Individual Campaigns
First, whenever you send a campaign, you’re going to be asked how it did. There are a handful of ways for you to answer this question.
Response Rate
The response rate is simply the percentage of people who responded.
If you only use only one medium or channel, you can use how many pieces or mail or emails you sent out. However, if you’ve used multiple channels, you shouldn’t add up every touch or contact made but the number of people you reached. For example, if you send to 500 people with postal addresses and then email the 300 of them that have email addresses, you don’t use 800 as your denominator - you use 500.
Net Revenue
Did you make money or lose money? As elsewhere in budgeting, the net is what you made minus what you spent.
However, do not use this metric to judge the success of an acquisition campaign. Many organizations lose money on acquisition because the goal isn’t to make money, but rather an investment in the people you acquire. People who will return that investment as they interact with the organization in other ways.
Average Transaction
The average transaction (or in fundraising, average gift) is simply the average of what all responders gave you.
For membership organizations that just asked for their dues, this number will be very predictable. For a nonprofit asking for different amounts from different donors, it might vary wildly from campaign to campaign and from donor segment to donor segment.
The Overall Health of the Program
Moving on from individual campaigns to the membership or direct response program overall…
Retention Rate
This is a highly sought-after data point that answers how many of the members (or donors) you had at this point last year are still with you now.
You can also perform this calculation on segments of your file. There is a big difference in retention rate between first year members and multi-year members (once someone renews once you almost have them for life). You can also look at members who were acquired via different methods (direct response or via a conference registration for example).
Lapse Rate
This is the opposite of the Retention Rate.
It’s really only used to calculate…
Average Tenure
This is how long an average member stays with your organization.
Equilibrium State
What will happen if you don’t do anything to improve your membership program?
As you can see, the calculation basically looks at the number of new members you’re bringing in versus the number you’re losing per year. When I arrived at both of my most recent roles, they had arrived at the Equilibrium State organically.
Average Value per Member per Year
This is similar to the Average Transaction of a campaign, but it takes into account all of the member spend per year -- not just dues, but also event registrations, publications sales, certification sales, donations -- everything and anything a member could spend.
Lifetime Value
Lifetime or Long Term Value - abbreviated LTV - is one of the most important metrics in direct marketing. And with the above metrics, we can now calculate this.
When I said earlier that making positive net revenue of an acquisition campaign isn’t as important as the people you acquire? This is where the payoff is. From a purely financial standpoint, an organization could actually spend up to this amount to acquire each new member!