The Best Tips To Reducing Membership Churn Rate
Have you noticed a decline in membership renewals over the past weeks, months, or years? An increase in unhappy members? If so, you might be facing a problem with membership churn. While you might feel you are giving your members the best experience possible, it is important to take a step back and understand what membership churn is and the actions you can take to prevent it. Understanding membership churn is crucial in measuring your success.
With the help of our tips below, you will be ready to reduce your churn rate by up to 70%. Here is what we will cover:
- What Is Membership Churn?
- Why Understanding Churn Important
- Figure Out Why Churn Is Happening
- Know The Warning Signs
- Know Who Is At Risk
- Best Tactics to Reduce Churn
Here we go!
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What Is Membership Churn?
To put it in the most simple terms, churn is defined as the number of customers who leave a company during a given period of time. It is a critical indicator of the health of your organization and sheds valuable insight into the effectiveness of your membership engagement strategy.
While this is a term often used for traditional businesses, it is equally important for nonprofit organizations to know what their churn rate is.
A good example of churn is when a member signs up, is registered in your database, pays their dues, is engaged throughout the onboarding process, and then decides not to renew their membership in the next membership cycle.
Pro Tip: Avoid glossing over traditional business concepts because you feel they do not 100% apply to the nonprofit sector. The major difference between "regular" businesses and nonprofit organizations is that nonprofits turn their financial investment into social impact, versus shifting profits to investors. The most successful nonprofits are run like businesses, just with a greater social conscious. Take business concepts and apply them in an ethical way.
How to Calculate Churn
Don’t worry, you don’t need to open up Excel or whip out a complicated calculation to determine your annual churn rate. All you need to do is take the number of new members you lost during your last cycle and divide it by the number of members you had at the beginning of the cycle.
Members Lost/Total Members = Churn Rate
Let’s break this down further with an example. Let’s say at the beginning of the cycle you had 100 members. You lost 3 during the cycle, giving you a churn rate of 3%.
Different industries have varied churn rates depending on their sector, product, and customer type. For example, for a SaaS (software as a service) company like Springly or Netflix, which is based on monthly subscriptions, the average churn rate can be upwards of 30%.
While there is little data on the churn rate in membership-based organizations, don’t hesitate to ask around in your network if you are worried about the number you are seeing, and be sure to include this data in your nonprofit kpi dashboard. Remember, there is nothing that can’t be fixed with the proper tools, guidance, and feedback.
Pro Tip: When calculating your churn, don’t forget to take into account the particularities of your organization. If you have seasonal members or a rolling membership cycle, be sure to take that into account as to not misconstrue the data.
Why Understanding Churn Is Important
Quick flashback to Econ 101: it is almost always cheaper and easier to retain customers than to acquire new ones. Monitoring your membership churn is the first step to learning how effective you are at retaining members.
Nonprofits have to invest their time and resources wisely. They have to be more vigilant with their investments because there is simply less budget to play with. Not to mention financial and annual reporting that requires certain diligence for good investments.
Acquiring new members has an important financial cost, therefore knowing how and why they churn is just good business. Forrester argues that it costs 5x more to acquire new customers than to keep existing ones. While this is more of a traditional business metric, the impact resonates equally for nonprofit organizations.
To sum it all up, it is in everyone’s financial interest to have a low churn rate. While it may seem trite in comparison to investing more time into your social mission, the reward will come back ten-fold by keeping your organization financially healthy and supported by engaged, happy members.
Figure Out Why Churn Is Happening
Now that you know what churn is and why it is important, we need to discuss how to find out why it is happening.
Members can churn for many reasons, which will depend on the organization, but the number one way to really understand why it is happening is to have meaningful exchanges with your churned members.
If you are familiar with our blog, you have certainly heard us give this advice before. The reason we repeat it is that we know that it always works. It is a 100% low-risk, high-reward technique to get to the bottom of the issue, and is also the first step in fixing it.
Pro Tip: It is important to be receptive to your churned member’s feedback. While it may be hard to hear what went wrong, they are giving you a gift with their transparent feedback that will, in turn, allow your organization to optimize your processes.
So, what constitutes a meaningful exchange? At Springly, when we want to do the same with our clients or colleagues, we give ourselves a few criteria for an ideal and honest exchange:
Have a fixed, set time in your calendars. We highly suggest that you avoid a surprise call or meeting at all costs. If you want to really get to the bottom of why your member churned, you need to dedicate the time to hear them out. Fixing a time and date will give you and your old member ample time to prepare and it also shows them that you are taking their feedback seriously.
Plan for more time than you think you will need. I don’t know about you, but we are big talkers. There is nothing worse than finally getting to the heart of the subject and having your phone ring for your next meeting. Give a buffer of 10-15 minutes for good measure, to wrap the meeting up appropriately, and discuss next steps.
Send the questions beforehand. Writing down a few questions before the meeting will help guide the discussion, make sure you are staying on topic, and get your juices flowing on what kind of feedback you are looking for. Sending the questions also gives your members time to prepare and have examples ready to support their arguments.
Meet in person (if possible). Good conversation happens face-to-face, no one can deny that. Many things can be misinterpreted via email, text or any other messaging device therefore make the most of your interaction by also having access to their body language and demeanor.
Meet in a calm, quiet environment. Bonus points if you can meet outside of your offices! Going to meet your member shows your good faith and that you value their time, but also gets you out of the office mindset. Avoid busy places like Starbucks where there is a lot of noise that could distract you or your guest.
Empower each other. A conversation like this should not be negative for either party. Empower each other during the conversation by validating their feelings, and creating concrete steps to ameliorate processes.
In general, meaningful interaction is where both parties come out feeling heard and positive about their future interactions with your organization.
Know The Warning Signs
Members rarely churn for no reason and with little notice. Recognizing the warning signs of when a member is wavering can help your managers or volunteers intervene before a renewal season comes around.
We have all heard it before, "He’s just not that into you." The same principle applies to your members: low engagement means low interest. While we can all understand that life gets in the way every now and then, if you are seeing consistent cancellations or unanswered requests, it can be considered a warning sign of churn.
If you are tracking engagement with specific criteria (i.e. attendance at monthly meetings) you should start to notice a lack of engagement fairly quickly. Drop-off tends to happen after the onboarding process, so be vigilant about checking your criteria on a regular basis (every month, quarter, or semester).
If you are just getting started with your membership program or don’t have set engagement criteria, don’t worry! You can easily check opening rates on your next few emails or attendance at online events. If you start to see a pattern, have your management team or volunteers give them a phone call to better understand what may be causing their hesitation.
Missing or Late Dues
If you are not using online payment for membership dues, you may already be spending time running after unsigned checks, missing cash, or wrong due amounts. Oftentimes the issue resolves itself with a quick phone call or email but if they become hard to reach and you are still missing your payments, it is a classic sign of potential member churn.
A lack of motivation to pay their dues in a timely manner can shed light on serious issues like your dues potentially being too high, but also a lack of motivation on behalf of the member themselves. Coupled with other issues like disengagement, you can be faced with the dilemma of choosing between revenue or engaging your member.
If you can do both at the same time, it is suggested. If not, because you don’t necessarily have the time or bandwidth, focus on engaging the member over counting pennies. Membership dues do contribute to the financial stability of the organization, but it is preferable to re-engage the member so that they renew their membership for years to come, giving you a more stable revenue stream. As we stated above, it costs more to acquire than to keep members, therefore, taking a small financial hit in the moment is worth it for a long-term solution.
Members play a key role in organizations. Not only do they make up a large part of the contributions to your core mission, they act as an advocate for your organization, and often give their skills, time, or money to furthering your work. If you are beginning to notice that their contributions in skills, time, or even referrals are slowly diminishing, you may be facing negative churn.
Giving these members some special attention is the simplest way to check in on them and get them motivated and excited about being involved in your organization. Here are a few questions you can ask:
What part of our mission excites you?
What subjects are you passionate about?
Where do you see yourself in a year within our organization?
Are you happy with your current mission?
What kind of support do you need?
How can your skills help our organization?
What can we be doing better?
Normally these types of issues are caused by a simple misunderstanding, putting the right member in the wrong mission, or a lack of transparency and structure on the organization’s end.
Asking a few simple questions and giving your members 15 minutes of your undivided attention can be the key to giving them a little boost and insuring your organization against unwanted churn.
Not Taking Advantage of Membership Benefits
If you offer exclusive events, training, access to privileged information, or commercial discounts to your members that are all gathering dust, you should be on the lookout for an unhappy member.
While not every benefit will be used by every member, it is important to note when none are being used during the first few months. It could be as simple as reminding the member that the benefits do indeed exist, but it wouldn’t hurt to remind them how to use them.
Show them where to sign up for exclusive events, how to access their member portal, or find a discount code for a local business.
Pro Tip: It is not enough to assume that your members will be excited by a benefit, you have to be 100% certain in order to have a good return on investment. Qualitative data (i.e. quotes, member interviews) is important in this circumstance because there may be a clear distinction between what you think your members may want from what they actually need. Send a survey or conduct interviews with past, present, and potential members to get more visibility on the fit of your membership benefits.
Know Who Is At Risk
Knowing the types of members who are at risk to churn from the start can make the lives of your member managers or volunteers easier. If they can keep an eye on potential churners from the start, the risk significantly decreases, all the while saving you time and energy.
Because every organization is different, there is no one size fits all approach to knowing what kind of profile is at risk. There are a few best practices to put into place that will help identify the right persona to look out for:
Analyze past churn data. Take a look at your data from the past 5 years and try to pull out any similarities between cases. Has a referral program gone wrong? Are there similarities in age, job titles, or working groups? While this may seem time-consuming and cumbersome, getting to the root of the problem is worth the time investment, and is an important metric to keep on hand for the next membership cycle.
Don’t force a fit. This tip comes straight from the core of Springly’s business model. We believe that if you have to spend a significant amount of time convincing customers that your offer is the best one, then they are not the right fit for you. If you feel hesitation or resistance after a few interactions, let them go. It is better to invest your time in members that see your immediate value and let the others come back when they are ready. Even if you need the cash flow, members who churn cost you money in time and resources, which negates the capital they brought in with their dues. Members that have been potentially talked into membership are prime personas to look out for.
Pro Tip: Know the difference between showing value and forcing a fit. Helping your member see the value of your offer and how your membership will benefit them is a very different kind of conversation than trying to simply get their payment. Showing value is putting the customer first, forcing a fit is putting your organization first. To empower your members, they should be at the heart of everything you do.
Now you have all of the tools you need to identify churn, let’s look more into some concrete measures to reduce churn!
Best Tactics To Reduce Churn
After finding out why your churn is happening you can put into place a system to reduce it. Your goal should not be to reduce churn all together since it most likely will never happen. Rather, your goal should be to be an advocate for your members, staff, and have a healthy member-organization relationship. With that as a top priority, you will have less churn, and reduce involuntary churn, over time. That being said, there are few universal tactics you can use to help your members along:
Focus On Long-Term Engagement
After the first three months of onboarding and engagement, often efforts drop off as the members settle into your organization and get the lay of the land. While this is great and you should lessen the intensity after the initial weeks, keeping up the energy and commitment shouldn’t go with it. In order to keep members interested long-term you can:
Push transparency. Many members disengage in the long term because they have little visibility on the future of the organization or on the actions they are leading. Providing members with an impact report, much like you do for donors, can be a great way to communicate clearly to your members about the impact of their contributions as well as give them an idea of what is to come.
Value over benefit. As a member organization, it is natural to want to push membership benefits to the top of the list. While this is certainly true, try focusing on the value your organization brings over simply what you can physically give to your members. For example, let’s say your nonprofit organizes network events for your members. Instead of giving the benefit (access to networking events), try showing the true value of what expanding your network means (access to high-level, like-minded people that can bring new professional and personal opportunities). Changing the rhetoric can be a game-changer not just in the short term, but is just good nonprofit communication in general.
Invest in relationship marketing. Relationship marketing is a fancy term for marketing that stresses customer relationships and success over sales benefits. This includes mainly things like testimonials, member success stories, or an ambassador program. You don’t need to rehaul your marketing and communication strategy, but adding in a success story in your monthly newsletter is a great way to motivate your wavering members.
Begin social listening. Another fancy term that simply means paying attention to what is being said about your organization. Since we all spend too much time on our phones, this should be fairly simple to put into place. Reward your members who boost you on social media or online, and get in touch with those who may be less enthusiastic. It is less important what they say, but how you react to their comments.
Long-term engagement takes dedication and gusto, if you find that you or your teams are overwhelmed at the prospect, recruit a few of your most active members to lend a helping hand. It shows that you value their time and opinion and frees up your time for other projects.
Access to skills training, special conferences, or personal coaching is a great way to avoid churn. Education always carries value and is an excellent way not only to engage your members in the short and long term but also a great data point to track engagement over the years.
Giving your members access to something they might not be able to afford on their own is an excellent way to add continuing value. Bringing in a speaker or a personal coach once a month is also a great way to grow your membership base.
Many coaches or speakers have a few dedicated pro bono hours per month, or give access to pre-made content for a reduced price. All you have to do is ask!
Pro Tip: Do your research. Verify that the speakers, coaches, or suppliers you are hiring are aligned with your values. Look up their previous work and ask to see an outline of their talking points beforehand.
A method that is simple and straight to the point. Everyone loves a good deal! Besides all of the great things, you offer them, for wavering members that may be hesitating, offering renewal incentives are extremely effective. Be sure to check with your treasurer before offering any discounts but here are a few of our best methods:
Renewal discount. A discount to renew your existing membership, normally between 10-15%
Referral discount. Free membership for the existing member for bringing on a friend, normally single use only.
Investment discount. Instead of paying per year, offering membership for a longer period of time for a discount, normally between 10-30%.
Upgrade discount. A discount for upgrading to a more expensive membership, normally between 5-20%.
Of course, this technique is best used when dealing with a simple churn problem (ex: resistance to online payment) that doesn’t require complex feedback.
Review Service Procedures
Sometimes we can get stuck in our ways, procedures, and processes that could use a refresh. If you are seeing churn happen because of a lack of support, onboarding, or consistent information, it could be time to put your service procedures under a microscope.
Start from the ground up with the root of the problem then work upwards. What information are your members missing? What could have been better? What was painful for them? Once you have this data, you can find a way to fix it.
Often when members churn, for this reason, they are missing a primary contact that is in charge of their membership and who can answer all of their questions. Even though you may have a membership manager, dedicated membership site, or a volunteer dedicated to this task, they could very easily be overwhelmed with emails, requests, and questions.
At Springly, we use the buddy system to help lighten the load within our teams. When a new employee joins our team, they are given a buddy to help them get situated during their first 6 months. The buddy is not a manager nor on the same team or department but is a friend who can answer any and all questions regarding the processes or company culture. The buddy system takes the pressure off of the manager and helps the new team member out, and greatly contributes to good internal business health!
This process can easily be adapted to your membership management system and gives older members an opportunity to share their wisdom and knowledge, all the while lessening your workload. It’s a win-win!
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Congratulations, you are officially an expert in membership churn! You have all of the tools you need to not only identify who in your community of subscribers may churn, how to determine what a high churn rate is, and all of the factors that can help your organization combat it on a daily basis. Good luck!