Sacha Litman is an alumnus of the Wexner Graduate Fellowship Program. He is the Founder and Principal Consultant of Measuring Success, a strategy consulting firm dedicated to developing quantitative tools and models to enhance organizational effectiveness. Sacha can be reached at: sacha@measuring-success.com.
As organizations I work with suffer losses in membership, enrollment, or donors; I hear time and time again that it is out of their hands. The conclusion tends to be that these losses are due to increased price sensitivity during tough economic times and a declining interest in Jewish activities. In response, many organizations we’ve worked with have decided to cut costs, thereby enabling them to reduce prices. What I have found, however, is that while reevaluating expenditures in order to run a tight ship is critical in these times, it tends to mask the proverbial 800-pound-gorilla in the room, which is the problem of poor levels of perceived quality.
What people are more sensitive about now is making sure that, before they buy something, the quality justifies the price. This perspective does not suggest that price is unimportant and quality is key, but that the two must be linked. The tradeoff that institutions make between cost and services defines the value participants see for each dollar spent or donated.
I believe the reason many organizations are suffering financially is because their customers consider their services to be mediocre, and are not willing to pay a premium for it during a time when frugality is the watch-word. In data we’ve collected across hundreds of non-profit organizations, there is no correlation between participation and price increases. Rather, we believe enrollment responds to perceived quality, and price should be set so that it matches the perceived quality (if price exceeds the perceived quality, organizations lose customers). We’ve studied data from many of our clients and found that those whose perceived quality of services is measurably outstanding are not suffering the membership or enrollment drops experienced by those providing mediocre quality. Cost cutting can create a vicious cycle in which it further reduces the capacity to provide services and thereby further reduces the perceived quality.
The factors that go into a person’s willingness to pay for a service are financial ability, commitment to the mission, and perceived quality of the service. To use a metaphor from retail, if you go shopping for a new sweater, whether you buy the sweater and how much you will spend is a combination of your disposable income, need (is it 10 degrees in January and you forgot to pack a sweater in your suitcase?), and your perceived quality of the sweater (materials, style, and brand). Often times, institutions are highly attentive to their customers’ financial ability and commitment, but fail to effectively monitor perceived quality, allowing it to drop to mediocre levels, which is ironic because this is the factor that institutions have the most control over.
Many studies have proven that the survey question “likelihood to recommend your institution to a friend” (known by the concept of promoter or net promoter score) is the best question for predicting a customer’s likelihood to stay or leave as well as the institution’s future growth or decline. Measuring Success, through its Peer Yardstick methodology, has developed tools that address this outcome and study its key drivers for many segments of the Jewish world including federations, schools, JCCs, and synagogues. It is fascinating to observe the aggregate percent of promoters across the types of institutions in the Jewish world and compare them to declines in enrollment or membership. Camps average 78%, Day Schools average 54%, JCCs average 48%, and Federations average 29% (for donors who gave $1-10,000 gifts). It is no surprise that many Jewish camps have waiting lists, while schools and JCCs are working hard to keep enrollment stable, and many federations have been losing donors. Keep in mind that these scores represent the average across all institutions that have participated in the data tools used in each sector and there are obviously individual institutions that scored much higher and lower. Naturally, the intensity of the experiences for each type of institution are also significantly different. However, this underlines the point that we need to improve perceived quality first and foremost, and should cut costs only in areas data indicates do not significantly contribute to perceived quality.
It’s not enough for an organization to rely on its ideological underpinnings to compel membership. These values must be supported through strong programming that meets the needs of the constituents. To learn more about how we help Jewish organizations to measure and improve their perceived value as well as their financial sustainability, please visit http://www.measuring-success.com/.
