THE TOOL
SHED
What Does it Cost to Service a
Member, and What is the Value of a Member?
The specific details will
vary by organization based on the categories of members,
the types of programs and revenues, etc. However,
the processes can be adapted to all types of membership
organizations. Pick the approach that works best for the
particular organization.
The better and more
precise the costing in the organization, the more
valuable the exercise will be.
Cost of Servicing the Member
Divide all non-program
expenses (e.g. governance, operations) by the total
number of members (all categories) to determine
the average cost to service a member.
Value of Member
Add up all the dues and
net program revenue, and divide this amount by the total
number of members. Subtract the cost to service
the member from the revenue generated per member to
determine the average annual value. Determine the
average tenure of membership in years and multiply it by
the average annual value to determine the average
lifetime value of a member.
(Do not differentiate
between revenue based on where it came from --
non-members, sponsorships, etc.)
Variation A
Include costs related to
subsiding programs in the cost of serving the member.
The value of a member will remain unchanged.
Variation B
Separate costs and
revenues based on membership category, and what is
attributable to each category. Calculate the average
tenure by member category. The cost of serving a member,
and the lifetime value of a member, will be different
for each membership category.
Variation C
Separate out operational
and program variable costs and revenues related to
non-members, and remove amounts from the calculations.
The cost of serving a member will likely be lower,
depending on the amount of involvement of
non-members. The lifetime value of a member will
drop, with the decline based on how much revenue comes
from sources other than members.
Variation D
Calculate average costs
of serving a member, but use your information system to
calculate the value of each individual member. The
advantage of this approach is that it recognizes that
one 5-year member may be far more valuable than
another...tenure is important, but the spending and
participation level is also very important.
Variation U
U...as in YOU. If
you have another variation, let us
know, and we'll add it to the list!
The
Tool Shed is the place to find the right tool for
the right job...and the tools are designed to work in
associations and other not-for-profit organizations.
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