Friday, August 21, 2009

In follow up to yesterday's post, as a membership geek, I'd like to share the formulas which provide a numeric way to help us track the effects of our membership marketing. Typically, these formulas are pulled together to create a Membership Dashboard which provides a 'snap shot' of these activities in a quick and easy to read format (if you'd like one I'd be more than happy to share the one we use at MGI).

As a quick reference, when talking with a CFO on membership activity, I usually find the following benchmarks to be most important:

  • Promotion Response Rate (PRR): The percentage of people who responded to a promotion.
    Total number of responses / Total number of prospects contacted X 100.
  • Renewal Rate (RR): The average percentage of membership that remains in a year
    (Total Number of Members Today - 12 month new members) / Total
    Number of Members in Previous Year
  • Membership Tenure (MT): The average time a member stays a member.
    1 / Reciprocal of Renewal Rate = .10
  • Lifetime Value (LTV): The economic value produced by a typical member.
    (Dues + Non-Dues Revenue) x MT
  • Maximum Acquisition Cost (MAC): An estimate of the maximum investment that can be made to acquire a member or customer at a profit.
    ((Dues + Non-Dues Revenue) - (Total Servicing Costs)) x MT

    Present these to your CFO to find out if they represent the metrics he/she is interested in. This is a great way to at least kick-off the dialogue.

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