Following on from last week’s blog post – our Top 10 Membership Marketing Tips, we thought we’d explain in more detail the numbers surrounding membership marketing. Without fully understanding the vital stats surrounding your members, you won’t know who to market to, how much you should be spending or how effective your marketing is.
The following measurements are the basics you should know about your members:
Membership Renewal Rates
The membership renewal rate calculates the number of members your organisation has kept over a certain period of time. The majority of membership associations are cyclical and measure performance over a 12 month period.
To calculate this, you must subtract the number of brand new members you’ve gained over the year period from your current membership total, then divide this number by the total number of members from the period before.
Total Number of Members Today (minus 12 months of new members) / Total Number of Members in previous 12 months
e.g. You now have 1050 members, and 150 of these were new memberships you gained within the last year. This time last year you had 1000 members.
(1050 – 150)/1000 = 90% renewal rate
Average Membership Term (AMT)
This measures how long your members stay with your organisation. The formula is based on your membership terms, so if your members renew on an one year basis then you subtract 1 from your renewal rate.
1 – Renewal Rate = AMT
e.g. From the above renewal rate analysis, we know that we have a 90% renewal rate, therefore have a 10 year average membership term.
1 – 0.90 = 0.10 (10 year average membership term)
Lifetime Value (LTV)
This equation measures the lifetime value of an individual member. It is taken from adding the annual membership fee plus the non-fee revenues, multiplied by the average membership term.
(Membership Fees + Non-Fee Based Revenues) x AMT = LTV
e.g. We know that our average membership term is 10 years. We have a £100 annual membership fee and get an average of £50 extra from each member during the course of their yearly membership (from events and merchandise purchases).
(£100 + £50) x 10 = £1500 LTV
Maximum Acquisition Cost (MAC)
This calculates the maximum amount of money that should be spent on trying to get a new member. Spending any more than this means that you are not making a profit on that member’s membership. This is a key calculation as it can be used to shape the size and spend of the membership marketing budget.
It is calculated by subtracting the assumed increase in servicing costs (i.e. the cost of renewing that member each year) plus the costs of additional goods sold (i.e. the cost of events and the wholesale cost of merchandise you are selling) from the membership fees and non-fee based revenues. Then multiply this by the average membership term.
((Membership Fees + Non-Fee Based Revenue) - (Servicing Costs + Cost of Goods Sold)) x AMT = MAC
e.g. Our membership fees are £100 and we gain an additional £50 from each member per year. Each member actually costs the organisation £20 per year, and the average cost of goods sold is £25. We have an average membership term of 10 years.
((£100 + £50) – ((£20 + £25)) x 10 = £1050 maximum acquisition cost