It is Not a Membership Problem. It's a Math Problem. - Matt Appenzeller, Executive Director, Southern Ohio Chamber Alliance
Many, if not all, chambers of commerce set membership goals based on the number of new members they plan to recruit each year. They may or may not understand the cumulative impact of retention and attrition over time. Membership retention and growth is a math problem, not guesswork. You must do the math before you make a plan. If you don’t, you and your Board of Directors will likely make unrealistic decisions regarding your growth and run the very real risk of staff burn-out.
According to the latest published ACCE membership data, the median average for member retention was 88% for Category 1 Chambers of Commerce with budgets of $450,000 or less (ACCE, 2019). This represented the highest retention rate among the five categories of Chambers that were measured in the survey. This number allows us to start doing the math about membership.
Remember those word problems in math class that we knew we would never use again? Sorry to say, but for the sake of your business planning (and maybe even your health), we were wrong. This information is critical to your long-term planning. Ready? Here it goes:
As of January 1 of this year, the Anytown Chamber of Commerce had 400 members. The Chamber has two employees, a full-time director and a part time staff member. The Board has set a goal of gaining 48 new members this year, an average of four per month. Assuming a 88% member retention rate (the median national average for a Chamber its size), how many members will Anytown Chamber have at the end of this year if they meet their membership goal?
(400 starting members x .88 members retained) + 48 new members = 400 ending members
The correct answer is 400. They’ll have exactly the same number of members at the end of the year as they had at the beginning. In other words, the Anytown Chamber will experience 0% membership growth with this set of assumptions. They can only “break even” because they gained as many members as they lost. If they use these same assumptions every year, the Anytown Chamber will always experience 0% membership growth. Numbers do not lie.
Math can also help your chamber determine your “break even” for retention and growth before you enter into a strategic planning session with your Board. You don’t want the “above average effect” (Alicke and Govorun, 2005) to creep into the session, leading to unrealistic membership goals. The above average effect is the tendency of a person to hold an overly favorable view of one’s abilities relative to others. The best way to illustrate this is with another word problem.
The Anytown Chamber is currently in a strategic planning session. A few enthusiastic Board members assert that “there’s no reason that Anytown Chamber can’t double its membership from 400 to 800 members over the next five years”. This, they argue, should be easy to do if they simply set goals to gain two new members per week (104 per year) for the next five years while achieving a 93% retention rate (5% above the median national average). They congratulate themselves for a great planning session and go back to their regular jobs. Does their math add up? Will they actually double their membership in five years?
(400 starting members x .93 members retained) + 104 new members = 476 ending members
(476 starting members x .93 members retained) + 104 new members = 547 ending members
(547 starting members x .93 members retained) + 104 new members = 613 ending members
(613 starting members x .93 members retained) + 104 new members = 674 ending members
(674 starting members x .93 members retained) + 104 new members = 731 ending members
At the end of five years, the Anytown Chamber will have 731 members which is well short of their goal. Despite gaining 104 new members per year and an excellent retention rate, the impact of attrition has a diminishing return on their net gain as the membership grows. They had a net gain of 76 new members in Year 1 which was reduced to a net gain of 57 new members in Year 5. The Anytown Chamber will not reach 800 members until the seventh year (835 to be exact). They have also “earned” a disillusioned staff who have been ground to a pulp mentally and physically. A Chamber staff of two who achieves 93% member retention and gains two new members per week for five years is a standard of excellence that few could sustain. The math says even those superhuman efforts will fall short of the goal.
The problem isn’t poor performance; the problem is an unrealistic plan. Math is relentless and unforgiving. The cold, hard truth is that the math doesn’t care about your excellent performance nor if you fall short of the ultimate goal set by enthusiastic Board members. This is why you must do the math beforehand, and you must show it to your Board before embarking upon any long-term membership growth goals.
Knowing the math raises many management questions for your Board of Directors and Executive staff, including:
The impact of diminishing returns on your efforts cannot be understated. As your membership grows, your “break even” numbers reset to higher levels. To demonstrate, we can also determine the break even number of current memberships if we preset our desired retention rate as well as the desired number of new members per year. For example, a Chamber that desires 95% retention and 52 new members per year has a break even point of 1,050 members. In other words, once your Chamber reaches exactly 1,050 members, you’ll need 95% retention and 52 new members per year (one per week) just to maintain current membership levels. Alternatively, the same Chamber could set a goal of 104 new members per year (two per week). They’ll need a retention rate of 90.05% to break even at 1,050 members at the end of the year. That’s two percentage points above the median national average for retention.
Is it really your plan to beat the national average every year? Or are you introducing the “above average effect” into your goal setting process? What will it take to maintain that exceptional performance over three, five, or ten years? What impact does that have on staff? Are you prepared to compensate them for beating the national average every year?
The ACCE Benchmarking data is so important. Knowing the benchmarks for a Chamber of your size and budget allows you to set smart, achievable goals. It’s also why we built the Membership Calculator on our web site (visit www.joinsoca.com and scroll to the bottom of our home page). You can enter different assumptions to find your break even point with your membership levels. You can also use the Membership Calculator, combined with ACCE Membership Data, to determine realistic membership goals for your Chamber.
The Membership Calculator can also show how many members you’ll lose over a period of time. In our example of the seven years that it took Anytown Chamber to double its membership from 400 to 800 members, they lost 293 members. Your churn increases as your membership level increases. You’ll need to decide whether or not churning through that many members is detrimental to your brand or if it’s simply a cost of doing business.
Once you know the math, your planning will become more accurate. Armed with the math, you can show your Board reasonable membership growth goals; the impact of diminishing returns on membership growth; attrition is inevitable; and that a substantial mix of non-dues revenue is critical to the long-term success of your Chamber.