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.

No comments: