No Good or Bad Renewal Rates

Because of the impact of differing business rules among associations and environmental factors, you cannot compare one association's renewal rate to others. There really is not a good or bad renewal rate. Instead, the purpose of calculating renewal rates is for an association to establish a standard to monitor the improvement or decline of membership retention.

Variables that limit the ability to benchmark renewal rates across associations and determine a "good" or "bad" renewal rate include the following:

  • Individual membership organization versus trade association membership. Associations that offer an individual membership as opposed to associations with institutional or company memberships typically will see lower renewal rates. ASAE reports that the mean renewal rate for is 83% for an individual membership association and 91% for a trade association.[1]

  • Member-paid dues versus company-reimbursed dues. Associations that serve a market where dues are reimbursed or paid for by an employer will see better renewal rates than dues paid out of pocket by individuals. Decision to Join reported that “two thirds of those who are now members of any association and have dropped an association membership in the past say that their employers stopped paying dues.”[2]

  • Growing versus declining memberships. Associations with a rapidly growing membership tend to have lower renewal rates than groups with a steady or declining membership. This occurs because growing associations have a larger proportion of first year of members and first year members typically renew at a much lower rate than longer term members.

  • Incentive-generated members versus full-price members. The stronger the incentive used get members to join an association, the lower the renewal rate will be when compared to members who joined with no incentive. Members who receive a complimentary membership when they attend the annual meeting, for example, will not renew as well as members who join at full price.

  • Transient industry versus stable industry. Associations that serve highly transient markets, where job turnover is high or members are moving out of the industry, will see lower renewal rates than a steady marketplace. A job change for an individual association member or a merger for a trade association member raises the likelihood of not renewing membership.

  • Short membership grace period versus longer grace period. Business rules on when a member is considered lapsed varies between associations. Some associations count members as renewing if they receive payment within 90 days of expiration. Other associations lapse a member on expiration and consider a payment 90 days after expiration to be a membership reinstatement.

Therefore, if an organization has an individual membership where dues are not reimbursed by an employer, is rapidly growing through the use of substantial new member incentives, is focused on an industry that members move in and out of, and has business rules that require ending an unpaid membership on the expiration date, then the association will probably have a what someone might characterize as a very low renewal rate.

But that does not mean the membership marketing staff is doing a bad job of serving and renewing the members. And comparing this organization to others that do not have the same factors is not helpful. Instead the organization should use the current rate as a benchmark and work to put new tests and programs in place to move the rate higher.

[1] 2006 American Society of Association Executives (ASAE) Policies and Procedures in Association Management: A Benchmarking Guide, Volume 1 Membership, p. 36.
[2] DTJ, ASAE and the Center, p.63.

1 comment:

Kate Snyder said...

Hi Tony. Great blog post on member retention rates. I have been director of membership for a farm organization for two years after a mid-career transition with a background in communications, so I am always looking for tips. Thanks!