Understanding member retention and what is the membership retention rate of your community is crucial for any membership website.
Retaining members of your community is at the core of the membership business model. So, what is the membership retention rate?
What Is The Membership Retention Rate?
The membership retention rate is the percentage measurement of how well you’ve been able to keep members in your community.
Most associations and communities will list increasing membership retention rates as one of their main goals. While the percentage companies aim for can differ from industry sector, financial models, and more, you’re looking for a higher percentage figure. In an ideal world, your community’s retention rate would be 100%, but that’s unlikely.
The main reason why you want to retain members is cost. On average, winning over a new member can cost up to ten times more than keeping current ones happy.
Most industry sectors consider 5% to be a good churn-over rate (how many members leave), and anything over 20% of members leaving is disastrous.
Remember, if one in 20 members are leaving (i.e., 5%), it is manageable, while one in five (20%) is not sustainable.
Put simply, ensuring that your business’s membership retention rate stays high is key to your company’s success.
Now that we’ve answered, “What is the membership retention rate?” let’s discuss how to calculate this rate.
How Do You Calculate Membership Retention Rate?
The basic formula for calculating the membership retention rate is:
((ME – MN)/MS) x 100
- ME = Members at the end of a time period
- MN = New members acquired during a time period
- MS = Members at the start of a time period
It might seem overwhelming initially, but if you’ve not done any formulas since school, you can always copy and drag this equation into Google, giving you the correct answer.
But to ensure that you get the right answer, here is a simple step-by-step to follow:
Step 1
Identify the time period you want to work out for the membership retention rate. If you want to work out your retention rate for the last six months, you need to determine the number of members you had at the end of that period.
This number represents the ME in the formula.
Step 2
The next figure you want for your formula is how many new members you’ve acquired during the time period in question. This number will be MN.
Step 3
As you can deduce, you now need to find the MS number. This number is how many members you had at the beginning of the time period or, in our example, the last six months.
Now that you have all the data points for your formula, it’s time to work out your membership retention rate.
As an example:
If you ended the six months with 630 members (ME), acquired 50 members during that time period, and started the time period with 600, your formula will look like this:
((630-50)/600) x 100 = 96.6%
And there we go; you can now work out your community’s retention rate.
Read next: How Can I Improve My Club Retention?
