Monday, February 11, 2008

Life Cycle V – Renewal

Renewal is the quantitative measurement of how successful you have been with the earlier components of your membership system. An aware, engaged, and interdependent member is much more likely to renew than one who is not.

But at the same time, there is a unique challenge to renewing members. Any renewal program needs to take into account that people are very busy and overwhelmed with communications.

Over the years, my analysis of why members’ lapse shows that the number one reason that people leave an organization is not that they are unhappy with the services or angry about customer service. No, the key reason most people do not renew their membership is because they “forgot”.

In some cases, the member moved and did not provide the association with a forwarding address. In other cases, the brand of the association did not stand out enough in the renewal notice, and it was overlooked. Whatever the reason, more members leave an organization by omission than commission.

In order to break through this omission challenge, renewal programs need to break through the clutter of competing communications.

Perhaps one of the simplest and often one of the most effective ways to improve renewals is simply to increase the frequency of notices. Increasing the number of notices sent to a member should be considered if tracking reveals that the final notices of the renewal program are generating a strong response or if subsequent reinstatement efforts produce good returns. I have met with organizations that do telemarketing to former members and have response rates in excess of 10 percent. This says to me that their renewal system is leaking members who communicated with properly are ready and willing to stay with the organization.

As a rule of thumb, the frequency of renewal notices should be increased until the cost of generating a renewing member through the system equals or exceeds the cost of acquiring a new member. In the rare event that tracking reveals the cost of renewing a member is higher than acquiring a new member, then decreasing the number of renewal notices would be appropriate.

A second tool to break through the challenge of members forgetting to renew is the use of multiple marketing media. In addition to mailed renewal notices, other channels like phone, FAX, and email can be employed.

A high frequency, multi-channel renewal program might look like the following.

Finally, an opportunity to positively impact renewals is to look at offering different options to actually eliminate the member’s renewal decision. This is accomplished by offering payment options like:

  • Automatic credit card renewal
  • Automatic electronic funds transfer renewal (EFT)
  • Multiple year memberships
  • Life memberships
  • Automatic monthly/quarterly credit card installment billing

These payment options change the renewal dynamic from asking the member to act pro-actively to continue a membership to requiring the member to act proactively to end a membership. Associations that have members who accept some type of automatic debit or credit card charge can see renewal rates 10 points higher for these members than for typical members.

What techniques have you used to increase membership renewals? Please feel free to share them here.

By the way, you can read my first four posts on the Membership Life Cycle through the following links: Awareness, Recruitment, Engagement, and Interdependence.

8 comments:

Scott said...

I completely agree that you need to use multiple efforts and multiple approaches to get people to renew. However, and I think you touched on this in one of your earlier posts, the key to renewal is providing something of value. How many times have you ever forgotten to renew something that you really needed? Would you forgot that you had to make a car payment? Would you forget that you had to pay the electricity? You may once but once they threaten to take your car away or turn off your electricity I guarantee you it won't happen again. Associations need to make sure that they offer something unique to their members and they need to figure out the best way to communicate that to their members so they can't "forget" to send in their renewal.

Tony Rossell said...

Scott -- Good comment. As you noted, I tried to address this value issue in my Life Cycle 4 post on building interdependence with your members. You are right, value is important. But I think that the proper operation of a reneweal system is also key. Because of a busy schedule, I one time lapsed my ASAE membership unintentionally and have even been late on a credit card payment. Both ASAE and my credit score are of value to me, but "I forgot". Tony

Lindy Dreyer said...

A proper renewal system should also communicate that the organization values the member. I believe that's why the phone call is such an important tactic...it shows that the organization cares enough to remind me personally that it's time to renew. A great renewal system helps to build the relationship.

Vinay said...

Hi Tony,

I really like the fact you bring out that the renewal process actually being either right when the new member joins or the existing member renews. This is so crucial for if we do our "front end" part right, that then sets the stage for the actual renewal, when the time comes. And certainly agree that mixing medias is helpful.

One question though. While I see what you're saying about everyone being on overload and therefore the need for multiple renewals, are we not adding to the clutter and also training members to ignore our renewals as they'll think, oh, more will follow, so I don't really need to pay attention to that right now? Wondering where's the "correct" balance, if there is such an animal?

Tony Rossell said...

Lindy -- I like your thinking. I remember that my wife sung with a choir for many years and had to drop it because of other commitments. She got a call to be sure to return her choir robe. A call to see if everything was okay and say thanks would have been a better move. Tony

Tony Rossell said...

Hi Vinay -- You point out a risk and challenge in increasing frequency. Here is what I would recommend -- test. We are doing a year long test with one client where we are adding touches to communications with members in odd zip codes and doing the regular program with members with even zip codes. We will see which produces the best ROI for our client. In other words, let the market speak as to what is the best level of frequency.

Also, when organizations find that they are getting in excess of 10 percent of former members coming back through reinstatement telemarketing, it says to me that something is clearly wrong with their renewal program. They value the membership, but have not responded to the renewal efforts. Tony

Anonymous said...

I was interested in the automatic repayment idea, as our organization has a number of folks who just fall away inactively rather than actively cancel their memberships.

I was wondering, though, if you or anyone knew what organizations do in regards to the security of the credit card info. That seems to be the big hang up here with the higher ups, they don't want to have that info. Any specific software or other privacy ideas I can push forward to help bring this about?

Tony Rossell said...

There are companies that you can use to outsource the monthly credit card installment billing to that take the security issue away from you. I would also suspect that some of the newer AMS systems have a way to limit access to credit card information. You may want to post that question on the EDM (effective database management) blog. Tony