improve your bottom line: combine roi and lifetime …...improve your bottom line: combine roi and...

IMPROVE YOUR BOTTOM LINE: Combine ROI and Lifetime Value

Strategies to Assure Longevity

National Arts Marketing Project Conference

November 13, 2010

The unique audience for live classical

has declined 13% since 2002.-

League of American Orchestras, Dec. 1, 2009

55% of new customers from the 2006-07 season

did not return the following season.-

Symphony Magazine, Jan./Feb. 2009

Movie attendance in 2009 was down 12%

from the decade peak reached in 2002,

though 2009 set a record for domestic ticket sales.-

The New York Times, Dec. 21, 2009

Audiences are shrinking.

Churn exists.

BUT

Dedicated customers are deepening their loyalty.

THE BIG QUESTIONS

Are we making the right investments to maximize the response from patron who are likely to

deepen their loyalty?

Do we understand the lifetime value (LTV) that

our patrons represent?

SESSION AGENDA

1.

Overview of Topic 2.

Introduction of Panel

3.

TimeLine Theatre Company –

ROI Case Study 4.

Artsmarketing’s

Approach to Understanding and

Using LTV 5.

Toronto Public Library -

LTV Case Study

6.

Questions

600 Tweets

700 Facebook

posts

34,000 Google searches

PER SECOND

There are more communication channels.

Patrons have more ways to participate.

Consumers are creating -

in real-time –

the reputation of your brand.

There are more decisions to be made.

Each decision has greater short and long term impact.

Understanding ROI is more important then ever.

START

LARA GOETSCH, TimeLine Theatre Company

WHO?• Timeline Theatre = small/midsize

• 90-seat flexible black-box theater

• 6 full-time employees

• Annual budget ~ $1 million

• Marketing budget ~ $75,000

WHY?• Marketing budgets down 16%

• Income goals up 40%

• Rapidly expanding universe of options

• Confusing array of choices

• Maximize every action

WHAT?• Return-on-investment (ROI)

• Apply to marketing/development initiatives

• Formula results in consistent measurementfor comparison

WHEN? WHERE?• What do you wonder about?

• Where are you spending the most?

• Test variations on campaigns

• Start somewhere

• Build gradually

HOW?• Implementation tools include:

— Customer database— Tracking codes— Google Analytics

• Can review big picture and/or dig down to compare tactics within campaigns

• Snapshot of activities/results

BUT?• These examples measure “Realized Value”

— Snapshot of an event— Historical view

• More power: Also incorporate “Potential Value”

— Future view— Take into account Lifetime Value

• 70% of this income from New subscribers

• Whole new story if use Lifetime Value of subscribers secured via this initiative:

BUT?

• Not as complicated as you may think

• Topline results are helpful— Dig deeper on specific questions

• Test. Measure. Adjust. Test again. Repeat.

• Rejoice in every opportunity to make adecision that is better informed!

CONCLUSION

The power of ROI is helping us understand

if we are investing our resources the right way.

It becomes more powerful when we look at it through the

lens of lifetime value (LTV).

WHAT IS LTV?

The amount of profit

an individual customer

can create for your business

for this year and the years ahead.

Understanding Lifetime Value:Understanding Lifetime Value:

Project the Long-Term Impact of Your Direct Marketing Programs & Improve Your Bottom Line

Presented by:Presented by:Irene E. GreenbergIrene E. Greenberg

Director of Development & CommunicationDirector of Development & Communication

Artsmarketing

Services Inc.www.artsmarketing.com

416‐941‐9000

http://www.artsmarketing.com/

Artsmarketing Services Inc.www.artsmarketing.com

LTV is the total revenue a patron is expected to give your organization this year and in the years ahead.

DonationsMembership feesSubscriptions & ticket salesSpecial eventsCapital campaignsPlanned gifts

What is Lifetime Value?


Why is LTV important?

Factors in activity over multiple yearsIdentifies:

Best toolsBest listsBest asksBest offers

Quantifies maximum acquisition costs


The equation:

Cumulative Annual Revenue

Attrition Rate

= Estimated Lifetime Value


Clarifying the terms:

Cumulative Annual RevenueThe total value of all transactions during the past 12 months

Attrition RateOpposite of the renewal rate – or 100% minus renewal rate

Lifetime ValueTotal revenue expected from supporter(s) throughout relationship

=Estimated

Lifetime Value

Cumulative Annual Revenue

Attrition Rate


The formula in action:Cumulative

Annual RevenueAttrition Rate

=Estimated Lifetime

Value

Example:1 museum membership renewal @ $250

1 annual fund contribution @ $50__________________________________________________________________________________

Cumulative Annual Revenue = $300Divided By

Expected Attrition Rate = 40%Equals

$750 Current Lifetime Value


Variable #1: Cumulative Annual RevenueGroup A Group B Variance

Patrons 100 100

Initial Transaction Value $25 $250 $225Initial Revenue $2,500 $25,000 $22,500

2nd Transaction Response 10% 10%

2nd Transaction Value $25 $25

2nd Transaction Revenue $250 $250

Cumulative Annual Revenue $2,750 $25,250 $22,500

Attrition Rate 50% 50%

LTV on 100 Patrons $5,500 $50,500 $45,000

Cume. Revenue per Patron $27.50 $252.50 $225.00Projected LTV per Patron $55.00 $505.00 $450.00

Higher initial transaction results in 818% increase in Projected Lifetime Value


Variable #2: Attrition RateGroup A Group B Variance

Patrons 100 100

Initial Transaction Value $250 $250

Initial Revenue $25,000 $25,000

2nd Transaction Response 10% 10%

2nd Transaction Value $25 $25

2nd Transaction Revenue $250 $250

Cumulative Annual Revenue $25,250 $25,250

Attrition Rate 80% 20% 60%LTV on 100 Patrons $31,562 $126,250 $94,688

Cume. Revenue per Patron $252.50 $252.50Projected LTV per Patron $315.62 $1,262.50 $946.88

Lower attrition rate results in 300% increase in Projected Lifetime Value


Multiple Variables at WorkGroup A Group B Variance

Patrons 100 100

Initial Transaction Value $25 $250 $225Initial Revenue $2,500 $25,000

2nd Transaction Response 10% 30% 20%Responses 10 30 20

2nd Transaction Value $25 $50 $25

2nd Transaction Revenue $250 $1,500 $1,250


Attrition Rate 80% 20% 60%LTV on 100 Patrons $3,437.50 $132,500 $129,063

Cume. Revenue per Patron$27.50 $265.00 $237.50Projected LTV per Patron $34.38 $1,325.00 $1,290.62

Multiple variables result in 3755% increase in Projected Lifetime Value


Cost ConsiderationsGroup A Group B Variance

Patrons 100 100


Return on Investment (ROI) 65% 0% 35%

1st Year net revenue $1,787.50 $0 $1,787.50

LTV on 100 Patrons $3,437.50 $132,500 $129,063

Expense budget $962.50 $26,500 $25,537.50

Multi-Year Net Revenue $2,475.00 $106,000 $103,525.00

The value of a campaign may not be apparent in its first year, as this

dramatization illustrates.


Tipping the scales in our favorStructure giving levels and benefits to incentivize higher level donors and subscribers

Beef up benefits for higher level donors and subscribers who choose longer packages and/or best seating sections

Make larger donations and higher renewal rates easy by offering an ongoing monthly payment option

Proactively cultivate all supporters to maximize renewal rates, even if it requires an investment of additional resources


How Cumulative Annual Revenue influences LTV:

The higher the value of the transaction, the greater the impact on LTV

Value of renewals Value of donationsStrength of commitment Satisfaction, renewabilityCreate appeals designed to generate higher value transactions


How Attrition influences LTVWorking actively to reduce attrition is a smart long term strategy

When we lose someone it’s not just this year’s incomeCultivate pro-actively to build loyalty Pay special renewal attention to newcomers


LTV – the key to working smarter, not harder

Focus resources where they will do the most goodToday’s decisions result in more revenue in future yearsHigher renewal rates and lower renewal costs reduce overall expensesLess churn = Larger base of supportEliminate unproductive practices

HOW DO WE TAKE ACTION?

Understand which efforts produce results.

Analyze LTV in our databases.

Think about campaigns that are multi-year in terms of

budgeting, goals, messaging and analyzing.

38

Lifetime Value in Action: A Case Study

NAMP November 13, 2010

Heather Rumball President

39

1 About Toronto Public Library

The World’s Busiest Urban Public Library System

Established in 1884

99 branches; municipally funded

3 tiered service model: - Research & Reference

- District - Neighbourhood

Used by 73% of population; 1.2M (49%) have library cards

Collections in over 40 languages

40

2 About Toronto Public Library FoundationProvide enhancedfunding for:- Collections- Programs & Services- Community Spaces

A History of Success: Over $47 million raisedsince 1997

41

4 Fundraising Program

Comprehensive scope

Community Giving– In-branch– Direct Mail– Telemarketing

42

Broadening Our Donor Base

Why Telemarketing?Acquisition focusTelling our story

Target AudienceNon-library users

43

Fall Direct Mail Results2008 2009

Segmentation Number of

Donors

Gross Revenues

Number of

Donors

Gross Revenues

Current Donors 469 $30,864.00 532 $43,728.65Lapsed Donors 73 $2,955.00 114 $ 6,920.00New Donors 117 $ 4,912.00 108 $ 5,285.50

Total 659 $38,731.00 754 $55,934.15Total Expenses $13,758.72 $12,794.38Net Revenues $24,972.28 $43,139.77Total Cost/$ Raised

$0.36 $0.23

44

Fall Telemarketing Results2008 2009

Segmentation # of Donors

Gross Revenues

# of Donors

Gross Revenues

Current Donors 144 $15,580.50 247 $25,398.69Monthly Donors 41 $ 3,091.00 43 $ 4,514.00Lapsed Donors 80 $ 7,035.00 122 $ 8,876.00New Donors

In-house listDemographic list Referrals

77290

7

$ 5,733.00$25,781.28$ 781.00

3458

4

$ 225.00$35,771.18$ 185.00

Additional Gift 106 $ 9,327.00 89 $ 6,875.01Total 745 $67,328.78 966 $81,844.88

Total Expenses $68,117.44 $85,818.37Net Revenues -$ 788.66 -$ 3,973.49Total Cost/$ Raised

$1.01 $1.05

45

2009 Telemarketing Results

Fundraising

Strong response rates6.5% for demographic lists

Average gifts were > Direct MailRenewals/lapsed = $91.15 vs. $78.40Acquisition (demos) = $77.81 vs. $48.94

Budget was almost break-evenAiming to still achieve breakeven

46

2009 Telemarketing Results

Raising AwarenessReached 7,148 new individualsand realized 4 referralsReinforced relationships with 2,356current donors

Donor AcquisitionAchieved 465 new donors• increasing donor database by 18.82%

Cost/$ raised = $1.76 • Direct Mail standard: $1.25 - $1.50

47

Combined Fall Direct Mail & Telemarketing Results

2008 (DM + TM)

2009 (DM + TM)

Segmentation Number of Donors

Gross Revenues

Number of Donors

Gross Revenues

Current Donors 760 $58,862.50 911 $80,516.35Lapsed Donors 153 9,990.00 236 $15,796.00New Donors 491 $37,207.28 573 $41,466.68

Total 1,404 $106,059.78 1,720 $137,779.03Total Expenses $81,876.16 $98,612.75Net Revenues $24,183.62 $39,166.28Total Cost/$ Raised

$0.77 $0.72

48

Lifetime Value

New Donors

Cumulative Annual

Revenue

Attrition Rate

Lifetime Value

Lifetime Value Per

DonorNew Donors from PRIZM Lists

374 $32,628.60 60.16% $54,236.37 $145.02

New Donors from In-branch Lists

117 $4,912.00 52.14% $9,420.79 $80.52

Cumulative Annual Revenue= Projected Lifetime Value

Attrition Rate

49

Strategies for 2010

1. Implement another acquisition-focused telemarketing campaign

• focus on highest-yielded segments specifically in average gift

2. Do more analysis• attrition, renewal rates, LTV

3. Test • donor mail/phone strategy (lapsed)• calling targeted segments of the internal

acquisition list • Mailing to targeted segments of

demographic lists

QUESTIONS?

SPEAKER INFO

Eric Nelson

DCM

Director, New Business and Marketing

718.488.5577 x5017

[email protected]

Lara GoetschTimeLine Theatre Company

Director, Marketing and Communications

773.281.8463 x25

[email protected]

Irene GreenbergArtsmarketing

Services Inc.Director -

Development & Communications603.778.1428

[email protected]

Heather Rumball

President

Toronto Public Library Foundation

[email protected]

improve your bottom line: combine roi and lifetime …...improve your bottom line: combine roi and...

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