How to Calculate Member Retention Rate in 5 Easy Steps
Your member retention rate reveals how well you’re engaging & providing value for your members. Calculate this metric with five steps.
Ah, member retention. When it’s good, it’s great, but when it’s bad, we worry.
In fact, 46 percent of associations reported that increasing member retention is one of their top membership goals, according to the Membership Marketing Benchmark Report.
If you’re worrying about member retention, the first place to start is to find out how you’re doing on paper. Once you have your membership retention numbers on hand, calculating your member retention rate is simple (don’t worry, math-haters, we’ll help you get there with a step-by-step guide).
How to Calculate Your Member Retention Rate
Though there are more complicated formulas out there, we’re keeping it simple with a proven classic:
((ME-MN)/MS) x 100
Let’s break down the formula a bit for those of us who haven’t taken a math class in a while.
- 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
Step #1: Choose a Time Period
To calculate your retention rate, first identify the specific time period you’re focusing on. Perhaps you’re looking at the last year, maybe you’d rather just examine the last six months, or maybe you’re interested in quarterly or monthly retention rates. Either way, the formula is the same; it’s just your figure at the end that will vary.
Step #2: Check How Many Members You Had
Next, you need to know how many members you had at the end of that period of time. This number is represented by ME in our formula.
Tip: If you’re calculating your current retention rate, it might be as easy as determining how many members you currently have.
Step #3: Check How Many Members You Recruited
You also need to know how many new members you recruited during your period of interest, so that you don’t include them as retained members in your final retention measurement. This number is represented by MN in our formula.
Now you’re ready to do your first calculation: subtract your MN number (new members acquired during the period) from your ME number (members at the end of the period).
Step #4: Check How Many Members You Had at the Beginning
The final number you need to know is how many members you had at the start of your period of interest. This number is MS in the formula. For your next calculation, you will take the solution to Step 3 (ME-MN) and divide it by how many members you had at the start of your period (MS). This covers the first part of the equation: ((ME-MN)/MS).
Step #5: Run the Equation
Finally, you want to turn that number into a percentage by multiplying it by 100. Your final number is your member retention rate for the time period you chose.
See? That wasn’t so bad, was it? Now, to illustrate things even further, let’s look at an example.
Remember, our formula is ((ME-MN)/MS) x 100.
Member Retention Rate Example
Your membership organization started the year with 500 members. Over the course of a year, you gained another 50 members and lost 20.
Your time period = 1 year
- ME (Members at the end of one year) = 500+50-20 = 530
- MN (Members acquired in one year) = 50
- MS (Members at the start of one year) = 500
((530-50)/500) x 100
(480/500) x 100
0.96 x 100
Your organization’s member retention rate is 96 percent. Pat yourself on the back, that’s pretty good.
Now all that’s left to do is plug and chug your own numbers.
When you’ve calculated your retention rate, let’s talk benchmarks: What’s a good member retention rate to aim for?
How Do I Know What A Good Member Retention Rate Is?
While the percentage you’re striving for will depend on the goals and financial models of your membership organization, obviously the higher the number, the better.
In a perfect world, all our retention rates would be 100 percent, but history shows us that isn’t likely to happen due to forces both inside and outside of your control. Still, for most industries, shooting for above 90 percent is a great goal.
Why Should I Care About My Member Retention Rate?
Why spend time calculating your member retention rate? There are three main reasons, from our perspective.
1. Better retention means better ROI from your initial recruitment effort. You’ve already done the hard job of convincing members to join. Why waste that effort by letting them slip away after one year? The more engaged they are, the more they may contribute and spend, time- and money-wise, with your association.
2. Happier members means more members. Hopefully, if your members are sticking around, you can turn them into MVPs to advocate for your association to others, hitting your goal of member acquisition in the process.
3. Your retention rate is a signal for your organization. Your member retention rate reveals how well you’re engaging and providing value for your members. If it’s at 100 percent, then keep doing what you’re doing! If it’s lower, you know you’ve got stuff to work on.
How Can I Improve My Member Retention Rate?
They say knowledge is power and knowing your member retention rate is no exception. Once you know how you’re doing, you can start making plans to improve.
Improving member engagement is a tried and true method for increasing member retention and improving the member experience. Engagement tools help you maintain strong relationships with your current members.
With software like online community or marketing automation, you start building out behavioral data that can offer insight into which members are at risk of ending their relationship with your organization. From there, you can take steps to earn back their trust, attention, and business.
Editor’s note: This post was originally published in March 2014 by Joshua Paul. It has since been refreshed to make sure we’re giving you the latest and greatest.