WHITE PAPER TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION

WHITE PAPER TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION Erik Schonher Senior Director Marketing General Incorporated PAGE 2 WHITE PAPER—TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION SPRING 2008 ARE YOU LOOKING AT THIS RECESSION AS A “HILL” OR A “CHANCE TO WIN?” Lance Armstrong, a world-class cyclist, loved hills when he competed. Why? Because that’s when his competition would be most vulnerable! Approaching a hill, other riders may have been distracted by concerns about the hill, their strength, the weather…whatever. Most importantly, some would emotionally drop out of the race which gave Armstrong a chance to win. He looked forward to hills, understood the challenges, and incorporated them as a tool in his winning strategy. Are you looking at this recession as a “hill” or a “chance to win?” It seems that every day when we pick up a newspaper, watch TV, or read a blog, we’re terrorized by the horrors of an imminent recession. While our depressed economy most likely will not be ‘good’ for many, it certainly will not be bad for everyone and there will be those who take advantage of the unique opportunities that a weakening economy can bring to an association. To cope with these troubled times, there are several factors that membership marketers should keep in mind as they refine their current strategies and prepare their strategic and tactical plans for the next two years. WHEN PEOPLE ARE LESS CONFIDENT IN THEIR JOB STABILITY, THE MORE INTERESTED THEY ARE IN ASSOCIATIONS. 1. BAD NEWS, GOOD NEWS. Bad News: Cutback expenses; greater concern on stability; increased scrutiny over price-to-value proposition. Good News: One, at a time when people are less confident in their job stability, the more interested they are in joining associations. Two, it tends to be a time when people invest more in credentials and education. Three, it pushes associations to evaluate and assess if they are providing what is more important to their members and delivering it in a way that makes the association indispensable to their members’ success. CONSUMER SPENDING WILL CONTRACT AS THE VALUE OF THEIR LARGEST AND MOST IMPORTANT ASSET SHRINKS. 2. UNDERSTAND WHAT’S GOING ON. The economy works in a cycle that has four basic phases: expansion, prosperity, contraction, and finally…recession. These four phases tend to occur in 10-year periods. A recession happened in the previous cycle around 2001, and the one before that around 1991. Scott Briscoe, in his article for the April 8, 2008, issue of Associations Now, points out that there is typically a “trigger” that economists believe causes the recession phase and this is the same force that causes growth in the first place. As for the recession we currently face, the severe fall in real-estate values is identified as Briscoe’s trigger. This takes on more serious impact when Briscoe cites David Heuther, chief economist for the National Association of Manufacturers, that “consumer spending accounts for 70 percent of the economy….” Since home ownership is considered the primary investment for many Americans, it is no wonder that consumer spending will contract as the value of their largest and most important asset shrinks. SPRING 2008 WHITE PAPER—TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION PAGE 3 3. EXAMINE WHAT IS CRITICAL TO YOUR MEMBERSHIP AND DELIVER WITH A PASSION. John Langan reported that “members look to their associations more in times of economic uncertainties….” Therefore, associations should assess the information vacuum experienced by their membership, prospects, and stakeholders. As an association executive, you should determine how you can fill this vacuum and satisfy their information needs. Depending on the benefits you provide to your membership, this could honestly be the best time for you to promote membership and increase retention. There are many ways to find out from your membership the information they use: through your website, a simple member-based survey, small test offers you think provide a compelling Unique Selling Proposition, or a series of questions member services representatives can ask members when they call in, to name a few. As always, the more refined your information is by subgroup within your membership, the more effective and efficient your acquisition and retention efforts will be in accomplishing your goals. Therefore, you may want to consider further investment into understanding the buying behavior of your members by analyzing your database. MEMBERS LOOK TO THEIR ASSOCIATIONS MORE IN TIMES OF ECONOMIC UNCERTAINTIES. THIS COULD BE THE BEST TIME FOR YOU TO PROMOTE MEMBERSHIP. 4. KNOW YOUR MOST IMPORTANT MEMBERS. We briefly mentioned the use of data-analytics to refine your marketing initiatives and increase the revenue impact of your promotions. Tony Rossell, Senior Vice President with Marketing General Inc., wrote in his blog that “past behavior is [the] best predictor of future behavior. So modeling should come more into play in getting and keeping members.” He continued with an actual example: “In a recent acquisition model that we [MGI] ran, we found that we would get 80 percent of the members by mailing only 20 percent of the prospects. In the chart on page four, the X-axis is the percentile of the prospect database and the Y-axis represents the percent of the members gained. The solid black (Neural Net1) line would be the results without the model.” Modeling can help you to refine your product offerings to your membership and expand revenue within your membership. Expansion in your core market (your membership) is basic to the survival of your organization. WE FOUND THAT WE WOULD GET 80 PERCENT OF THE MEMBERS BY MAILING ONLY 20 PERCENT OF THE PROSPECTS. PAGE 4 WHITE PAPER—TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION SPRING 2008 C5 1 100 Neural Net 1 80 Logic Regression CHAID 1 60 % Gain C&R Tree 1 QUEST 1 40 20 0 0 20 40 Percentile 60 80 100 INCLUDE YOUR LAPSED MEMBERS AND YOUR NON-MEMBER BUYERS. 5. GO AFTER YOUR LOW-HANGING FRUIT! This would include your lapsed members and your non-member buyers. They’ve already expressed an interest in your association, so now is the time to convey how important membership is for their own success in a difficult economic environment. 6. MARKETING IS A STRATEGIC ISSUE. UNDERSTAND HOW THIS AFFECTS YOU! Once you’ve identified these information needs and the urgency felt by your membership, you can begin to evaluate your plan, products, pricing, promotion channels, delivery mechanisms, and profitability. Writer Glenn Gow noted an example of this: “In the last technology downturn, software companies became very creative in their pricing schema, creating many variations of software as a service (SaaS) that enabled them to sell when their competitors were stuck in an old paradigm.” THE ECONOMY HAS CHANGED AND THIS MAY HAVE HAD AN IMPACT ON MEMBER BUYING BEHAVIOR AND ENGAGEMENT. First and foremost, check your benchmarks! During the months since you’ve put your plan together, the economy has changed and this may have had an impact on member buying behavior and engagement. No doubt, you will want to keep closer tabs on your monthly membership numbers and the effectiveness of your conversion and renewal programs so you can head off any potential problems as this “economic downturn” progresses through your marketplace. If you are struggling with what to measure, Rossell wrote in his blog that “one measurement tool…not fully utilized in the membership area is benchmarking. Five key benchmarks for a membership program should be captured each month and can be SPRING 2008 WHITE PAPER—TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION PAGE 5 presented on a single sheet of paper in what is called a Membership Dashboard.” These include: 1. 2. 3. 4. 5. Current Member Total Current Year New Members Conversions Y2+ Renewals Total Renewals Rossell continued by highlighting the additional metrics essential for every membership marketing professional: ● ● ● Average Tenure: Reciprocal of renewal rate/1 Lifetime Value (LTV): Dues plus Non-dues Revenue times Average Tenure Maximum Acquisition Cost (MAC): (Dues plus Nondues Revenue) minus (Incremental Servicing Costs plus Costs of Goods Sold) times Tenure 7. SECURE YOUR BUDGET! John Quelch, professor of business administration at Harvard Business School, wrote in a recent article that “it is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times.” Remember that marketing is a strategic issue and anything that impacts strategic initiatives must be well thought out and not subject to decisions driven by immediate and temporary fear and/or panic. When talking with your CFO, if you can’t measure it, don’t do it! The best way to protect your budget is to show concretely that what you spend drives revenue or ROI. If you can prove ROI, your conversation with the CFO becomes much less complicated. That’s why many organizations are stepping up their use of direct marketing. In a Special Report from MarketingSherpa, “30 percent of survey respondents [companies] said they are increasing direct marketing investments this year in response to economic conditions.” This holds true for association marketing as well. Direct mail, telemarketing, and online marketing offer you the ability to accurately target, carefully track, and precisely measure the effectiveness of your marketing. This equates to proving ROI, and that ultimately makes your life better, not only defending your budget, but also revising your budget and moving promotion-dollars to initiatives that you know provide a profitable ROI. If you must trim spending, try to maintain frequency by using alternative channels to deliver your message. This can open up new REMEMBER THAT MARKETING IS A STRATEGIC ISSUE. PAGE 6 WHITE PAPER—TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION SPRING 2008 opportunities for you through new partnerships with other associations, industry stakeholders, your regional groups, and a host of others. 8. MEDIA Don’t lose focus on your members’ needs and wants for the sake of saving money! Sure, many associations have moved to online publications saving tremendous sums; but, if their members are not net-savvy, then they’ll lose membership. Keep using the media that your members and industry accept while ramping up your testing of alternate channels to deliver your messages. In review, there are three media most commonly used by associations that are trackable: direct mail, telemarketing, and online marketing. THE BEST CHANNEL FOR ASSOCIATIONS TO PROMOTE MEMBERSHIP AND SALES OF PRODUCTS AND SERVICES. Direct Mail Direct mail is still the primary channel associations use to communicate with their membership (The Decision to Join, ASAE & The Center, 2007). In our experience, it is also still the best channel for associations to promote membership and sales of products and services. With ever increasing database technology mailers have the ability to deliver personalized messages directly to their members and prospects. Continued advances in print-on-demand technology are further driving costs downward, opening up a plethora of creative and truly unique promotional opportunities for marketers. When promoting a $175 annual membership to 10,000 prospects at $1.00/piece for a total cost of $10,000, an association only needs to acquire 58 new members, or a response of .58 percent—that’s less than one percent! When you look at lifetime value (LTV) of these members you realize that this “annuity” will potentially deliver an ongoing return for several years. Telemarketing As trackable as direct mail, telemarketing is more expensive. But, you can realize an average of up to 10X greater response. And, unlike direct mail, where you must wait sometimes as long as six weeks to learn if an offer is working, given the dynamic presentation opportunities of this medium you have the opportunity to test and modify offers and messages throughout a campaign. This could save you money in the long run. ASSOCIATIONS CAN SUBSTANTIALLY INCREASE THEIR RENEWAL RATES BY USING TELEMARKETING EFFORTS. It also allows the association the opportunity to deliver a more personalized touch, which for some members may provide the difference between spending their money with that association or not. At MGI, we’ve found that associations can substantially increase their renewal rates by using telemarketing efforts. SPRING 2008 WHITE PAPER—TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION PAGE 7 Online Marketing As cited by MarketingSherpa in its recent study, “38 percent [of the companies surveyed] are increasing online investment….” Deeper into the study, MarketingSherpa reports that “…more than half [53 percent] of respondents are investing more in email marketing to house lists…. Likewise, 47 percent are increasing spending on Web 2.0 strategies….” Given its trackability, low cost, and ease of implementation, online marketing has proven to be a powerful promotional tool when used in combination with direct mail either before receipt of direct mail alerting prospects to the coming package or after delivery as a follow-up reminder. ONLINE MARKETING HAS PROVEN TO BE A POWERFUL PROMOTIONAL TOOL WHEN USED IN COMBINATION WITH DIRECT MAIL. 9. KNOW YOUR CAPABILITIES. A recessionary market has proven to offer great opportunities to associations that are ‘entrepreneurial’ by nature with little bureaucracy and, as noted by researchers Raji Srinivasan, Arvind Rangaswamy, and Gary Lilien, “view recessions as opportunities and exploit that perceived opportunity with aggressive marketing programs.” Some associations are very ‘siloed’ in their internal structures, with departments duplicating among talents that other departments possess with very little cooperative marketing occurring among them. This duplication and lack of cooperative effort eats away at profits. But I don’t think it’s wise to change your overall structure during this economic downturn because that may cause your organization to focus on the change when they should be focusing on the market. If your organization is like this, an option may be to create a “skunk-works” of entrepreneurial-minded people who can come up with ideas and work with an external group to implement them. CREATE A “SKUNK-WORKS” OF ENTREPRENEURIAL-MINDED PEOPLE WHO CAN COME UP WITH IDEAS AND WORK WITH AN EXTERNAL GROUP TO IMPLEMENT THEM. 10. TEST…TEST…TEST! Now, more than ever, it’s important to think of new ways to market that you can accurately track and are scalable and financially viable. This may include not only test mailings, telemarketing, and online marketing, but also exploring new partnerships that share work with other associations. Possible test ideas include: ● If you’ve mailed to a list that has a good response rate, mail to the same list again within 30 days. Odds are that you will receive 50 percent of the first mailing’s response rate. Response rates to “odd” priced goods beat “even” priced goods. The most powerful word in direct marketing is “FREE,” especially in a recession. Piggyback—ask your vendors if your orders can be run on the back of larger orders which could save you money. Coupons may provide a lift to your response rates. ● ● ● ● PAGE 8 WHITE PAPER—TEN TIPS FOR MEMBERSHIP MARKETING IN A RECESSION SPRING 2008 WHAT’S MOST IMPORTANT IS THAT YOU LOOK OUTSIDE THE BOX. There are lots of ideas, and I urge you to talk with your vendors about what other association marketers are doing. What’s most important is that you look outside the box you normally work within and consider ideas that at one time would never have even made it to the table for discussion. CONCLUSION. There are lots of ideas, and I urge you to talk with your vendors about what other association marketers are doing. Keep your head and don’t abandon your plan! Your current plan should have well thought out strategies and tactics based on data you’ve collected and analyzed with your team’s expertise. Simply step back and evaluate if and how it is affected, then build new tactics that compensate for potential problems and that take advantage of new opportunities. Also remember, as we said at the beginning, the economy is cyclical, so now is the time to prepare for the next phase in your business cycle. If business is down, it will go up. And if business is up…well, you know the rest. Good luck! REFERENCES Surviving, or Even Thriving, in Tough Economic Times, John P. Langan, Executive Update, October, 2001 Dealing with the Economic Downturn, Gerry Romano, Association Management, November, 2001 Tony Rossell, Senior Vice President, Marketing General Inc. When the Bubble Bursts, Scott Briscoe, Associations Now, April, 2008 Marketing During a Downturn, Part 1 – 10: Insights Into How Marketers Are Handling the Slump, MarketingSherpa, 2008 Turning Adversity into Advantage: Does Proactive Marketing During a Recession Pay Off? Raji Srinivasan, Arvind Rangaswamy, Gary L. Lilien, International Journal of Research in Marketing, 2005 Marketing Your Way Through a Recession, John Quelch, Harvard Business Online, March 3, 2008 5 Tips for Marketing in a Recession, Glen Gow, January 29, 2008 209 Madison Street, Third Floor Alexandria, Virginia 22314-1764 703.739.1000 www.MarketingGeneral.com Erik Schonher is a Senior Director with Marketing General Inc. He has more than 20 years of experience as a marketing and sales entrepreneur and in leadership positions with major corporations and publishing houses. Erik can be reached at 703.706.0358 or at ESchonher@MarketingGeneral.com. Click here to view more articles by MGI.