Membership recruitment and retention is one of the most important topics in the association sector — particularly, how to prevent existing members from leaving while still enticing a newer generation. Sidecar hosted predictive analytics gurus and co-founders of Tasio, Thomas Altman and Dray McFarlane, for a workshop on just this.
McFarlane and Altman showed us how to craft strategies to target specific groups of members, and gave us a framework to understand if and how much of a discount organizations can offer members to keep them.
One of the key points they touched on was understanding how to find and utilize your organization’s break even point. Simply put, your break even point is the maximum discount an individual can receive before an organization loses money during recruitment.
“It’s important because it gives you a framework for understanding what’s the maximum amount of discount you could offer to somebody across your different products and still fund the organization going forward,” said Altman.
So, how do you find your association’s break even point?
It’s simple. Start by understanding the revenue generated from a member. Determine how much they are projected to spend on dues and non-dues contributions, then multiply that by the total number of members in your organization. Then divide that sum by your total number of members.
It seems redundant, but having that step becomes relevant later when calculations become more specific.
Next, look at your books and determine how much it costs to serve your members. How much does your staff get paid? What member benefits do you offer when onboarding or retaining? Factors like these tend to add up quickly, so it is imperative that you include any operating costs.
Lastly, subtract one from the other.
“Hopefully, revenue is more than cost,” joked Altman. “That is your margin per member. That becomes the maximum you can give a discount for before you’re losing money and it’s actually costing you money to serve your members.”
By knowing your margin per member, your organization can rethink your recruitment and retention strategies and confidently say what can or cannot be supported. Organizations could offer discounts to conferences, events or continuing education, give grants or even hold a competition of sorts.
Knowing your break even point, and utilizing your margin per member will allow your organization to successfully engage existing and potential members with ease.