Math doesn’t usually make it to the top of the list when people think about membership. And yet, if you work in a membership organization, you know that math and metrics are at the heart of what we do every day. We use math to understand where we’re starting, to figure out what’s working, what our ROI looks like, and what we need to change.
The math gives us insight into the health of an organization; is it growing, shrinking, or stagnating? Here are a few of the basic calculations we regularly work with to help us understand the current state of associations.
Renewal Rate measures the number of members kept over a given period of time — usually during a fiscal or calendar year.
Calculation: Total Number of Members Today (minus 12 months of new members) / Total Number of Members in Previous Year
Example: (105 – 15) / 100 = 90% Renewal Rate
How long on average do members stay with an association?
Assume 90% Renewal Rate
Calculation: Reciprocal of Renewal Rate (1 – 0.90 = 0.10) Divided Into 1
Example: 1 /.10 = an Average Tenure of 10 years
Lifetime Value (LTV)
What is the economic value produced by a typical member?
Assume $100 / Year Dues and $50 / Year in Non-Dues Revenue
Calculation: (Dues + Non-Dues Revenue) x Average Tenure = LTV
Example: ($100 + $50) x 10 = $1,500 LTV
Maximum Acquisition Cost (MAC)
What’s the maximum investment that can be made to acquire a member or customer at a profit?
Assume Incremental Servicing Costs = $20 and Cost of Goods Sold = $25
Calculation: ((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
What’s your equilibrium point where members gained will offset members lost?
Assume 2,000 New Member Input / 90% Renewal Rate (=10% Lapse Rate)
Calculation: Annual New Member Input / Reciprocal of Renewal Rate (Lapse Rate)
Example: 2,000 / .10 = 20,000 member steady state