How Much Should You Spend On New Member Recruitment?
This is a question that we hear being asked at a lot of membership and associations seminars and conferences. It’s something that a lot of association and membership based organisations struggle with, yet we feel it’s one of the most important decisions they’ll make.
We see a lot of organisations under-investing in getting new members. They all have huge, grand plans of increasing their membership base each year, but when it comes to allocating the budget to accomplish this, the amount is often alarmingly low.
For example, if you wanted to attract 1000 new members, with an annual membership rate of £150, how much would you allocate to achieve that goal? A £20,000 marketing and lead generation budget might sound generous at first, but when you work it out, that only equates to just £7.50 per new member. It’s unlikely that you’ll be able to achieve your goals with such a small amount.
The recent 2013-14 Membership Research Report discovered that on average, successful membership organisations spend approximately 59% of the first years dues on membership acquisition. In our above example, that’s £88.50 per member – and with goals to attract 1000 new members, you’d need a total budget of £88,500.
You then also have to factor in how many years an average member stays with your organisation, and how much they also spend on non-membership related areas – such as merchandise, training and events.
Continuing with the above example, if a member remained a member for an average of five years, this would equate to £750 in membership fees – plus any additional spend. You should also be aware of how much it costs to retain members (for example it might be approximately 20% of their membership fees each year- £30 in this example). Then subtract this retention fee, along with the acquisition fee from the total membership fee amount (£750-£150-£88.50 = £511.50), and this gives you the net revenue for that member (plus any additional non-fee income they may provide).
- Take the total membership fees you expect the member to pay (i.e £150 a year for five years = £750
- Subtract the amount you'll spend on retaining the member (i.e. 20% (£30 )of their annual membership fee over five years = £150
- Subtract 59% of the initial membership fee (£88.50 in our example).
- You'll then have the net revenue for that member (not including any additional spend they may make)
So if you can see you’d be getting over £500 in net revenue per member, then it’s easier to justify the initial recruitment costs. You shouldn’t be focusing on how much it’s going to cost you to get that member vs how much the first years membership fee is. You need to look at the total picture to truly understand how valuable each member is to your organisation.
It can be difficult to extract this information from your membership base if you’re not on top of your membership data. By using a membership solution like Silverbear, you have all your membership statistics under one system – completely integrated with your finance system too, so it’s as easy as clicking a button to run the desired report. Once you have the report with all the relevant information, it’ll be a lot easier to request the funding necessary to support your membership recruitment drives.