We love it when companies get how important member retention is. But exactly how do you calculate the membership renewal rate?
One of the most important details to get right with your membership website is calculating an accurate membership renewal rate. So, in this article, we’ll explain and give you the tools for you to be able to accurately calculate your membership renewal rate.
How Do You Calculate Membership Renewal Rate?
To calculate your membership renewal rate, simply follow the steps below:
- Define the Time Period: You first need to determine the time frame for which you want to calculate the renewal rate. This could be monthly, quarterly, or annually, depending on your membership model.
- Count Your Total Members At The End Of This Period: Calculate the total number of members you have at the end of this same time period. This typically includes members whose membership is up for renewal.
- Count Renewals: Count the number of members who renewed their membership during this defined time period.
- Count Your Members You Had At the Start: The last figure you need to know is how many members you had at the beginning of your defined period.
- Calculate Your Renewal Rate: Minus the new members from the number you have at the end of the period, then divide this number of renewals by the total members you had at the start. Finally, multiply by 100 to get the percentage.
For example, if at the end of the year, you had 200 members, but you recruited 20 new members, and started the year with 190 members your membership renewal rate would be 95%.
What Is The Formula For Membership Renewal Rate?
The formula for your membership renewal rate is the following:
(ME – NM)/SM x100
Where the following definitions apply:
- ME stands for the total members at the end of a period of time
- NM stands for new members who signed up during this period of time
- SM stands for the members you had at the start of the period of time
So if you stick with our example you get the following:
(200 – 20) / 190 x 100 = 94.74% (rounded off to 95%)
The percentage you are aiming for will be unique to your membership website and will depend on your goals, content, and how you keep your members engaged. However, as a measurement of how successful your model is, anything higher than 75% signals a strong renewal rate, suggesting your members are more likely to stay in the long run.
How Do You Calculate Net Renewal Rate?
Net renewal rate factors in both renewals and the number of members who should renew to provide a more comprehensive view of membership retention.
Here’s the formula:
Net Renewal Rate = MR / TM x 100
Where the following applies:
- MR denotes the number of members who do renew
- TM stands for the total number of members who could renew
Divide the number of renewals by the total number of members at the beginning of the period and multiply by 100 to get the percentage. This metric helps organizations understand the overall health of their membership base. The closer to 100% means most, if not all, of your members renew.
Read next: What Is A Good Membership Renewal Rate?