MGI Tipster – Volume 10 Issue 4

April 21, 2011   |   Vol. 10   |   Issue 4
Grow or Shrink: Testing Your Way to Success

Membership organizations cannot renew their way to growth. Even with a 100% renewal rate, which is impossible to achieve, membership will remain flat without a successful program to recruit new members, and that takes planning, patience, and pragmatism.

Setting the stage for growth

In 2008, MGI partnered with an association that had experienced a dramatic membership decline. Over the past ten years, member attrition had reached five digits.

Our proposed solution was obvious and realistic. Based on the association’s historic 80% renewal rate, MGI recommended an aggressive acquisition program to halt the decline and set the stage for renewed growth.

Learning by constant testing

Since this association had very little experience in direct marketing acquisition, MGI agreed to develop an effective learning system. First, we would identify market segments most likely to join; second, develop effective test offers; and finally, research the market for other likely prospects. To meet these objectives we designed a direct mail campaign that tested three offers among five targeted groups as follows:


TABLE A

  Package offer 1 Package offer 2 Package offer 3
Target Segment – Lists Quantity Quantity Quantity
Administrators Group A 5,000 5,000 5,000
Administrators Group B 5,000 5,000 5,000
Administrators Group C 5,000 5,000 5,000
Professionals Group A 5,000 5,000 5,000
Professionals Group B 5,000 5,000 5,000

We used this methodology to determine how differing prospect groups responded to various test offers, and responses came back with extreme variations: panel response rates ranged from a low of .10% to a high of 1.52%. The highest-performing segment and offer compared to the lowest varied more than 1500%.


TABLE B

  Package offer 1 Package offer 2 Package offer 3
Target Segment – Lists Paid Response % Paid Response % Paid Response %
Administrators Group A 1.52% 1.50% .70%
Administrators Group B 1.32% 1.08% .54%
Administrators Group C .86% .78% .34%
Professionals Group A .38% .26% .10%
Professionals Group B .24% .14% .10%

The dues revenue generated by the recruitment was $10,000 less than the cost of the effort, and our client concluded that the campaign had failed. However, from MGI’s perspective the $10,000 was actually an invaluable and relatively inexpensive investment in market knowledge.

Lifetime Value

On the one hand, this single effort recruited 493 new members who would renew on average for five years as well as purchase additional products and services.

Because membership over time is actually an annuity, many members acquired today repurchase their membership for years to come. The number of years a member stays with an organization multiplied by the sum of the annual dues and annual non-dues purchases equals the member’s lifetime value (LTV).

Often new member acquisition programs that lose money in the first year dues actually deliver a multi-year income stream that may far exceed the investment in the initial recruitment campaign.

Fine tuning member acquisitions

But more importantly, as Table B shows, the campaign’s testing identified the highest responding groups and offers that can be targeted in future acquisitions.

So it’s important to keep several things in mind as a recruitment effort is designed and implemented:

  • Create a structured learning environment that tests multiple target audiences and offers.
  • Be sure that what is learned is actionable information for future campaigns.
  • Recognize that each new member represents multiple years of dues and non-dues revenue.
  • Refine recruitment programs to identify the most and the least productive combinations of offers, target segments, and creative appeal.
  • Finally, keep in mind that an initial investment today, even if it incurs a loss in present day dollars, if done correctly can acquire essential knowledge to refine future acquisitions and set the stage for long-term organizational growth.


To find out more about lifetime value and how to set up a successful testing methodology to help your organization grow, contact Jason Gudenius at 703-706-0392 or email him at jgudenius@marketinggeneral.com

Posted in: