How to Calculate where your Membership is Headed

Last month was really busy. I met with many organizations who are looking for help after a distressing 2009. And some of them do not realize just how much trouble they may be in going forward.

When I meet with groups, I use a simple method to calculate where their membership is headed given their current metrics. It is called a Steady State Analysis.

Using your current data, you can also do this analysis to see what the ultimate equilibrium of your association membership count will be. You can also use the analysis to model where it might be if you add more new members or have higher renewals.

To do the calculation, you only need two numbers; your renewal rate and your total new member input from the past year. Here is how it works. You take your new member input from the past year and divide it by your lapse rate presented as a decimal. So if your renewal rate is 80%, then your lapse rate is 20% or .20.

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

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

Here are three examples of how you can project your future membership.

• A 75% renewal rate and 8,000 new members per year will result in a steady state membership of 32,000 members
• An 85% renewal rate and 2,000 new members per year will result in a steady state membership of 13,333 members
• An 80% renewal rate with 5,000 new members per year will result in a steady state membership of 25,000 members

One other thought to consider. From my personal observation, the organizations that I am seeing in the most distress are those that pulled back from marketing this past year. Groups that continued to aggressively market membership actually came through the year in much better shape. This confirms some of the research that we shared at the start of this recession.


Vinay Kumar said...

Tony, this is a great post. It reminded me of a study done in UK where 183 UK companies were studied during periods of recession and recovery. Here's what they found.

Of the 183 companies, 110 were "scroungers". Their leaders had a scarcity mind set, so they cut their marketing spending during recession. Result: during recovery, their profits grew by merely 0.8%.

Now compare that to 20 who were "spenders". Their leaders had an investment mindset and as a result they actually increased their marketing spending. During recovery, their profits grew by 4.3%.

Growth nearly 5 TIMES THAT OF SCROUNGERS. That's a HUGE difference in-terms of bottom line performance.

So the question for association executives is, are you operating from a scarcity mindset or an investment mindset.

Since our outer world is a reflection of our thoughts, it's important we each introspect and honestly look at our thoughts and then see how those are either helping our organizations, or holding us back. For the organizations are mostly reflections of the leaderships' thoughts.

Tony Rossell said...

Vinay -- Thanks for the comment. I think by nature many membership organizations are cautious. This is understandable. But I agree that data seems to indicate that continued engagement with the market in tough economic times appears to be a productive strategy. Tony