Membership Marketing Calculations and Formulas.

‘Know the numbers’ is the best advice that anyone can give you when it comes to membership marketing. Knowing the numbers can help answer key marketing questions like:

‘What is the value of a member?’

‘How much can I afford to spend to obtain a member?’

‘What is my membership retention rate?

The following formulas are provided as a handy reference tool for membership marketers to help them take a strategic look at the economics of membership.

Renewal Rate

  • Renewal Rate measures the number of members kept over a given period of time — usually during a fiscal or calendar year.
  • Total Number of Members Today (minus 12 months of new members) / Total Number of Members in Previous Year
  • Example: (10,500 – 1,500)/10,000 = 90% Renewal Rate

Average Tenure

  • Average Tenure measures how long on average a member stays with an association.
  • Reciprocal of Renewal Rate: 1 – Renewal Rate or, 1 – .90 = .10
  • Example: Divide Reciprocal into 1, or, 1 /.10 = an Average Tenure of 10 years

Lifetime Value (LTV)

  • Life Time Value measures the revenue stream that a member will produce.
  • Assume $100 / Year Dues and $50 / Year in Non-Dues Revenue
    Dues + Non-Dues Revenue) x Average Tenure = LTV
  • Example: ($100 + $50) x 10 = $1,500 LTV

Maximum Acquisition Cost (MAC)

  • Maximum Acquisition Cost measures the long term net incremental value (or margin) of a member.
  • Assume Incremental Servicing Costs = $20 and Cost of Goods Sold = $25
  • (Dues + Non-Dues Revenue) – (Incremental Servicing Costs + Costs of Goods Sold) x Avg. Tenure = MAC
  • Example: (($100 + $50) – ($20 + $25)) x 10 = $1,050 MAC

Steady State Analysis (or Potential Analysis)

  • Steady State projects the long term equilibrium of a membership based on current new member input and lapse rates.
  • Annual New Member Input / Reciprocal of Renewal Rate (or Lapse Rate) Shown as a Decimal = Total Membership Steady State.
  • Example: 20,000 New Member Input / .25 Lapse Rate = 80,000 Total Membership.
Posted in:

Leave a Reply