By Erik Schonher, Vice President, Marketing General Incorporated
When I played sports in high school, my coach would always have us work on “fundamentals.” For soccer (yes, the greatest sport in the world!), we would focus on kicking properly, “heading” the ball, dribbling, and a host of other activities. This helped us to create “metrics” so we could evaluate our own performance and become better players.
As membership professionals, our typical metrics are:
- Response Rate
- Renewal Rate
- Average Tenure
- Lifetime Value (LTV)
- Maximum Acquisition Cost (MAC)
- Steady State Analysis
For many of us we have computer programs that automatically calculate these metrics. However, after over 25 years in this business, I can tell you that occasionally these programs are incorrect, so it is always a good idea to understand how these metrics are calculated just in case you are suspicious of a number and you can do the math yourself.
| Metric | Measures | Formula | Example |
| Response Rate | Campaign effectiveness | Total Responses/Total Number Promoted | 120/10,000 = 1.2% |
| Renewal Rate | Member retention | (Total Members Today – 12 Months of New Members)/Total Members in the Previous Year | (10,000 – 2,000) / 9,500 = 84.21% |
| Average Tenure | Membership duration | 1 / Reciprocal of the Renewal Rate | Reciprocal = 1 – .8421 = .1579;
1 / .1579 = 6.333 years |
| Lifetime Value (LTV) | Member revenue | (Dues + Non-Dues Revenue) x Average Tenure = LTV | ($150 + $100) x 6.333 = $1,583.25 |
| Maximum Acquisition Cost (MAC) | Member profitability | [(Dues + Non-Dues Revenue) - (Incremental Costs[1])] x Average Tenure = MAC | [($150 + $100) - ($50)] x 6.333 = $1,266.60 MAC |
| Steady State Analysis[2] | Membership Projection | Annual New Members Acquired / Reciprocal of the Renewal Rate = Total Membership Steady State | 3,000 / .1579 = 12,666 Total Membership |
[1] Incremental Costs include customer service, cost of goods sold, etc.
[2] Note that this does not tell you when it will occur, just that it may given the current situation.
Erik Schonher is Vice President of Marketing General Incorporated (MGI). In addition to providing strategic and tactical planning for a number of MGI clients, Erik also oversees MGILists which provides list management services for over 80 association clients.
MGI is America’s leading provider of membership marketing services to the association marketplace. For over 31 years, MGI has provided strategic and tactical services that have successfully grown associations’ memberships and driven non-dues revenue. Visit MGI on the web here.
