To help you master these concepts we have compiled a guide that walks you through how to understand and use these metrics to better manage your membership program. Our guide serves as a reference tool for you to take a strategic look at your membership program.
What did you select as the best membership marketing strategy from the case study posted earlier this week?
The correct answer based on the data provided to you is the first option.
Let me explain why.
In order to create the optimum strategy, associations need to define where the opportunity for growth lies — through enhanced acquisition efforts, renewal efforts, or a combination of both.A technique called 'Potential Analysis” (also called Steady State Analysis) can be an effective tool to evaluate what long-term strategy is best for your organization.
To do a Potential Analysis, you use a simple calculation based on the potential new member input and the organizations potential lapse rate (non-renewal rate). Using these numbers, the formula calculates the level where your total membership will reach equilibrium.
Here’s the formula. Annual New Member Input / Reciprocal of Renewal Rate (or Lapse Rate) Shown as a Decimal = Total Membership Steady State.
For example, 20,000 New Member Input / .25 Lapse Rate = 80,000 Total Membership.
Using the Potential Analysis formula, the results for the case study proposed in the previous post came out as follows:
How did your intuitive response compare with the Potential Analysis?
Clearly, based on this exercise, the aggressive membership acquisition strategy had the best potential outcome for this group, followed by the balanced strategy.
However, this case study in no way is means that an aggressive acquisition strategy is always the solution!
In fact, a renewal strategy can be the best option for some groups based on which estimates are put into the analysis. This is particularly the case for associations with low potential new member input opportunities. In the above situation, if the potential renewal rate were 94%, then option two would have been the best selection for this group. Long-term membership with a 94% renewal rate and 2,000 new members a year would have yielded 33,333 members.
Give this tool a try with your membership.
My next post will take a look at the financial implications of selecting the best membership marketing strategy.
I have listed three potential strategies below. Assuming all three are achievable, which do you think will get the best results for a typical? Here are your choices:
In my next post, I will outline which strategy that I think makes sense and provide a technique for calculating potential outcomes based on various renewal rates and acquisition levels.
Lifetime Value (LTV)
Maximum Acquisition Cost (MAC)
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