by Sacha Litman
What does capitalism and market pricing have to do with congregational membership retention and growth? Capitalism tells us that price should reflect the value a product or service adds to society. Yet time and time again, researchers discover that people are bad at accurately estimating the price of an item or service.
Several years ago, Panera Bread undertook a social experiment in which menu prices were left up to customers. The idea was that those without financial means could eat and those with means could subsidize the needy. Panera listed suggested prices. The company found that the average amount paid by customers for each item was about 80% of the retail price (60% of customers paid suggested price, 20% paid more, 20% paid much less).
What does this have to do with faith-based institutions’ membership retention and growth? Our research shows that synagogues do not price programs anywhere near their cost. For instance, the fee for Hebrew school is typically 50% or less of its true cost. Adult education programs are typically $10 or $20 a ticket, when the actual cost is $100 per person or more.
Some synagogue members would say this is not a problem; membership dues and fundraising are meant to subsidize the difference. This mindset, however, can be damaging if it does not expand to include communication of actual costs. Synagogues lower the perceived quality of their offerings when they charge lower prices AND do not communicate actual costs to members. For example, if a synagogue charges $900 for Hebrew school but doesn’t communicate the actual cost of $3,000, members will place $900 worth of perceived value on that education. If a synagogue tells members that Hebrew school costs $3,000, but only charges $900 due to subsidization by membership dues, members will value Hebrew School more highly. They will also place greater importance on their membership dues, knowing that it supports valuable Hebrew education.
But what if members don’t value Hebrew education? Our data suggest that 30% of membership dues and fundraising subsidizes Hebrew school (primarily due to low price). Yet on the whole, members do not want – or at the very least are not aware of – large amounts of money going to support Hebrew school. That’s a disconnect. In order to maintain dues structures and request charitable giving, synagogues must first communicate a program’s true cost, and second, communicate a program’s value. Members frequently leave congregations because their money is funneled into projects or programs they don’t support. Don’t get me wrong – we are not arguing against subsidizing Hebrew school or other programs. However, in order to remain sustainable, leaders must better educate members on how programs build community, ensure Jewish identity formation, and promote spiritual growth.
From surveying over 15,000 synagogue members, we know that a key driver for member satisfaction is budget transparency. Transparency allows members to better understand true costs of programs and feel rewarded by knowing that their contribution serves a valuable purpose. Showing congregants where their money is going, involving them in budget priorities, and communicating the value of dues-supported programs are great steps to retaining members and ensuring financial sustainability.
Sacha Litman is the Founder and Managing Director of Measuring Success, a strategy consulting firm dedicated to developing quantitative tools and models to enhance organizational effectiveness.