It’s membership renewal season! And if your association operates on a calendar renewal cycle, it’s likely that you’re in the middle of a big renewal campaign. If you’re operating on an anniversary cycle, you’re might be reflecting on your December campaign, which might still be your largest cohort of renewals during the year.
Wherever you are in the renewal cycle, you need to know if your efforts are successful. Are you retaining enough members to remain a viable organization into the foreseeable future?
Let’s do some math
Determining your renewal rate is straightforward. Divide the number of renewals by the number of members eligible to renew. Then multiply the result by 100.
For example: At year’s end, you had 3,250 members who were eligible to renew and 3,120 who renewed by the deadline.
- Your renewal rate is 96%. 3,120 ÷ 3,250 = .96. .96 × 100 = 96%
You can use this formula during the different stages of the renewal process. Just use different cut-off dates for different measurements. For example: the percentage that renewed by the deadline or the percentage that renewed within the grace period.
If you use an anniversary renewal cycle, you can use the same formula to determine the renewal rate on a monthly or quarterly basis. And when you compare renewals from year to year, be sure you use the same time periods in each year’s calculation.
You can also determine renewal rates for the different segments of your membership. By calculating the renewal rates for each segment, it will be easier to compare large segments to smaller ones. If you offer tiered membership, you can calculate rates for each tier of membership. You can then answer questions like: Does one type of member tend to renew more than another? Or should you consider developing new benefits for the members who aren’t as likely to renew?
What’s the opposite of a renewal rate?
If you subtract your renewal rate (also called your retention rate) from 100, you can determine the percentage of members that you lost – also called your churn rate.
In the example above, the churn rate is 100 minus 96 or 4%. That’s 130 members who chose not to renew.
Why does my churn rate matter? I attract new members every year.
Your churn rate tells you how many new members you must recruit to replace the non-renewing members. If you don’t recruit at least as many members as you lose, your membership declines.
Membership drops are often tied to events outside of your control like pandemics, recessions, depressions, and supply-chain issues, and many associations are continuing to recover from the declines they saw in 2020. You can’t expect membership to automatically rebound to previous levels. Keeping a close eye on churn rates by segment lets you know how well you’re doing with each type of member and where you should concentrate your retention efforts in the coming year.
Other things to consider
When you calculate your renewal and churn rates, be sure to exclude honorary or lifetime memberships – those that don’t renew. You may report them as part of your total membership counts, but they can skew your renewal calculations. You can always report a renewal percentage and include a mention of the number of non-renewing memberships. For example, you might say your association had a 96% renewal rate, not including 78-lifetime memberships. That way, you’re being transparent about membership numbers while reflecting an accurate renewal rate.
You’ll also need to consider how to count memberships that are in grace periods or are considered reinstatements at the cut-off for your report. Your association may have other member categories that are offered with special rules or guidelines.
Make sure your AMS has powerful reporting. Your data is key and most of it often lives within your AMS as that’s where members renew and become members. Check with your vendor if you have any questions about reporting and extracting the reports your association needs.
How you handle membership in a grace period can be critical when you report their status. Are they considered members or not? Reinstated memberships pose their own questions, particularly in an anniversary renewal environment. Do they keep their member numbers, regardless of how long it takes them to pay dues? Are reinstatements handled differently than members who rejoin? The details in these cases can affect pre-set reports from your association management software or CRM. Make sure you understand how your AMS assigns and counts member types. With a little research, you can be sure your calculations are accurate.
Finally, you must plan to benchmark your membership regularly during the year. Decide what reports you need, determine what they tell you, and make them available to affected staff members and volunteers. And when membership grows, celebrate!
