The truth is, each member of your association is clearly worth more than the dues they pay. They provide man hours, word-of-mouth marketing, and emotional and creative insight that keeps your association moving forward.
But there is a benefit to learning how much each member contributes to the financial goals of your association over the lifetime of their membership.
Once you have put a dollar amount on the monetary value of your members, you will be set to give them better discounts, customized service, and valuable offers to keep them engaged. Tasio created a simple spreadsheet to figure this calculation out yourself which you can download here.
NOTE: The above workbook is not to be used in the place of professional accounting or financial advice. The Lifetime Member Value worksheet is designed to give you a rough estimate of your member’s worth over the lifetime of their membership. For a more detailed breakdown, speak to your accountant or financial advisor.
5 STEPS FOR CALCULATING THE VALUE OF YOUR MEMBERS
There are several things you need to know before you can do this simple calculation. The most important being that you will working with a historical data set—a set of year-long data where the outcomes (lost or retained) of the members is known.
Step 1: Know the Numbers
Work with your team to gather this information, which may include IT data, financial data, and employment data. You will need to know:
Total number of last years’ members with member loss data. You will need to create a historical data set of everyone who was retained or lost from a year-long period before now. The closer to today, the better this data will be.
Total dues and non-dues revenue for historical data set. This will be split into two sections on the workbook, and will need to be included for everyone on the historical data set.
Total cost to service a member over historical data period. This includes salary and cost of membership departments, publication, and marketing and promotional advertising costs. It also includes any monetary or financial benefits members receive. It may also include other elements, depending on your unique association offerings.
Average lifetime of membership. You find this by reviewing your historical data set for members who were lost, or “churned.” For each member that was churned over the period of your historical data set, calculate how many years they were members. Then create an average for the entire group of churned members.
Step 2: Find the Average Cost Per Member
For your historical data set, you need to take the total cost to service a member and divide it by the total number of members (including those who left, or were “churned”). This is the total amount of funds that you spent per each member last year.
Step 3: Calculate Expected Lifetime Revenue
After you have created your average lifetime for membership, you will multiply this by the average dues and non-dues of revenue that each member generates each year. In the Association Retention Workbook, the calculation is done for you.
Step 4: Calculate Lifetime Cost to Service Member
We will also do a similar calculation for the cost to service a member of their lifetime with your association. This is done by multiplying the average lifetime of a member by the yearly service cost per member.
Step 5: Calculate Lifetime Revenue of Membership
By subtracting the cost of servicing a member from the total revenue over the lifetime of a member, you can see whether you are spending too much on servicing or if you have room to offer discounts and other financial incentives to increase your retention.
The revenue minus your costs is your break even point—this is the highest amount of discount you can give before you are making zero dollars towards your association’s goals.
ACCORDING TO THE IMPACTS VALUE STUDY, A NEW MEMBER TO YOUR ASSOCIATION BRINGS IN AN AVERAGE YEARLY INCOME OF $114 IN REVENUE, WITH A RENEWING MEMBER BRINGING IN A YEARLY INCOME OF $189 BY YEAR 5 OF THEIR MEMBERSHIP. THE COSTS FOR RETAINING THESE MEMBERS IS INVERSE, WITH NEW MEMBERS COSTING BETWEEN $20-$25 EACH YEAR AND RENEWING MEMBERS COSTING BETWEEN $4-$5 EACH YEAR.IMPACTS VALUE STUDY, COLEENDILEN.COM (10/14/17)
What About the Value of Social Impact for Your Association?
Despite the calculation above, you might realize that there are some reasons why you would be willing to go over the break even point on the behalf of your members. For many associations, there are intangible benefits from offering some programs, resources or discounts.
These are a valuable part of identifying the value of your members, and can be considered as you are using these calculations to make decisions about where to trim or increase your spending.
Your Members are Valuable. Retention is Key.
Every member represents a huge investment of time, effort, money, and resources on behalf of your organization. And while all members are valuable, retained members bring in the most revenue for the least cost.