Know the Numbers on Membership Marketing

'Know the numbers' is the best advice that anyone can give you when it comes to membership marketing. Knowing the numbers can help answer key marketing questions like: 'What is the value of a member?', 'How much can I afford to spend to obtain a member?', and 'What is my membership retention rate?

The following formulas are provided as a handy reference tool for membership marketers to help them take a strategic look at the economics of membership.

Renewal Rate
  • Renewal Rate measures the number of members kept over a given period of time -- usually during a fiscal or calendar year.
    · Total Number of Members Today (minus 12 months of new members) / Total Number of Members in Previous Year
    · Example: (105 - 15)/100 = 90% Renewal Rate
Average Tenure
  • How long on average do members stay with an association?
    · Reciprocal of Renewal Rate: 1 – Renewal Rate or, 1 - .90 = .10
    · Example: Divide Reciprocal into 1, or, 1 /.10 = an Average Tenure of 10 years

Lifetime Value (LTV)

  • Assume $100 / Year Dues and $50 / Year in Non-Dues Revenue
    · (Dues + Non-Dues Revenue) x Average Tenure = LTV
    · Example: ($100 + $50) x 10 = $1,500 LTV

Maximum Acquisition Cost (MAC)

  • Assume Incremental Servicing Costs = $20 and Cost of Goods Sold = $25
    · ((Dues + Non-Dues Revenue) - (Incremental Servicing Costs + Costs of Goods Sold)) x Avg. Tenure = MAC
    · Example: (($100 + $50) - ($20 + $25)) x 10 = $1,050 MAC

3 comments:

Ben Martin, CAE said...

Tony, welcome to the blogosphere! I have a some feedback about MAC. It seems ludicrous to spend that amount to acquire a member. What is your opinion? Have you ever had a client routinely spend the full MAC amount to recruit a member? Do you have a methodology to arrive at what percentage of the MAC is an appropriate amount to spend on recruitment per member or per prospect?

Tony Rossell said...

Ben, thanks for the welcome. Great point on the MAC! The MAC is the Maximum amount that you could in theory spend to get a member. I do not know anyone spending at that level now. My concern is that many associations spend far less than they should. The July issue of Associations Now carries an article I wrote that discusses this further. I will post a link to the piece, but it is titled, "Marketing Meltdown No. 1".

Greg said...

Tony,

Thanks for starting this blog and sharing your knowledge. Can't wait to read more.

Greg