Your Guide to the Most Important Membership Numbers You Need to Know

To find success and be effective in membership marketing there are some essential concepts that you need to master.  These concepts are as simple as determining the response rates of your marketing efforts, to the more complex calculations like how to determine the long term steady state of your organization's membership.  

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.

To get your copy of the Guide to Membership Marketing Metrics please use this link. 

How to Calculate Your Membership Renewal Rate

One of the most important numbers to get right in membership marketing is the proper calculation of an association’s renewal rate.  Nevertheless, it is not uncommon as I meet with associations to find their renewal calculation incorrect.  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 March 1, 2017.  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 pay dues after the grace period has ended) are counted as either new or renewing.  With an anniversary date system, I recommend that late payers who are given a new expiration date should be counted as a “new” member and not be included as a continuing member.  With the example above, if 500 reinstated members were removed from the continuing membership number and 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. Essentially, this method means that the terms renewal and retention can be used interchangeably.

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.  Once the aggregate renewal rate is established, then a month by month rate can be calculated using the same method with the exception that the count of renewing members should continue to be updated until the grace period for that expiration month comes to an end.

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

Renew Your Renewal Program

Today's focus is on the critical area of keeping your current members by improving your renewal efforts.

Even small improvements in the renewal rates for an organization can have a dramatic impact on the overall membership.  For example, going from the average individual association renewal rate of 79% to an 85% rate, increases the average tenure of your membership from 4.76 years to 6.66 years.  That’s a 40% jump in tenure for a 7.5% lift in renewal rates.

Here are some adjustments you can make in your renewal program that will pay immediate dividends.

1. Increase the Frequency of Contact -- Research shows that associations with better-than-average renewal rates have between seven and 15 renewal contacts in their system.  However, you can measure the impact of increased touches on your own.  Simply add one additional mailed notice to your current program and divide the cost of this additional step by the number of renewing members.  It will almost certainly be less expensive renewing that last member than acquiring a brand new member.

2. Start Renewals Earlier -- When the renewal series begins also has an impact on renewal rates. The most effective series starts more than three months before expiration.  To avoid the inevitable member complaints of why early renewals are being sent, try including an "early bird" special offer to reward those who respond early.  Like it or not, there is a lot more competition for our members’ attention, so giving them an early warning of their dues payment coming up makes a difference.

3. Offer Members Payment Options – If your members pay their dues out of their own pocket, making automatic credit card renewal plans and installment options available can dramatically improve renewal rates.  One association reports increasing on-time renewal rates using an installment option from 55% renewal for non-participants to 82% for participants.

4. Use the Information in Your Database – The “finger prints” of your members’ behavior is captured in the form of data throughout your organization.  Properly analyzed, this data can tell you who is likely to renewal and who is at risk.  For almost any group, usage of the website, opening emails, and product and service purchases are a positive predictor of renewal.  None usage by a member may require an intervention even before the renewal program begins to help communicate the value of membership.

5. Use Personalization Print Technology – The question some will ask at this point is how do I pay for these additional renewal strategies?  One solution is to move to a template renewal notice and use personalized laser printing to vary and customize your message.  This should result in much lower direct mail production costs.  Just like the laser printer in your office, you can print copy, graphics, and member specific information on a blank renewal form each month.  This variable printing allows for savings through postage presorts, less inventory storage, and the complexity of having your lettershop insert different renewal notices into different envelopes.

It is my observation that for many membership organizations renewal programs can fall into a rut.  The same program is run year after year.  Even worse, some programs continue to decrease the frequency of mailings to save costs and rely more on email and then they are surprised when renewal rates falter.

That is why it is important to take time each year to re-evaluate your renewal communications and the results that they are producing and evaluate changes that can help you pop your numbers.  Sometimes simple adjustments can produce highly profitable results.