The Preeminence of Mission for Membership Associations

It is very easy in life to replace the end with the means.  This happens when we focus our attention on best business practices, individual leaders, or our own projects as the goal instead of the mission of the organization that we serve.

That’s why a recent presentation by Mark J. Golden, FASAE, CAE, at the Association Chief Executives (ACE) Symposium this month serves as an important reminder for membership professionals. 

He made the point that “Membership is a means to an end, not an end in and of itself. It is a feature of our volunteer--‐based ecosystem, not an actual benefit. We have membership because it is a way to marshal the economic and intellectual capital necessary to achieve the mission.”

Putting mission first with membership says that our efforts to recruit, engage, and retain members should have the overarching goal of helping our organization achieve the mission for which it was founded.  Ideally excellence in any business practice whether it is marketing, publishing, customer service or technology supports the mission.  But when this excellence becomes the goal in and of itself, it can actually deter mission. 

And this principle applies to for profit organizations as well as non-profits.  John Coleman, coauthor of the book, Passion & Purpose: Stories from the Best and Brightest Young Business Leaders, shared this on the HBR Blog:  “A great culture starts with a vision or mission statement. These simple turns of phrase guide a company’s values and provide it with purpose. That purpose, in turn, orients every decision employees make. When they are deeply authentic and prominently displayed, good vision statements can even help orient customers, suppliers, and other stakeholders.”

But as we come to the end of the year, it might be helpful to step back and apply these thoughts on mission to our own lives.  Putting mission first can also empower our own personal effectiveness and fulfillment in life.  I know that it is easy for me to get off track and off mission and to let competing everyday demands take me away from what is important.

The late Stephen Covey maintained that “personal mission statements based on correct principles are like a personal constitution, the basis for making major, life-directing decisions, the basis for making daily decisions in the midst of the circumstances and emotions that affect our lives.”

So my wish for you as we come to the end of this year is not only success in achieving the mission of your organization, but that you will remember your personal mission and enjoy the year ahead in fulfilling your purpose.



2013 Membership Marketing Observations


At the end of the year, many bloggers present their trends for the year.  I am not going to be so bold, but I will share some observations of what I have seen and discussed with dozens of membership professionals over the past 12 months.
Let me combine these thoughts into five observations.

1.     Growth of Online Marketing: More and more marketing dollars are moving toward various forms of online advertising. The money is clearly coming out of print advertising and other channels.  Membership organizations are using Google Search and Content, Facebook and LinkedIn ads, Google Remarketing, and web ads to initiate a dialogue with a prospective member by gaining an email opt-in request to start and relationship with the organization.  These digital marketing methods are being adopted because they are track able, scalable, measurable and global.

2.     Squeezed Marketing Budgets: During this past year, I have seen some rather large associations cut budgets for membership recruitment.  At the same time, I have interacted with a number of moderate to small organizations who report surprisingly inadequate budgets to accomplish their membership goals. Money for marketing appears to be scarcer, so cost justification and marketing smarter are understandably more important than ever. 

3.     Growth of Data Analytics: Perhaps out of a need to market smarter, data analytics has taken a much more prominent position in membership marketing.  Good analytics can tell you who the best candidates are to recruit, who are most likely to renew, and what strategy will produce the best membership ROI.  The ability to track and analyze is more important than ever. 

4.     Senior Association Staff Transitions:  Over the past year, I have spoken with more senior association staff members that are either out of work or looking for new career opportunities.  Perhaps it is because of the tight budgets noted earlier or because they were remaining in a position until the economy began to improve.  Whatever the reason, there are some very talented association staff that are looking to move into new positions. 

5.     Average to Above Average Growth in Membership Counts: The combination of innovative new strategies like online marketing and data analytics and budget cuts has resulted in most organizations experiencing only average to above average outcomes in membership marketing.  The groups with above average growth have often also used aggressive pricing strategies to bring in new members.   But most organizations it appears have seen single digit growth or slight declines in their membership numbers this past year.
As I write this, I realize that in many ways, membership organizations reflect the economy as a whole with slow growth, a move to web and digital communications, and a sluggish job market.   In January, we will be launching our next Membership Marketing Benchmarking Survey.  So it will be interesting to see if my small sampling of observations from this past year is accurate across a much broader audience.

What have you observed in your 2013 membership marketing experiences?  Please feel free to share your thoughts. 

Membership Marketing Focused on Lapsed Members


In a recent piece, Jeffrey Cufaude wrote about a little experiment he conducted.  On purpose, he let his membership expire with three professional associations to see what would happen.  What he found was that “1 out of 3 slightly acted in a manner consistent with organizations that profess to be about ‘community.’  But since then?  Crickets.  Silence.  Nada.”
Fortunately, discontinuing communications are not how all membership organizations operate.  The 2013 Membership Marketing Benchmarking Report highlights that 32% of associations “continue indefinitely to contact lapsed members.”
Here is why staying in touch with former members is so important.  Every relationship personal and professional can have problems.  But in most cases, it is best to try to fix the problem rather than starting a wholly new relationship.
The same is true with membership.  A member may be dissatisfied or lose touch with the organization.  But in almost every case, organizations that I have worked with have found a former member more likely to re-join the organization compared to a totally new prospective member.  This is why membership reinstatement is a significant component of the membership lifecycle.  All members will someday leave, but many will come back if asked.
So when you look to get former members to come back, here are some things to keep in mind.
1.      Learn.  There is an old proverb that says, “Look where you tripped and not where you fell.”  Former members can be your most valuable resource to identify problems and impediments in your membership program.  Ask them why they did not continue and drill down beyond the standard answer of it was too expensive.  Then use the information to keep more members and win back those who have left.

2.      Acknowledge.  Address a former member as someone you know had a previous relationship with your organization.  One association does a great job of this by instead of asking the former member to “please join” they send out a greeting card that says, “We miss you.”  The card includes a personalized message to the former member.

3.      Keep trying.  Perhaps the most important message about reaching out to lapsed members is, do not give up on re-establishing a relationship.  Many associations are sitting on a relational and financial goldmine of former members that they have failed to re-engage.  They just need to replace the chirping of crickets with an ongoing effort to restore the relationship.
There are many marketing tools available for following up with former members.  Since an association has a previously established business relationship with lapsed members, it is appropriate to use both email and telemarketing in outreach efforts.  Some organizations also use staff and board calls to encourage a member to return.  But whatever the mechanism that works best, try contacting your former members and replace silence with a request to return. 

Developing a Successful Student Membership Strategy


According to the 2013 Membership Marketing Benchmarking Report, 52% of associations offer a Student membership category.  At 71%, Student membership is offered most frequently by individual membership associations.
When you take a look at existing programs, students are typically offered a somewhat downsized membership package ranging from one year free to a dues payment of between $25 and $50. Many Student programs are presented very nicely and highlight the economic benefits and advantages that are available through membership. 
Here are some examples:
·        Association for Computing Machinery makes five levels of Student membership available starting at $19.

·        Society for Industrial and Applied Mathematics makes free Student membership available with some conditions, but Student members receive the periodical in an electronic format.

·        American Counseling Association has a Student membership that parallels their New Professional membership at a $94 dues rate and includes professional liability insurance.


However, in speaking with membership professionals, it is not always clear that there is a defined strategy for what a Student membership is attempting to accomplish.  Here are some important questions to consider in building a Student membership strategy.

1.      How do you identify eligible students for membership?  If you build it, they will not come.  And unlike established professionals or firms in a field who can often be identified in marketing and licensure lists, finding accurate contact information for students is much more challenging.  So a strategy needs to include building a channel to reach students through schools, referrals from professors, online ads, or a chapter structure. 

2.      How do you deliver value to these members?  There are many conversations today about the different needs of each generation.  The needs of students will vary from your typical member. So spend some time defining what will be of value to a student and how they want to communicate.  One dental association, for example, uses a free booklet titled, “Keys to a Successful Career in Dentistry” to encourage acceptance of a free membership and to demonstrate relevance to potential student members.   

3.      How do you stay connected to students once they join? When you calculate retention rates by membership category almost every group will find students have the lowest renewal rate.  Often the chief challenge is not that students do not value the membership, but that the association loses touch with them as they graduate and relocate.  Therefore, it is critical to capture permanent mailing address, phone, and email information from students.  Requesting an opt-in for texting is also of value.

4.      How do you justify the economics of servicing students? Perhaps the most important part of a Student membership strategy is building a sustainable economic model.  Do students ultimately convert to a regular member who is engaged with the association?  One way to determine this is to track the pathway of students to full membership or do a computer match of previous Student members and your current membership database.  A smart strategy will evaluate whether the economic commitment of acquiring, serving, and in many cases subsidizing students ultimately leads to a committed member. 
In the long run, today’s students are the future of any organization.  Developing a strategy on how to reach them, serve them, retain them and building a foundation that makes economic sense is time well spent for any membership organization focused on a sustainable future. 

Announcing a Full-Day Membership Marketing Seminar Presented by Tony Rossell and Mark Levin

If you are looking for powerful ideas and strategies to grow your organization’s membership next year, this is a program you may want to consider.

 
Mark Levin, CAE, CSP, President, B.A.I., Inc. and one of the leading authorities on membership and I will be teaming up to present a one-day program titled, Membership Success for 2014: Developing and Executing a Powerful Strategy.  We will offer the seminar in Chicago and in metropolitan Washington DC area. 

You can register for this program using this link.

Membership Success for 2014 is designed to help even the most experienced membership professional to diagnose and find solutions for the pressing challenges facing their organization today.  Topics include how to:

1.       Establish and Communicate Membership Value
2.       Align Staff and Board in Support of Membership
3.       Diagnose your Membership Marketing Challenges
4.       Determine the True Value of a Member
5.       Develop a Membership Marketing Action Plan
6.       Define Awareness and Recruitment Strategies
7.       Engage Members by Creating a Membership Experience
8.       Maximize the Retention and Renewal of Members 

These programs take place on Thursday, November 21, 2013, in Chicago at the Holiday Inn Chicago Mart Plaza, and on Thursday, December 5, 2013, in Alexandria, VA at the Holiday Inn & Suites.

Registration fees for these programs are $315 for the first participant from each organization, and $295 per participant for the next two from the same organization. The fourth registrant from each organization is free.

You can sign up now for unique one-day program that combines the many years of knowledge and experiences of both Mark and me in membership marketing. 

Winning in Membership Marketing Even if you are Wrong 99.5% of the Time


Here is something that I have been observing in membership organizations of late.  Many organizations too quickly assume rejection.

When I ask why they do not reach out to this or that group of non-members, I might hear statements like, “we asked those people to join when they attended our meeting and they did take our membership offer.”  Or “they didn’t renew their membership awhile back, so we do not contact them anymore.” 

Essentially some organizations have imposed restraints on themselves that might not be supported by marketing data.

The fact is that even if 99.5% of the time you are correct and indeed a prospect will not join your organization, most organizations can still be remarkably successful with a .5% acceptance rate.

The psychological challenge – and the reason we may impose restraints on ourselves -- is that there are very few life situations where a 99.5% failure rate can actually be good.  It does not work in school, engineering, sports, or even Vegas.

Here is some quick math to support how we can be wrong a lot and still be successful. 

Let’s say you have 5,000 prospects that may have declined membership even after a couple of sales attempts.  Most likely you could reach out to them with a direct mail solicitation and a couple of follow-up emails for $1.00 to each person or $5,000 in marketing cost.  If the dues amount for these members is $200 and half a percent of them decide to join, you have generated $5,000 in new dues revenue.  And if your organization maintains an industry average renewal rate of 80%, you will realize $1,000 in lifetime dues revenue from each of these new members (or $25,000 total lifetime dues revenue) plus any non-dues purchases that they might make. 
 
Yes, there will be costs to service these members over their lifetime with your organization, but your overhead and fixed costs will exist whether or not you added these new members.  On an incremental basis, the cost to provide services to these new members should be minimal.

However, these numbers reflect a minimalist view.  Clearly, you always want to do everything possible to achieve the highest success rate you can.

So here is another scenario.  Conceivably, you could be wrong only 99% of the time as to whether or not a prospective member will decide to join your organization.  In this more optimistic case with a 1% success rate, your first year revenue from reaching out to these prospects would jump to $10,000 against a $5,000 marketing cost and your lifetime dues revenue would be $2,000 for each new member and $50,000 in total lifetime dues revenue.

What might we learn from this example?  When we hear from prospective members that they are not interested in joining, it is easy to project that feedback over a larger population.  However, our perceptions can easily trick us.  Instead of drawing premature conclusions, be sure to do the math and remember that even if 199 out of 200 prospective members say, “No” to membership, we may only need one out of the 200 on average to say, “Yes” to maintain a successful program.  Do not give up too soon on reaching out to prospective members.
 

Leveraging Non-Member Email Addresses for Membership Recruitment


Many membership organizations have accumulated email addresses in their database of prospective members through site registrations, event attendance, or product purchases. 

Here are some strategies that you may want to consider in order to maximize these records to strengthen your overall membership marketing efforts.

1.     Improve Targeting – Email is one of the least expensive marketing tools, but also has lower response rates than other more expensive channels like telemarketing, direct mail, or face to face sales.  However, email can allow you to cast a broad net across industry segments, recency of contact, and source of records and through open rates and click through rates see where the hot spots of interest appear.  The emailed segments that demonstrate interest in membership with high click through rates or new joins will probably warrant the use of more expensive marketing channels.  The non-responding segments will be unlikely to be cost effective targets for more expensive promotions.    

2.     Gain Contact Information – Some organizations have only a name and email address in their database.  Without a mailing address available for a thorough merge-purge, there may not be clarity whether the individual is a current member or not.  Sending the individual an email that offers free content with the requirement of providing full contact information is a great way to update information and re-engage a prospect in the membership conversation. 

3.     Verify Data – Another concern of many organizations is the accuracy of mailing addresses for non-member records in their database.  People change jobs and move to new companies.  Once again, email is an effective tool to verify that a prospective member is still at the same company.  If the work email is not deliverable then it is unlikely that the mailing address is still correct.  Other data hygiene solutions should also be used like running mailing addresses through the National Change of Address (NCOA) registry.

4.     Deploy Flash Offers – Although email may not produce as high of a return as other marketing channels, it does lend itself to deadlines and instant response.  That makes email a great channel for short-term specials called “flash offers”.  These are exceptional deals made available for only 24 to 48 hours that are designed to encourage an impulse buy.  Like it or not, sales do motivate purchases and email lends itself to immediate decisions.

Effective marketing is all about connecting the tools and channels available to you with the appropriate target markets, messages, and offers.  Email is one tool that not only can be used to sell, but also allows you to read the digital fingerprints of those who receive it to leverage your overall membership marketing program.

Another Membership Marketing Success Story


If membership as a way to connect with your community and customers is a dead or dying concept, why are so many for-profit companies running to embrace it?

There are lots of success stories around membership.  Here are some key statistics from one for-profit organization that focuses on membership, Costco.  From new member input, to growing the top membership tier, to maintaining a high renewal rate, Costco’s numbers are enviable.

New Member Input -- Costco continues to see a growth in the addition of members.  They added 2.3 million members in 2009, more than 4 million in 2011, and over 1.6 million new members joined Costco during the first two quarters of fiscal 2013.

Tiered Membership – Costco offers a higher tier of membership called “Executive” membership for $110 compared to the typical $55 rate.  Today that higher tier of membership represents one-third of Costco’s overall members and is rising.

Membership Renewal – The membership renewal rate for Costco has made incremental improvements over the past year.  It now stands at 89.9% and Costco even had a fee increase of 10% late in 2011[1].

Why has Costco been so successful with their membership program?  I think there are four main ingredients that have contributed to their success. 

1.     Market Size – One advantage that Costco has over most membership organizations is the enormous market potential that they enjoy.  They are a global brand and there are a lot of consumers.  But there is also fierce competition for the dollars of these consumers. 

2.     Product Value – Membership’s high renewal rate demonstrates that consumers are receiving value for their membership dollar.  The price and quality of goods are excellent. 

3.     Promotion – Membership allows Costco to focus its marketing efforts on a core group of customers instead of having to broadcast messages to the general public.  This targeting is much more economical. 

4.     Economics – Membership allows Costco to deliver goods almost at cost to its members and instead make its profits from membership fees. Those fees make up only 2% of its total sales revenue, but 77% of its operating income [2].  

Costco is only one example of both for-profit and non-profit organizations that have built successful enterprises around membership programs.  So if you are in doubt of the benefits of a membership program, don’t raise the white flag.  There is hope.

I will be sharing some of this hope on August 4th at the ASAE Annual Meeting in Atlanta, where I will present a session titled, Diagnose and Solve Your Membership Marketing Challenges.  If you are at the meeting, I hope you can attend the session and then stop by and say “hello.”



[1] Costco's New Membership Growth Keeps Sales Humming,
June 4 2013. 
[2] 3 Reasons to Buy Costco, Isaac Pino, CPA and Blake Bos, The Motley Fool Jan 17th 2013

Join our Webinar on the Membership Marketing Benchmarking Report


Two of our authors of the Membership Marketing Benchmarking Report will present an interactive webinar on July 30 at 2:00 p.m. EDT to review the findings from our 2013 benchmarking research. 

You are invited to participate using this link.  The webinar is free of charge. 

Our presenters, MGI Vice President Erik Schonher and Director of Research Adina Wasserman, Ph.D., will focus on how associations have fared over the last 12 months and how the industry has evolved over the past 5 years.

You can also download a copy of the 2013 Report
using this link.  Registration is now open.  I hope you can participate. 

How to Test Big and Win Big in Membership Marketing


One thing that disappoints me the most in the practice of membership marketing is the lack of testing that is conducted.  In our 2013 Membership Marketing Benchmarking Report only 16% of responding associations said that they conducted A/B split testing (a control versus a test segment) as part of their membership marketing efforts.  And that is down from 20% who said that they did so last year.

Besides under spending on marketing, lack of testing remains the single biggest missed opportunity to grow membership.

The three basics to test in marketing remain the list you market to, the offer you make, and message/package you send.

1.     Testing Lists – It is not unusual to see a huge variance between list response rates.  Right now I am looking at a results report where lists were tested.  The best performing list produced a 1.88% response rate.  The worst list – one tested as a sample – produced a .14% response rate.  The good news is that I know what each list achieved and can make decisions on my next campaign based on these results.

2.     Testing Offers – It is not unusual to see a variance of 100% or more in an offer test.  Offers can include how you package or the products and services you include in your membership.  Is it like a luxury car loaded with options or is it a basic model.  But more often the offers that you will be testing are the special incentives you use to encourage a prospective member to join.  These might include a free trial, a discount, a voucher for future purchases, or installment payments.

3.     Testing Messages/Packages – These tests can influence response by 50% or more.  In direct mail, a test package might include all new format, graphics, and copy.  In email efforts, it may be just the look and the copy.  Message testing can go to the core of your membership offer and test various presentations of your value proposition or it can simply present a new and different appearance that will help a prospective member take another look at your organization. A very simple test that many forget to do is trying different “From” lines and “Subject” lines in your email marketing to a portion of your list.  Then send the remainder of your file with whatever “From” line or “Subject” line had the best open and click through rates. 

In addition to the elements that should be tested, there are also important practices to keep in mind.

First, be sure to test big things.  I have relearned this lesson the hard way with a client of late.  We tested several individual pieces in an engagement and renewal program.  The problem was over the course of a year the member received hundreds of communications from the organization, so when I looked to see if our one “special” new member touch made a difference in renewal rates, I was disappointed to see that the extra “pebble” we gave them of free content at the start of their membership did not seem to hurt or help their ultimate decision to renew.  We should have tested a significantly different engagement or renewal program not simply one small element of an existing system. 

The same idea applies to membership recruitment.  Don’t test a postage stamp against a pre-printed indicia.  Test a full membership price against a substantial new member discount or a new list that will open up a new market for your organization.

Secondly, test with statistical accuracy.  There are times that our tests receive such small returns that the results are not really valid.  As a very general rule of thumb, in direct marketing recruitment, if you achieve a 1% response rate, you will want a minimum of 40 responses to both your control and test offers to achieve a statistically valid test.   Remember it is not the number of people who you promote to that matters, but the number of responses you receive. The smaller the variance you want in statistical accuracy or the lower your response rate, the larger the responding sample size you need.  If you want more information on testing statistics, here is a site with some nice tools you can use.  

Finally, testing something is better than testing nothing.  Any test that you construct is going to create additional work for someone in your organization and create push back.  So find something that can be tested quickly and easily.  Get some fast testing wins.  When you do this, testing and reading marketing results can become an exciting and fun part of your job and your organization’s culture.

 

Remembering the Human Factor in Membership Retention and Renewals


Sometimes we get so focused on the marketing mechanics of membership renewals that we forget that we are dealing with real people involved with everyday real life challenges. 

I have been reminded of this as I have read through hundreds of open ended responses shared by members in some clients’ research where they explain why they have not continued their affiliation.

There are always a few comments that members disagree with the association’s policies or stances or they do not feel that they have received value for their dues dollar or they do not feel engaged or connected with the association.  And these are the common reasons membership directors believe that members lapse, but these responses are actually not all that frequent in unprompted member comments.

Instead, real member comments present a different picture.  Simply put, members say that life is complicated, busy, transient, and costly and this interferes with them continuing membership.

Here are some of the paraphrased responses members shared as to why they have not continued their membership.

1.      My employer STARTED to pay for my membership, so my membership address is now at the office.
2.      I am retired and want to continue, but did not see a low cost retired membership category available.
3.      I have not had a raise for years and I simply cannot afford membership.
4.      I was very busy and just keep forgetting to renew.
5.      The online renewal process was too complicated or did not work, so I gave up trying.
6.      I have been sick, but plan to renew when I feel better.
7.      We trade off membership every other year in my office.
8.      I have some unexpected expenses, but plan to come back when I have some more funds.
9.      I thought that my membership was still active.
10.   I am out of the country, but plan to continue when I return.

So what are the lessons that we may want to take away from these “life happens” types of member responses?

I have two suggestions. 

First, be sympathetic.  We spend so much time and effort in trying to communicate with members that when our efforts go unnoticed it is easy to assume the worst.  We assume that either our organization does not have the value members want or that members do not care about our issues or industry.  But remember to walk in your members’ shoes and understand that just like us they have financial, health, work, and family priorities that keep them from focusing on your organization.

Second, be persistent.  In the comments that I have reviewed, very few members complain that an association stays in touch with them too much over time.  So keep checking back with former members.  Let them know that you have not forgotten them.  Tell them about the new products, services, and content that you have waiting for them.  Be available to them when life gives them the time, funds, and needs to re-engage with you.

Finally, remember that since life is complicated and members are busy, we need to make the renewal process as simple and seamless as possible.  If you have a retired membership category, make it clear.  Test the website to be sure that renewal is easy.  And de-duplicate your records, so that you have a member’s latest address in the system.    

 

Free Download of the 2013 Membership Marketing Benchmarking Report Now Available


 
 
It is my pleasure to announce the release of the 2013 Membership Marketing Benchmarking Report. With site registration, a free download of the report is available using this link. Please download your copy of the report now and let me know what you think. 

A final and full printed report has also just been mailed to all of those organizations who participated in this year’s research. 

This marks the fifth year that Marketing General Incorporated (MGI) has surveyed associations to better understand what is going on in the membership market and what is working best to recruit members, engage new members, renew existing members, and reinstate former members. 

I think you will find the new data and the trend data from the past five years very useful. 

The most important aspect of this report is that it goes beyond cataloging membership practices of responding associations; the Benchmarking Report also takes these practices and cross-tabulates them with the membership outcomes that associations are experiencing. The comparison of practices and better renewal rates or more members provides strong directional information to help you select the tactics and strategies that might fit into your marketing plans for the upcoming year. 

I hope that you find the 2013 Report of help as you seek to maximize the membership results for your organization.

Four Challenges to Effective Content Marketing for Membership Recruitment

Over the years, I have done a number of posts related to trading content for contact. This technique is called a content marketing strategy where free samples of your membership content are made available -- typically online -- and those interested in using it connect with your organization.

But what if you have tried this approach after reading some of these posts and it is not working for you?  What might be the problem?  Joe Pulizzi shared some good insights on why content marketing may not work in the May issue of COO: Chief Content Officer.  

Here are some of his points. 

1.     Make sure that your content is not all about you.  Prospects are looking to solve their problems.  So be sure your content provides a solution. 

2.     Your content does not include calls to action.  Remember the real reason that you share content for free is to initiate and ultimately sell a membership. You need to communicate that buying a membership will ensure an ongoing flow of content.  

3.     Your shared content is too broad.  Your shared content needs to prove that your organization is the leading expert in your membership category.  If it is too general, you will attract unqualified prospects that do not need the specific solutions that you offer to members. 

4.     Your testing is too slow.  Pulizzi notes that “speed beats perfection”.  The web allows for rapid prototyping.  Offer up the content and if it does not work, try something else – fast.

For some additional ideas on how to implement a content marketing program, you may want to take a look at my post titled, Using Online Lead Generation to Drive Membership Recruitment. 

Confusion in Calculating Membership Renewal Rates


Probably the most frequent question I get asked from clients and inquirers is how to calculate renewal rates.  I think the confusion stems from getting lost in the trees instead of starting out looking at the forest.

Let me explain.  In very simple terms, an organization’s renewal rate calculates how many members remained with the organization from twelve months earlier.  To get these numbers, you first need to know how many members you had at the beginning of the period.  Next you need to know how many members you have now.  Then to determine how many continued  their membership over the past year, you subtract the total number of new members from your current membership (new members were not eligible to renew).  This gives you the count for how many members your organization retained.

Here is an example.  Let’s say you had 10,000 members on May 1, 2012.  And twelve months later you also have 10,000 members.  But of the current 10,000 members, 2,500 were added as new members over the course of the year.  That means your net continuing members were 7,500.  And if 7,500 of your original 10,000 members continued with you, you have a 75% renewal rate.

So that is looking at the big picture – the forest.  But what happens if your computer report gives you a different number?  This discrepancy typically comes because of the business rules that were used to set up the database report.

Here are a couple of common problems.  One is how reinstated members (those who renew late) are counted.  If they are included in your new member count, they will lower your renewal calculation.  With the example above, if 500 reinstated members were now counted as new members, the new member count would be 3,000, pushing your renewal rate down to 70%.  The other common problem is where Life Members or multi-year members are counted.  They continued their membership, so in the example above, they would be counted as renewing members even though there was not a separate financial transaction.

My personal opinion is that reinstated members who pay after the grace period ends should be counted as new and Life and multi-year members should be counted as continuing or retained members.  But wherever you choose to count them, you need to build this into your calculation.

The bottom line is when you are attempting to calculate your renewal rate, start out with the big picture.  Do the simple math first then if reports come out of your database that do not corroborate the simple math, look into what business rules have been factored into your report.

The goal is to get an accurate renewal calculation where your math and the database report sync.  Ultimately, the economics of members and calculating lifetime value, maximum acquisition cost, and steady state calculations depend on an accurate renewal rate.