The cost per new member is how much it costs your organisation to recruit each new member.
It's useful to know, because it tells you how much it's worth spending to recruit each new member, and how much surplus is available to the organisation to invest in the things the members want, or that can otherwise advance your organisation's purpose and agenda.
In basic terms, the direct cost per new member is calculated by taking the total direct cost of your member recruitment work per year, and dividing it by the number of new members you get per year. For example, if you employed ten membership recruiters that each cost you $100,000 per year, then your direct cost of recruitment is one million per year. In the very unlikely situation where you got one million new members in that year, then each member would cost one dollar (just to show how the sums work).
If you got 100, 000 new members per year, then each new member would cost $10 (again unlikely). If you got 1,000 new members per year, then each new member would cost you $1,000. If you got 500 new members, then they would cost $2,000 each.
Obviously, the same calculation applies no matter what type of recruitment you are doing.Â For example, if you had five offline (face to face) recruiters, and five online (social media) recruiters, then the cost is the same.
You can also argue about how many overheads to include or not. I am talking initially about direct costs like salary, super, car, long service leave, and work injury insurance. That's where the $100,000 direct cost per worker comes from. The rule of thumb used by most organisations is that the indirect and additional cost of employing anyone is between 50% and 300% of the direct cost. This covers their management, support, resources, rent, and other normal expenses of running an organisation.
So the total actual cost of recruitment is actually much higher than just the direct cost. An average rule of thumb is to say the direct and indirect cost of a worker is twice the direct cost.Â So if the direct cost per worker is $100,000, then the total of direct and indirect cost is $200,000. Rather than argue about it, I suggest you calculate a few different scenarios, such as the best and worst case.
My point is that if you assume that the total cost is double the direct cost, and you are recruiting say 1,000 per year with a direct and indirect investment of two million (twice the direct cost), then your cost per member is $2,000 each!
On average, I find the scale of this figure is under-appreciated by membership organisations, or in any media commentary on the issue. I call it the political economy of membership.
The amazing thing is that this may still not drive you broke (even though it's not good). Your situation depends on how long they stay, and how much the members pay in the member fees per year.Â For example, if members pay you $500 per year (or $41 per month), and stay an average of 5 years, then on average they pay you $2,500 over their so-called membership "life-cycle". You make $500 surplus to spend on what you do for the member... whether its micro or macro activity.
Clearly, the above is a bare bones or break even situation (because you have to at least allow for some cost to servicing the new member, and communicating with them). To improve it, you either need to recruit more effectively, charge more for your membership, or reduce your overheads... or all of the above. I see many organisations with this situation on their hands. Effectively using some good training to improve the rate of member recruitment is one of the various solutions to the problem.