Growth through Membership Retention

Over the course of this month, I have been looking at five growth strategies. The first post on this was, October 12th, Five Growth Disciplines -- Introduced.

Today, I wanted to look at the growth strategy of keeping the growth that you have already earned or membership retention.

The retention rate obtained by an association in large part determines the ultimate level of membership for an association. For example, an association that adds 5,000 new members a year and maintains a 75% renewal rate will grow to 20,000 members. While an association that adds the same 5,000 new members but maintains an 85% renewal rate will grow to 33,000 members.

Better membership retention helps an association grow by lowering the number of new members that go toward making up for lost members and letting those new members contribute to membership growth.

So how do you increase renewal rate? I believe the key is through engaging or establishing interaction between your association and your members.

This interaction can be as simple as a phone call. In a presentation for ASAE and the Center that I did with Karen Gebhardt of the Aircraft Owners and Pilots Association (AOPA), we reported that their research showed members who called the association’s '800' number compared to those who did not had an improved retention rate.

Interaction can also be in the form of member transactions. In a data analytics study we did for an association, we found:

  • Members who also maintained membership in an optional local chapter along with their national membership were 17 percent more likely to renew than those who were not a member of a chapter.
  • Members who attended an association meeting in the past year were 19 percent more likely to renew than those who did not attend a meeting.
  • Members who attended an association meeting at any time in the past were 7% more likely to renew than those who never attended a meeting.
  • Members who attended four or more meetings were 30 percent more likely to renew than members who never attended a meeting.
  • Members who placed a product order in the past year were 28% more likely to renew than those who had not placed an order.
  • Members who upgraded their membership in the past year to a higher level of service were 12% more likely to renew.

The effectiveness of member engagement was further highlighted in ASAE and the Center’s Decision to Join (DTJ) study. DTJ found that “Those [members] who are not involved lie perilously close to former members in their overarching assessments of the value they derive from associations. If former members are thought of as being dead, the uninvolved are close to comatose.” (page 4)

In an upcoming post, I will look at techniques to engaging members in order to increase retention. Does this growth strategy sound like a good one for your association to use?

The AARP Growth Strategy

Yesterday’s post, My Favorite Growth Strategy – Market Expansion, outlined the theory of growing membership through market expansion. I thought that it might be interesting to take a look at the classic example of using this strategy today – AARP

In 1947, Dr. Ethel Percy Andrus, a retired high school principal, founded the National Retired Teachers Association (NRTA). But after ten years of operation, in 1958, NRTA evolved into AARP when Andrus opened the organization to all senior Americans.

“Apart from a bumpy period in the late '70s, AARP's rolls have risen rapidly each year since its founding in 1958: 1958 50,000 1968 1.6 million 1978 11.8 million 1988 30 million“(Money Magazine).

Membership was boosted in 1984 when AARP further expanded its markets by lowering the age of membership eligibility from 55 to 50.

Today AARP reports 38 million members.

Clearly, the AARP growth included favorable demographics, market need for insurance and other products, and a good membership value proposition. However, if AARP did not look beyond its original narrow teacher market, some other organization would be serving seniors today instead.

That’s why market expansion is so important.

Thinking broadly about who might benefit from the products and services provided by an association can lead to substantial growth.

My Favorite Growth Strategy – Market Expansion

In my post on Growing Revenue through Membership Packaging,
Wednesday, October 5th, we looked at product line extenuation as a strategy for growth.

Today, I want to discuss one of my favorite growth strategies, Market Expansion.
I was reminded of this strategy in the last issue of
Associations Now in the article Picking Markets That Matter by Noel Capon.

Capon warned that there are two mistakes organizations can make. One is overstretching to new markets and the other is remaining static and not moving fast enough.

He gave two corporate examples of organizations that successfully looked beyond their existing markets to grow. One is “GOJO’s launch of Purell as a first-in-its-category consumer product for keeping hands clean.” This launch moved it outside its traditional healthcare and food-service markets and “put it on unfamiliar ground.” But today, Purell is a very successful consume brand.

The second example is Progressive Insurance which launched a discount pricing strategy tied to an analysis of customer’s credit ratings. This allowed it to “acquire and retain a new population of medium- and low-risk customers.”

This market expansion strategy “drove Progressive’s growth from the 13th-largest to the third-largest player in the U.S. car insurance market.”

I have also seen the strategy of reaching out to new markets used with great success in the association marketplace. Sometimes, a market expansion strategy will require some modifications to member benefits and services.

Here are some examples of market expansion:

  • Professional engineering associations reaching out to operators
  • US associations expanding internationally with electronic membership
  • High visibility cause driven-associations reaching out to consumers as donors
  • College based associations reaching out to AP high school teachers

Here are some tips to help you get started with a market expansion strategy to adjacent or hot new markets.

  • Use secondary research to begin scanning new markets to see if who would benefit from your association’s insights;
  • Initiate primary research with executive interviews, focus groups, and surveys to identify unmet needs;
  • Match your existing members and customers against commercial databases with data analytics to identify individuals from new markets who are already joining and using your services;
  • Add live test quantities of commercially available mailing lists and databases in new markets to your ongoing marketing activities to measure potential response in these segments.

What new markets should you explore to expand the growth of your organization?

New Member Discounts and Incentives

I often hear people say that a dues discount cheapens membership and attracts members who the association really does not want. I appreciate their good motives of wanting to attract true believers to the association, but based on real life marketing experience, I disagree.

That’s why I enjoyed reading Maddie Grant’s post on her blog, Diary of a Reluctant Blogger, picking up on an ASAE marketing listserv discussion related to new members dues discounts.

Maddie and I both came to the same conclusion that discounts are okay. In fact, she reports her association gives new members a $500 first year dues discount.

I won’t repeat the quantitative test results that I used to support trying a new member dues discount, except to say that with in one long-term test, we found that an initial dues discount helped one association end up with many more members and much more dues revenue after a full three years of tracking. You can read the details in a past post that I did on the Membership Marketing Blog on the topic of Gathering Data through Market Testing.

But I would like to comment on why I think a discount or any appropriate incentive can be effective.

Through running membership programs for over 20 years, I have come to the conclusion that membership is what marketers call a “push” product. Prospective members may wake up in the morning and say, “I’ve got to find a Starbucks”. But they do not wake up saying, “Gee, I have to find an association to join today.”

In fact, only a small number of members will “find” an association on their own. We learned from The Decision to Join (DTJ page 83) that a mere 2.6% of the survey respondents found out about the association from “browsing the Internet”. Most were introduced to the association by colleagues, conferences, ads, or some type of marketing.

In other words, membership is sold not bought.

This is no different from sharing samples as you stroll through the aisles of Costco or offering trial subscriptions to magazines. It is said of churches that new members often belong before they believe.

Because membership is a push product, growing associations are typically those that have aggressive programs to ask people to become members and incentive them to give the association a try. They say to prospects, “Try it, you’ll like it.”

Sure some members will try the association and not renew. DTJ reports that the number one reason members leave an association is that they, “Did not receive the expected value to justify the cost of dues” (page 81). But because many associations offer a sold product that can truly help a member; the goal needs to be getting that prospect into the fold so that they can become the true believer that we all desire for our association.

Five Growth Disciplines -- Introduced

Okay, if growth is what we want for our membership, what do we do to get it?

Several years ago a book came out that I enjoyed. I liked it because it clearly outlined strategies that I had long believed in as foundational to generate growth.

The book is, Double-Digit Growth: How Great Companies Achieve It--No Matter What, by Michael Treacy

Treacy articulated five disciplines that led to double digit growth for organizations. They are:

1. Keep the growth you already have earned.
2. Take business from your competitors
3. Show up where growth is going to happen
4. Invade adjacent markets
5. Invest in new lines of business

I don’t think that the book caught hold in the non-profit market. We don’t like to talk about “taking” business from other associations or “invading” markets. Nevertheless, there is wisdom in his recommendations.

So in the association membership context, I might translate his disciplines to:

1. Retain your current members
2. Present your value proposition in your marketplace
3. Stay on the cutting edge of your industry or field
4. Expand to new markets
5. Expand your product lines

I hope to take a look at some of these growth strategy disciplines over the next few posts. But first let me know if I am missing something in this list?

Characteristics of Growing and Declining Associations

When we talk about membership, most would agree that growing the number of members is a good thing. But why do we agree with this? What are the implications of a growing membership compared to a declining membership?

Here are some of the impacts that I have observed in associations with increasing and declining memberships.

Characteristics of Growing Associations

  • Economic
    Efficiency is increased as fixed costs spread over more members
    More net revenue is available for investment in new initiatives

  • Members
    Boosts confidence of current and potential members
    High demand associations can set the agenda on pricing

  • Staff
    Attract brightest and best staff (also volunteers and thinkers)
    More opportunities to enhance personal skills and expertise

Characteristics of Declining Associations

  • Economic
    Budgets are too tight to try new initiatives
    Efficiency is lower as fixed costs are spread over fewer members

  • Members
    Less momentum and excitement with members
    Members demand lower pricing

  • Staff
    Financial rewards lower
    Less personal growth opportunity
In my upcoming posts, I would like to look at some of the key strategic drivers of membership growth. Does your experience allign with what I have outlined above?

The Cost of the Wrong Membershp Marketing Strategy

In my two previous posts, I tried to outline the profound long term opportunities of choosing the best membership marketing strategy for an association. Picking the one that looked good to some of you would have resulted in a long term membership nearly 60 percent lower than the full membership potential in our case study.

That’s why it is so important for every association – however well intentioned it may be -- to conduct this type of analysis before launching a membership marketing strategy.

Now let’s take a look of the financial opportunities of selecting the proper membership marketing strategy. Selecting the best strategy also has profound implications for the financial future of the association.

In the case outlined above, assuming an average dues rate of $95 and average member product purchases each year of $80, the financial outcomes of choosing the correct strategy are significant.

  • Option one – focusing on membership acquisition -- generates an annual dues and member product sales revenue stream of $5,600,000.
  • Option two – focusing on membership renewals -- generates an annual dues and member product sales revenue stream of $2,332,275.
  • Option three – focusing on a balanced strategy of acquisition and renewals -- generates an annual dues and member product sales revenue stream of $4,375,000.

Choosing the membership acquisition strategy #1 over strategy #2 more than doubled the association’s potential annual revenue.

Potential Analysis is a shorthand methodology to focus the membership development direction of an association. The key to its success is using realistic estimates of how many members could be added to the association and what the renewal rate could be. Therefore, market research and benchmarking with other organizations can be used to hone these estimates and generate a more accurate future picture. But without doing this analysis of where an association is and where it can be, many groups significantly sub-optimize their potential.

A Tool to Calculate Your Potential Membership

What did you select as the best membership marketing strategy from the case study posted earlier this week?

The correct answer based on the data provided to you is the first option.

Let me explain why.

In order to create the optimum strategy, associations need to define where the opportunity for growth lies — through enhanced acquisition efforts, renewal efforts, or a combination of both.A technique called 'Potential Analysis” (also called Steady State Analysis) can be an effective tool to evaluate what long-term strategy is best for your organization.

To do a Potential Analysis, you use a simple calculation based on the potential new member input and the organizations potential lapse rate (non-renewal rate). Using these numbers, the formula calculates the level where your total membership will reach equilibrium.

Here’s the formula. Annual New Member Input / Reciprocal of Renewal Rate (or Lapse Rate) Shown as a Decimal = Total Membership Steady State.

For example, 20,000 New Member Input / .25 Lapse Rate = 80,000 Total Membership.

Using the Potential Analysis formula, the results for the case study proposed in the previous post came out as follows:

  • The first option with a 75% renewal rate and 8,000 new members per year will achieve a total membership of 32,000 members over time.

  • The second option with an 85% renewal rate and 2,000 new members per year will achieve a total membership of 13,333 members over time.

  • The third option with an 80% renewal rate with 5,000 new members per year will achieve a total membership of 25,000 members over time.

How did your intuitive response compare with the Potential Analysis?

Clearly, based on this exercise, the aggressive membership acquisition strategy had the best potential outcome for this group, followed by the balanced strategy.

However, this case study in no way is means that an aggressive acquisition strategy is always the solution!

In fact, a renewal strategy can be the best option for some groups based on which estimates are put into the analysis. This is particularly the case for associations with low potential new member input opportunities. In the above situation, if the potential renewal rate were 94%, then option two would have been the best selection for this group. Long-term membership with a 94% renewal rate and 2,000 new members a year would have yielded 33,333 members.

Give this tool a try with your membership.

My next post will take a look at the financial implications of selecting the best membership marketing strategy.

What's the best strategy?

“Would you tell me, please, which way I ought to go from here", asked Alice in Wonderland. "That depends a great deal on where you want to get to", said the Cheshire Cat.

The same question and answer apply to membership marketing.

For some associations, an acquisition strategy is the most effective means to grow. For others, focusing on a renewal strategy will benefit the association over the long term. And for some, a balanced strategy will be the best solution. The job of the membership marketer is to analyze the options and develop the the plan for the best allocation of the associations marketing dollars.

I have listed three potential strategies below. Assuming all three are achievable, which do you think will get the best results for a typical? Here are your choices:

  • Focus on acquisition by prioritizing the membership-marketing budget to maintain the current 75% renewal rate and add 8,000 new members each year.

  • Focus on renewals by prioritizing the membership-marketing budget to achieve an 85% renewal rate and maintain the current level of 2,000 new members who join during the year.

  • Focus on a balanced approach by prioritizing the membership-marketing budget to achieve an 80% renewal rate and adding 5,000 new members each year.

In my next post, I will outline which strategy that I think makes sense and provide a technique for calculating potential outcomes based on various renewal rates and acquisition levels.