Basic Calculations That Offer Insight into Your Membership

Day in and day out, you’re involved in the acquisition, retention, and marketing of the members of your organization. With all the hustle and bustle of your daily duties, do you still take the time to routinely calculate the effect of your efforts? Here are some easy calculations to help you get started.

The most basic calculation you can perform on your membership is your retention rate. Your retention rate is the number of members who have stayed with your organization within a given period of time. Quite simply, your retention rate shares the number of members who continue to remain satisfied with your association.

How to calculate your retention rate:

(End Count – New Members) ÷ Start Count = Retention Rate

Example: At the end of 2016, VP Associations had 2,300 members (start count). By the end of 2017, membership was at 2,150(end count), which included 50 new members.

2150 – 50 = 2100

2100 ÷ 2300 = 0.91 =91%

 

Renewal rate is the number of members that renew their membership with your organization over a given period of time – typically a year. Your renewal rate is as equally important as your retention rate as it offers insights into which members are seeing the benefit of your organization. Don’t fret if members don’t bite on your first marketing effort to renew. We often see renewal rates increase on across a multi-step renewal series.

How to calculate your renewal rate:

# of Members who Renewed ÷ # of Members Eligible for Renewal = Renewal Rate

Example: In 2018, VP Associations had 2,500 members who received a renewal notice. Of that “class,” 2,350 renewed and remained a part of the association.

2,350 ÷ 2,500 = 0.94 = 94%

 

Your churn rate is the opposite of your renewal rate, often called your “lapse rate.” It is the number or percentage of members who discontinue their membership over a given period of time – again, typically a year. Consider offering a discount or promotion to past members who did not renew. And, if those options fail, consider investigating as to why those members did not renew – Is your organization not providing applicable benefits? Was the member renewable in the first place (i.e., deceased)?

How to calculate your churn rate:

# of Members who did not Renew ÷ Start Count of Members = Churn Rate

Example: In 2018, 26 out of 2,300 members of VP Associations did not renew.

26 ÷ 2300 = 0.011 = 1.1%

 

To further understand your membership, use your lapse rate and renewal rate to help you calculate the average membership tenure, or the average length of time a member stays with your organization. Your membership tenure will help you calculate your lifetime value of members, which helps you understand your membership as well as forecast your budgets for member benefits, staff, etc.

How to calculate average membership tenure:

1 ÷ Lapse Rate = Average Membership Tenure

Example: At the end of 2017, VP Associations had an overall renewal rate of 85.62%, so the lapse rate was 14.38%.

1.00-.8562 = .1438

1.00 ÷ .1438= 6.95= ~7 years

 

Use all the information you’ve gathered above to help you determine the lifetime value of a member. You’ll use your dues, non-dues, and average membership tenure to help you calculate this. For the sake of simplicity, we’re going to keep operating costs out of the equation.

How to calculate the lifetime value of a member:

(Dues Revenue + Non-Dues Revenue) x Average Membership Tenure = Lifetime Value

Example: Membership dues for VP Associations are $150. Each member contributes at least $75 in non-dues revenue. The average membership tenure is 7 years.

($150 + $75) x 7 = $1,575

 

Want to see some of these calculations in action? Check out our new member campaign calculator to determine ROI on campaigns!

Article written by:

McKenzie Decker

Marketing Manager