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.