Recently I was interviewed for an upcoming article on association membership in CEO Update. The writer asked me, “What do you think is biggest mistake that organizations make in the membership marketing?”
I shared with him that for me the answer is pretty simple. Most membership organizations under invest in getting new members. The basic mistake that many membership organizations make is that they under estimate the cost of acquiring a new member and they overlook the lifetime value that a new member can deliver to the organization. Their budgets are built backwards.
An organization determines how much they want to spend and then asks the membership staff to use it in the best way possible.
But the correct question should not be how much you are allowed to spend, but how much you can generate in revenue for the organization. In other words, base budgets on the harvest, not on the cost of the seeds.
It is not uncommon for me to meet with organizations that have very lofty plans on how many new members they want to add. When I ask them what they have budgeted to accomplish this, the answer is shockingly low.
One recent group I spoke with, for example, wanted to stem their decade’s long membership decline by developing a marketing campaign to recruit an additional 3,000 members over the next year at a dues rate of $65 each. However, they only budgeted $30,000 to accomplish this goal or $10 per new member. Unless they discover a marketing silver bullet, it is unlikely that they will accomplish their membership goal.
At the same time, members in this organization typically stay for four years. So from the members that they acquire, they will realize an income stream from each new member who joins of $260 plus any revenue from non-dues purchases. Assuming that they have incremental servicing costs of $15 per member, per year, a new member represents a $200 net revenue stream for the organization.
How much should an organization be willing to spend for a new member in order to produce $200 in net revenue? They should be willing to spend more than $10.