are  dropping like flies because the only ones it has left who are factored into overall retention rate are the increasingly lonely, but high performing multi-year donors. These remaining loyal donors are propping up the overall metrics on a crashing file.

There are two lessons here…

  • If you like your org and don’t want to have to start a new one, keep acquiring new donors. Always.

That’s the lesson from this specific scenario. But what I really want you to takeaway is:

  • Stop judging your program with overall performance metrics. They are pernicious little nuggets of deception. You have to go deeper. And if you can’t do that on your own, we will help you.

4 Comments

  1. avatar

    Great post Joe, too the point and a painful enough to cause change!

    Reply
    • avatar

      Thank you Dave! And good to hear from you.

      Reply
  2. avatar

    What it tells us is that you cannot look at only one metric. And that has been a truism for fundraising forever. We could say the same thing for average gift. Or any one metric. You have to look at the whole picture and make sure all KPI’s are moving in the right direction. So, overall performance metrics are not rubbish. They are just one set of metrics, but only tell us part of the story. Nice headline, but be careful how you frame things. There is no silver bullet in fundraising. Just acquiring more donors will not, in and of itself, help an organization to grow if their second year retention rate is in the toilet or their multi-year retention rate is 50% or less. It all works together, as you well know.

    Reply
    • avatar

      Thank you Chris. I both welcome the conversation and respectfully disagree – particularly the part of “make sure all KPI’s moving in the right direction.”

      As shown in the first post, often times growth in one metric appears as loss in another – and vice versa. For example, a common thing I see is for overall retention to appear as stable or even improving YOY, meanwhile for each individual lifecycle it has decreased since the previous fiscal year. While overall retention is up, the correct interpretation of the data is that this org’s retention is suffering. I was inspired to write this blog because 4 out of 5 meetings I’m in where this occurs, half the room is fixated on their inaccurate, “great” retention performance and the other half is trying to figure out what’s wrong with perfectly correct data.

      To be clear, when I’m referring to ‘overall metrics’ I am specifically referring to Retention, Average Gift, and Frequency. Each one of these are so heavily impacted by the donor mix that I have come to believe that looking at the overall value for a file more often than not points people toward an incorrect insight. And I don’t like that. Not to mention, to start a presentation with: “I’m going to tell you later why these metrics are actually wrong” is just not a focused analysis or good data story-telling.

      Where we do agree is that the story is not contained in a single metric and that growing your donor file isn’t the only way to improve your progam. Win. Lift. Keep. Amen to these points.

      Reply

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