Should Associations Pursue a Membership or Customer Strategy?

One question that comes up from time to time is whether an association will economically benefit more by pursuing a customer growth strategy instead of membership growth.  The thinking goes that perhaps focusing on selling professional development, conferences, and publications might be more profitable for an association than getting more members.
For the most part, the client data that I have gathered would argue strongly for following a membership strategy. 
When evaluating which strategy to follow, here are some points to consider.

  1. Based on our 2018 Membership Marketing Benchmarking Report, the mean renewal rate for an association member is 81%.  This translates to an average tenure (how long a member continues membership) of 5 years.  So membership provides an ongoing income stream of revenue and only 19% of members need to be replaced each year to maintain counts. 
  2. In data analytics completed for one client, we found the renewal rate of a customer (someone who attended a meeting, bought a book, or went to a conference more than one time) was 8%.  So the customer tenure was 1.2 years.  To maintain customer levels, essentially 92% of customers needed to be replaced each year.
  3. In this same analysis, the median lifetime value for a member was $516 while the median lifetime value for a customer was $100.
  4. Finally, the cost to acquire a new member or customer is one of the more expensive marketing efforts.  While the cost to renew an existing member or customer is usually a fraction of the marketing cost.  But as noted, a membership continues for a number of years through renewal efforts and while the pipeline of customers’ requires more extensive acquisition efforts to stay full.

Most associations find that a member who has identified an interest in the content and services of an association typically makes an excellent candidate to make additional purchases in addition to paying members dues.  In fact, you can make the case that members are effectively paying to become a customer.
For a comparison, one of my clients shared with me a statistic with a for-profit membership, “Consumer Intelligence Research Partners (CIRP) estimates . . . that Amazon Prime subscribers spend $1,300 per year, nearly doubling the $700 per year the average non-member spends on the e-commerce site."

Every association is different, so to determine the optimum strategy some analysis of purchasing patterns and lifetime value is required.  But when exploring a strategy, an important component to include in the calculation is not just first year of sales, but to calculate the lifetime value of a member and a customer.

1 comment:

Joey said...

As long as a member is committed to the association, they will help to grow the association with their profession.