The church needs to pivot

We spent this year’s Good Friday morning with friends at a local café followed by a visit to the gym while my wife went shopping at the mall. I don’t remember when society suddenly decided that commerce trumps tradition, but it is a sign of the times and the church is in trouble – the Evangelical-Lutheran Church that is.

The church not only has an image problem – on both sides of the aisle, caused by remarks both for and against things like gay marriage and female priests, but it also suffers from the rise of individualism and a decline in tradition. Helsingin Sanomat reports that soon less than 50% of people in Helsinki will belong to the church and the numbers for the rest of the country look equally bleak:

  • In 1950, 95% belonged to the church.
  • In 1985, 90% belonged to the church.
  • In 2009, 80% belonged to the church.
  • In 2018, 70% belonged to the church.
  • In 2030, 50% will belong to the church.

The final congregant will, by the looks of it, turn off the church lights sometime around 2052. Probably even sooner.

Church participation chart by Jonas Forth 2019. CC BY-SA 4.0

The church faces many of the same challenges that old industries do – poor product fit, digitalisation and disruption from smaller and more agile players – and I found it interesting to look at some of the core metrics to get a grasp of where our church is heading.

It’s not looking good.

Key performance indicators

There are many so called KPIs (Key Performance Indicators) once can look at to determine the short and long term health of a business but I focused on five of them:

  • Customer Acquisition Cost (CAC)
  • Lifetime value (LTV)
  • Monthly Active Users (MAU)
  • Net Promoter Score (NPS)
  • Runway

Why these five? Well, they sort of build upon each other. A working entity or business, that has users paying for a service is always in a state of motion. It is constantly challenged by others, competing for attention and money. Your MAU tells you if you are continuously providing value to your users and your NPS hints at whether your value is worth telling others. The LTV ties into the CAC and based on the how much runway you have, you can estimate for how long you can keep things going.

1. Customer Acquisition Cost (CAC) is the cost associated in convincing a customer to buy a product/service – or in this case to join the church.

For the church, the costs for getting new members has historically been very low as most people up until a few decades ago, registered their children after birth and the system took it from there. It has been possible to leave the Evangelical-Lutheran Church since 1923 but starting in 2003 exiting was made much easier. The chart below tells much of the story.

Chart by Iktyodocus on Wikipedia CC BY-SA 4.0

2. Lifetime value (LTV), the measurement of the net value of an average customer to your business over the estimated life of the relationship with the business.

Finland started collecting church tax in 1923, and it was paid as a separate annual one time fee up until 1959, when people started paying it as an advance collection tax. The current church tax has ranged between 1 and 2.25 % and the average tax is now 1.43%. The average income in 2017, men and women included, was 29540 €. This means that the state on average collects 422 € per church member annually.

LTV is calculated with the following equation: average purchase value x average purchase frequency rate x average customer’s lifetime span.

The first two are easy – 422 € and 1 year but the third one is tricky. Some people stay a member of the church until death while some leave in their teens. For the LTV I would focus on the regenerative part and calculate how many years on average people stay on after they start paying taxes. People roughly start working or studying at 18 and die on average at 77. That leaves 59 years of paying taxes. So, 422 x 1 x 59 equals 24898 € LTV, if the member were to stay on his or hers entire life. I tried finding data on the average time of being a church member, including joining-leaving-joining scenarios, but I couldn’t really find any. However 2/3 people leaving the church do so between the age of 18 and 39 (PDF link), so one could argue that the average age of exiting the church is 29 ((39-18)/2+18). That would mean a LTV of 422 * 1 * (29-18) = 4642 €. The third (but incorrect) way of calculating the LTV is using the average age of the member which is 42. That gives an LTV of 422 x 1 x (42-18) = 10972 €, with the same kind of calculation

I should also mention that Finnish companies pay a percentage of their profits to the church. This money is earmarked for the upkeep of cemeteries and church buildings as well as the population registry, all of them state mandated tasks.


3. Monthly Active Users (MAU) is an important KPI for most companies, but especially digital companies. MAU is the number of unique users who engage with a product (usually and app or site) in a 30-day period. For this post it might make sense to look at yearly active users (YAU) as people tend to interact with the church only at Christmas, at weddings or christenings and children’s activities (PDF link).

About six million people (measured as sessions with overlapping people) attended the Evangelical-Lutheran Church Sunday mass in Finland in the mid-1980s. By 2016 that number had fallen to 3,2 million, the majority (of the uniques) only attending the Christmas mass. In a 2011 gallup by Gallup Ecclesiastica, 6 percent of members said that they attended mass at least once a month. The Christmas mass is still the most popular event during the year but in 2015 the amount of attendees has fallen to 320 845. The total number of members in 2015 was 4.016.657 (Excel link), meaning about 8 % of the total amount of church members attended Christmas mass.

Data from Osallistuva Luterilaisuus, page 74 (PDF link)
Mass attendance in the Nordics.

Regardless of which core church activity you look at, a fraction of the members actively participate in any of them. One can of course argue that popular things like youth and children’s services, flea markets and other activities such as couple therapy, should be included in the MAU or YAU.

Data from Kirkon Tilastot. The use of church services in 2018.

A 2015 report states that over half of Finnish people pray at least once every year. (PDF link) Perhaps that should be counted as a member activity too.

This development is of course not in any way unique to Finland but a general trend in both Europe, the US and other parts of the world. It should be mentioned that some religions are gaining ground in areas that have been slower to modernize.

Original by Guardian Graphic available here.

4. Net Promoter Score is an index ranging from -100 to 100 that measures the willingness of customers to recommend a company’s products or services to others. NPS was introduced back in 2003 by Fred Reichheld, whose company was conducting research on growth. He found that the most important indicator was the answer to the question How likely is it that you would recommend our company/product/service to a friend or colleague? The user is asked to grade the answer using a scale from 0 to 10. NPS scores vary across different industries, but a positive NPS is generally deemed good, a NPS of +50 is generally deemed excellent, and anything over +70 is exceptional. (Apple has an NPS score over 70 and that’s a cult).

I couldn’t find any studies or data that directly addresses this in a church context and just based on anecdotal evidence, I have never been recommended the church’s services nor have I heard anyone recommend the church.

Since the church up until now has not had to focus on the cost of user acquisition (as seen in point 1), and their position in Finland has to a large degree been monopolistic, it hasn’t had to work on offering the best user experience for everyone. I would also say that the church suffers from serving two user bases with different needs – one being the hardcore users where the core original message is important and the other being users who stay on out of loyalty or tradition (a comparison to cancelling Netflix comes to mind).

Individual services can more easily be measured, as when the Vantaa congregation’s couple’s therapy scored +67 in one NPS trial, but asking a member to state how likely it is that they would recommend the church to a friend is trickier. Especially if the question refers to the church as a holistic entity, when everyone has their own take on what that really is.


5. Runway is critical to the survival of any company. Runway is the measure of the amount of time until the company runs out of money, most often expressed in months. You need to know your revenue and monthly fixed and variable expenses since that enables you to calculate the company’s Monthly Burn. Runway is then calculated by dividing remaining cash by monthly burn. Doing that for the church is however more easily said than done.

Net result in euro per member per parish 2008-2011.
Page 344 of this 2011 report (PDF link)

While researching this piece I was positively surprised that the church publishes its statistics on a monthly basis – including financial data. You can also get the information of all parishes through Finder.

The church tax base is slowly shrinking and the parishes have sold off real estate in the past years to get rid of the costs of maintenance and alsoraised money by raising the rent for land in certain places. The church states in their 2011 report that although the tax income is stable, the church’s expenses are growing at a faster rate (PDF link, page 316).

Net result of the Evangelical-Lutheran Church 2018 / 2017
The data can be found here

The highest figure in church tax accounts was reached in 2009 and it has slowly fallen since then. The Evangelical-Lutheran Church is still doing a positive net result, although some parishes are struggling. In 2016 the net result was 31 million, in 2017 43 million and in 2018 tentatively a little over a million.

About 80% of the parishes’ revenue comes from taxes and about 70 percentage points of that is tax from church members, with the remaining 10% being earmarked corporate tax. The church owns a significant amount of real estate and forests, as well as other investments, which to an extent helps its burn rate and will carry the church as the number of members continues to drop. The church concludes on page 344 of its 2011 report:

During the reporting period, the economic situation of the congregations weakened strongly and regional inequalities continued. The church’s operating expenses increased and more and more money was spent on church investments – more than the churches had income. This was financed by using savings, loans and selling assets. In the long term, this development is unsustainable.

Conclusion

The Finnish state has officially collected church tax for close to a hundred years and if it were to end in a few decades, I would still say that the church had a good run. We’re only a little more than a decade away from having less than 50% of people belonging to the church, and when that happens the societal and political conversation is going to change.

  • The church is missing the the viral loop it used to own and dominate.
  • The church lacks values that resonate with the majority of its followers as well as a coherent story to carry it forward.
  • The church behaves and reacts as a business.

Steve Blank, a Silicon Valley entrepreneur, defines a pivot as “changing (or even firing) the plan instead of the executive. The church might not have to ditch the man in the sky but it does need to pivot.


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