As the old adage goes, it costs a lot more to get a new customer than to keep an existing customer.
That is not only true, it isn’t the half of it. Consider this. If you are a member-based association that provides services to help advance the member throughout their career, they may join your association in their early 20s and remain a member into their 60s. This could be about 35 years on average. If your association is like mine, you charge each member annual dues and receive income from the sale of other professional services, such as continuing professional development.
Calculating Member Lifetime Value
To keep it simple, let’s say in total that member dues and other income from each member works out to $500 per year. Multiply that over the 35-year member lifespan and the lifetime value (LTV) of each member is $17,500, before any inflation or other increases.
The Real Cost of Attrition
Let’s also say your association has 1,000 members and your annual rate of member turnover is 20%. 1,000 X 20% = 200 X $17,500 = $3,500,000. In other words, each year some part of $3,500,000 of LTV is walking out the door.
The Cost to Replace Attrition (Never Mind Growth!)
Of course, to keep your membership numbers at 1,000, you need to replace the 200 or so who leave each year. Estimates of the cost to acquire a new customer vary considerably, but my association spends about $600 to acquire each new member, including salaries benefits, marketing and other related expenses. So if your member retention rate is 80 per cent the cost to replace the 200 members you lost is 200 X $600 = $120,000. It adds up, doesn’t it? Well, add some more if you’re planning on growing your membership base.
(Note to self: How big is my potential market for new members? If I don’t know this, how can I set growth targets?)
What Do Ex-Members Have to Say About You?
The cash expense isn’t the worst of it. Unless your association has very, very broad appeal, the total pool of non-members is finite. But remember, each year you’re adding 200 ex-members to that pool, and what are the odds that these ex-members are going to recommend membership in your association? Not good. Five, 10 years down the road and you’ve got a lot of word of mouth working against you and growing that membership base will get harder and harder.
First-Year Members are the Most Vulnerable
But here’s another question for you: What’s your first-year member retention rate? I guarantee you that no matter how good your overall member retention is, the first year rate will be substantially lower. Why? To a certain extent, new members haven’t yet drank the Kool-Aid. They joined out of interest, but they’re not yet committed, and you’re going to have to pay particular attention to them to ensure that they do learn and appreciate the benefits of membership during that first year or else they will be gone.
So no matter what your member retention rate is, improve it. That’s going to be one of the things that we’ll be discussing in my CAE Webinar: Member Attraction, Engagement and Retention on March 9.
CAE Webinar: Member Attraction, Engagement and Retention
The Human Resources Professionals Association (HRPA) has averaged 6% compounded annual growth in membership for the past decade, while increasing member engagement and member retention by 25% and 27% respectively. Join Chris Larsen, HRPA’s Vice President, Marketing, Membership and Professional Development as he shares 13 strategies that drove HRPA’s outstanding performance.
Chris Larsen is Vice president, Marketing and Membership at the Human Resources Professionals Association (HRPA). Since 2007, Chris and his Membership team have piloted the association to a 40% growth in membership while member retention has improved by 20%. Prior to joining HRPA in March of 2007, Chris was Chief Operating Officer of McDonnell Haynes Advertising of Toronto. An Internet advertising pioneer, he launched one of Canada’s first Internet media companies in 1995 and was a founding member of the Internet Advertising Bureau of Canada. In the early ‘90’s Chris ran a network consulting group at ISM, a unit of IBM Canada, and was SVP Operations for an Internet engineering firm. Chris holds a B.A. from the University of South Florida.