How Much is a New Member Worth?
By Kevin Carter
This paper describes a study to determine how much value a croquet club should put on a new member.
The need to do this was born during 2000, when Tony Fathers, chairman of the CA Marketing Committee, said that 'clearly £3000 should not be spent on an advertisement campaign which only generated ten new members'. This sounds intuitively right, but what if the cost were £1000 - is £100 per member good value? Or if £3000 generated 50 new members - is £60 per member good value? It would be useful to both the CA and clubs to know the answer.
Many might disagree with an approach which regards croquet and each club primarily as a business, with income, expenditure, margins and profits (or losses!). There is far more to it than that, but it is sometimes useful to measure one special aspect of 'the business' in isolation.
Variable Income, Fixed Expenditure
When a club recruits a new member it will have income from subscriptions, club tournament fees, perhaps catering and a bar and possibly other sources. These sources of income are mainly 'variable' - in direct proportion to the number of members.
However, most of a club's expenditure is 'fixed'. Leasing land, maintaining lawns and a clubhouse, etc. are, in the main, independent of the number of members. A club will need a minimum number of members to cover its fixed costs and most income above that will be 'profit'. Now, we know that clubs plough back this 'profit' into developing new or better facilities, but in a business sense that reserve is still effectively bottom-line profit (or technically 'net operating margin').
If we understand better this relationship between income, expenditure and membership we shall be able to put a value on an incremental new member. This will, in turn, assist in justifying where effort is put and how much is invested to attract new members into clubs.
Secretaries and treasurers of sixteen clubs helped to provide data for this exercise and we are very grateful to them.
Most croquet clubs are independent and are seeking to increase their membership. This is where the net value of an incremental new member is at its highest and it is this model which we concentrate on. There are, however, others. When a multi-sport club has a croquet section most of the income will probably go into the running of the whole entity, and so the benefit 'to croquet' will be less obvious. It is interesting that some examples of clubs operating like this, such as Sidmouth and Winchester, are very successful at recruiting members, not only because of very good, shared facilities, but also they are motivated to recruit in order that they 'compete' for space and attention among the other sports.
Other financial models occur when a club's expenditure is directly linked to the number of members - such as Ealing and Crawley, which pay their council landlords a rent based on membership numbers, and when a club is full, such as Bristol or Bowdon, where this is less financial incentive to recruit.
We found that the number of members per lawn is generally in the range 10-20. Below ten is barely viable and it is generally reckoned that 25-30 members per lawn represents maximum capacity. So, most clubs are looking for new members.
In our survey we found that total income per (playing) member averages £192, but varies greatly, from £120 to £280 per year. Members' subscriptions averaged £112 pa for a playing member and subscriptions generally represent between 40% and 70% of a club's total income. Fees for tournaments and catering/bar profits, usually made up most of the balance. The proportion of total annual income which is related purely to the number of members averages £122 and is generally in the range £80 to £180.
On the other hand, expenditure, is mostly fixed - that is unrelated to the number of members. The lawns still have to be cut, the pavilion painted, the rates paid, whether there are two or two hundred members. Indeed, expenditure on maintenance averages £1700 per lawn.
Total expenditure per (playing) member (excluding capital investments) averages £152 and is usually in the range £100 to £200. However, the proportion of expenditure which does vary with the number of members is very small, averaging only about £8 per year.
The 'Value' of a New Member
So, these figures together tell us that, on average each year, an incremental new member is worth £122-£8=£114 per year to a club (in terms of 'net operating margin').
If we look at this in a purely business sense - as, say, a mobile phone company might regard this information - we know that each year we shall lose a few customers (members), so we are interested in the average period we keep them and in the income (or, technically, the 'net present value') over that period.
The typical membership profile of a club shows that once members have tried croquet and decide to join a club, most then stay for a very long time (as one of our respondents put it 'for 10, 15 or 20 years or until they die'!). Our calculations, taking into account all reasons for resigning from a club, show an average period of membership of 8-10 years.
However, let us be conservative and take into account only the first five years of membership, but, for simplicity, ignore inflation and the cost of money (technically the 'discount rate'). Five years of an average financial benefit of £114 pa gives us £570. This is a crude but justifiable calculation for the value of a new member to a typical club. Perhaps Tony Fathers' £3000 advertisement campaign bringing in ten new members would not be bad value after all....
The Value of This Data
But, what is the practical use of this analysis? First and foremost it is to be hoped that clubs will take on board just how valuable new members can be. Not all have a proper recruitment drive each year, not all have a committee member specifically responsible for recruitment, and certainly many are not prepared to invest significantly - either money or time - in recruitment activities that will yield this massive return. For instance, how many clubs are putting aside a weekend in the Spring to borrow the CA mini-carpet? How many will offer members a significant incentive for introducing a friend who subsequently joins?
Let us delve a little deeper. Marketing activities do not directly produce members; they produce enquiries. Then there is a conversion rate, of enquiries to members, which depends upon many factors, not least the welcome they are given, the quality of coaching and how well new members are integrated into the mainstream club.
In our survey we found a wide range in the ratio of enquiries to joiners - from 30% to 70%! It is notable how well those with a high conversion rate manage their enquiries. Those that do not generally have a good reason; for instance: 'we cannot find anyone who is prepared to take on coaching'. Well, if a new member is worth £570 why not hire a coach to run weekly sessions? It might cost, say, £500 in a season. So what, if it brings in three, five or ten new members?
Then, some clubs still adhere to this strange practice of charging a 'joining fee', on top of the first year's subscription. When one secretary was asked for its justification his answer was just: 'we have always done it'. Isn't about time we dismantled barriers to recruiting new members?
The overall conclusions to this exercise are that it will pay clubs to re-examine their attitude to recruitment, to re-evaluate - in the light of our findings - the financial benefit of each new member and to become more business-like in the execution of their marketing activities.