©SHRM Membership CLA Quarterly Webinar: Economics of Membership Phyllis Shurn-Hannah, SPHR and Scott D. Ferrin, SPHR, PMP Field Service Directors April 17, 2014 Bhavna Dave, PHR Director of Talent SHRM member since 2005

©SHRM Agenda Welcome Affiliation Requirement and Monthly Membership Report At-Large Postcards Membership Value and VLRC Guests and Presentation Q&A Future Meetings

©SHRM SHRM Membership SHRM Chapter Membership Requirements as of January 1, 2012 Applies to all existing and new chapters - no grandfathering. Chapters not currently meeting new affiliation requirements will have a five-year period to do so (by December 31, 2016). 100%-Chapters Minimum of 25 SHRM members AND 100% SHRM membership Non-100%-Chapters Minimum of 25 SHRM members AND 51% SHRM membership Three more years to meet the requirements

©SHRM Membership Report – State Rollup 2014 Star & Super Star Goals: Membership Star = 1% % Membership Super Star = 4%+ (over the 12/31/13 count) 2014 Star & Super Star Goals: Membership Star = 1% % Membership Super Star = 4%+ (over the 12/31/13 count)

©SHRM Membership Report – Chapter Review 2014 Star & Super Star Goals: Membership Star = 1% % Membership Super Star = 4%+ (over the 12/31/13 count) 2014 Star & Super Star Goals: Membership Star = 1% % Membership Super Star = 4%+ (over the 12/31/13 count)

©SHRM SHRM At-Large Strategy Promoting Chapter Membership to SHRM At-Large Members Recently, SHRM sent out 2 communications to domestic SHRM at-large members. The first was a postcard sent to 70,000 members with under 2 years of membership with SHRM with a message promoting local chapters. It was also customized based on their zip code with a listing of the closest chapters to them. postcard sent to 70,000 members Also, SHRM sent out an e-blast to more than 125,000 SHRM at-large members with a message about the benefits of joining their local chapter. It included a link to find the chapters in their state. We believe that these efforts will result in some new members to our chapters throughout the U.S.

©SHRM SHRM Membership ROI of SHRM Membership We’ve run the numbers for you: 12 Issues of HR Magazine$ Reading 3 of the more than 50 research reports$ Participation in 12 webcasts from other organizations $1, Savings by not having to pay some consultant fees Your estimate Full access to SHRM sample forms, policies, how-to guides and presentations $ SHRM Membership Value = $2, or higher You Pay Only $185 for 1 year full professional membership New, First-Time SHRM Member? Use promo code 0118 to receive a $15 discount off your 1 year full professional membership = $170!

©SHRM SHRM Membership “Convince Your Boss” Presentation

©SHRM The Online Promotion offers FIRST-TIME new members special membership rates when they join May 1 – May 31 using the ONLINE membership application only, excluding the bill me option and pdf forms that are printed off and mailed/faxed in with payment. U.S. and U.S. territory residents = $170 Special targeted promotion to U.S. and U.S. territory residents = $170 (with promo code) Outside the U.S. or its territories = $80 internet-only membership or $170 full professional membership May 2014 SHRM Membership Promo Save $15 and get a SHRM Tote Bag

©SHRM ©SHRM 2014 The Main Event

The Economics of Membership © 2014 Marketing General Incorporated. All rights reserved

12 Key Membership Calculations Response Rate Cost to Obtain a Member Renewal Rate Average Tenure Lifetime Value Maximum Acquisition Cost Steady State Analysis

13 Response Rate M easures the number of prospects who responded to a marketing effort. Response Rate = Total number of responses / Total number of prospects contacted X 100.

14 Response Rate - Example ABC Association Direct Mail Acquisition Campaign: Package A: 1,000 prospects mailed Through promo code tracking, we see 9 new members join The response rate from this mailing is: 9/1,000 *100 =.90% Package B (testing a different message): 1,000 prospects mailed Through promo code tracking, we see 12 new members join The response rate from this mailing is: 12/1,000 *100 = 1.20% Response rates help us create a learning system!

15 Cost to Obtain a Member The cost to obtain a member = costs of acquisition / # of total members acquired. Let’s tie this into the previous example. Both packages used the same components with only the messages varying, so the production costs were the same. Let’s assume each piece cost $0.60 to produce and mail. What is your cost to obtain a member for package A and B? What’s the financial difference between and ? A B

16 Package A cost = $.60 X 1,000 = $600 Package A new members = 9 Package A Cost to Obtain a Member = $66.67 Package B cost = $.60 X 1,000 = $600 Package B new members = 12 Package B Cost to Obtain a Member = $50.00 A B Cost to Obtain a Member

17 Renewal Rate = (# of members today – new members over the past 12 months) / # of members 1 year ago today. Ex. We have 1,000 members today. 280 new members came in over the past 12 months. One year ago today we had 900 members. What is our renewal rate: (1, )/900 = 720/900 = 80% Renewal Rate TIME TO RENEW

18 Avg. Tenure defines how long on average members stay with an association. We need to know our renewal rate to find this. Average Tenure = 1/(Inverse of renewal rate) Inverse of Renewal Rate = 1 – renewal rate (also known as lapse rate) If we have a renewal rate of 80% how long on average do members stay with our organization? Average Tenure = 1 / (1 -.80) = 1 /.2 = 5 years Average Tenure

19 Getting to Lifetime Value (LTV) Revenue Gained across Average Tenure

20 Lifetime Value (LTV) Using our average tenure, we can understand the economic value of a member over time. 1. Lifetime Value = (Average annual dues revenue + average annual non-dues revenue per member) * Average Tenure 2. With annual dues of $50 and average annual non-dues of $25 what is the lifetime value of our members? 3. Lifetime Value = ($50+ $25) * 5 = ($75 * 5) = $375 Knowing that on average we will receive $375 per member we bring in, we can spend more than the $50 1 st -year dues amount to invest in more members and greater long term revenues. Getting new members is an INVESTMENT.

21 Maximum Acquisition Cost (MAC) Defines the theoretical maximum investment that can be made to acquire a member or customer at a profit. MAC = ((Avg. dues rev. + avg. non-due rev.) – (Incremental annual servicing costs + avg. cost of goods sold)) * Avg. Tenure At what point are we going over the amount we should spend on acquiring new members?

22 A Note on Incremental Servicing Costs Legal services Website Building maintenance and rent Staff AMS/Databases Mailing a welcome kit Mailing the magazine/journal Sending out renewal notices Incremental Servicing Costs Costs that exist whether you get a new member or not

23 MAC Example Example: Association ABC Avg. annual dues = $50 Avg. member annual non-dues rev. = $25 Incremental servicing costs = $15 Avg. cost of goods sold = $13 Avg. Tenure = 5 years (80% renewal rate) What is our MAC: MAC = (($50 + $25) – ($15 + $13)) * 5 MAC = (($75) – ($28)) * 5 MAC = $47 * 5 = $235

24 Steady State Analysis Defines the equilibrium of total membership where members gained will offset members lost. This projects total members over time assuming new member input and renewal rates remain constant. Steady State = Annual New Member Input / Lapse Rate

25 THINK OF YOUR MEMBERSHIP AS A LEAKY BUCKET Steady State Analysis The water you put into the bucket each year is new members But your bucket leaks. Each year a certain percentage of members do not renew How full the bucket is represents your total membership level.

26 Mapping it Out Looking at it a little differently… You start a brand new association. Your membership starts at zero. In the first year you acquire 1,000 new members. Of those members, over the next year 80% renew. If you were able to continue doing this every year, acquiring 1,000 new members and renewing 80% of your members, how large would your association be over time? Steady State = 1,000/.2 = 5,000 members

27 Steady State – As Raw Numbers

28 Steady State – Graphed

29 Now We’re Talking “What If?” What if we invested more in acquisition getting to 1,500 new members a year and were able to maintain 80% renewals? Then where are we headed? Steady state = 1,500/.2 = 7,500 What if we invested more in our retention efforts getting 1,000 new members a year and we get to 85% renewals? Then where are we headed? Steady state = 1,000/.15 = 6,667 The steady state tool lets you look at different possible scenarios for the number of members you want to get.

30 Recap of Calculations 1.Response Rate = Total number of responses / Total number of prospects contacted X 100. Shows which approaches work best – lists, creative, channels and offers. 2. Cost to obtain a member = costs of acquisition / # of total members acquired. Shows how much you are spending to bring someone in. 3. Renewal Rate = (# of members today – new members over the past 12 months) / # of members 1 year ago today. Tells you how many members you’ve kept overall in a 1-year span. 4.Average Tenure = 1/(Inverse of renewal rate, which is your lapse rate) Shows the average number of years someone is a member.

31 5. Lifetime Value = (Average annual dues revenue + average annual non-dues revenue per member) * Average Tenure How much $ a member provides over their lifetime. 6. Maximum Acquisition Cost = ((Avg. dues rev. per member + avg. non-due rev. per member) – (Incremental Servicing Costs + avg. cost of goods sold)) * Avg. Tenure Maximum level to spend on a new member before losing money over the lifetime. 7. Steady State Analysis = Annual New Member Input / Lapse Rate The total number of members you are heading toward. Recap of Calculations (con’t)

32 Questions? Jason Gudenius Account Director Marketing General Incorporated

©SHRM 2014 (Please note that these slides are copyrighted material and may only be distributed to an audience at a SHRM speaker presentation. Further distribution is not allowed, except with permission by SHRM.)

©SHRM ©SHRM Membership Meetings 1/23 - 3:00 PM ET 4/17 - 3:00 PM ET 9/4 - 3:00 PM ET 11/20 to 22 - Membership Summit at the Volunteer Leaders Summit – Washington, DC. 12/2 - 3:00 PM ET Past webinar information can be found at: esforVolunteerLeaders/Pages/default.aspx#archives6 esforVolunteerLeaders/Pages/default.aspx#archives6 Future Meetings

©SHRM ©SHRM 2014 Contact US Phyllis Shurn-Hannah, SPHR Field Services Director , Option 1, Ext Jason Gudenius, CDM Account Director Web: Scott D. Ferrin, SPHR Field Services Director , Option 1, Ext. 6453