Automatic Renewals: Realistic or Too Good to Be True?
Associations appear optimistic that automatic-renewal billing could boost retention rates and reduce workloads, but a variety of hurdles may make broad adoption hard to attain.
In an ideal world, members would stay forever. Once they joined, they’d always renew, and associations wouldn’t have to spend 10 to 20 percent of their membership marketing budgets on renewals. What a wonderful world it would be.
If you poke around on ASAE’s Collaborate discussion forums, you might suspect that a lot of associations are hoping to make that dream a reality through automatic-renewal billing. (See here, here, here, here, and here—ASAE member login required.) And why not? Behavorial economists and marketers alike know opt-out is way better than opt-in. (Just ask Austrian organ-transplant recipients.) Getting your members to hand over the keys to their renewal decision every year sounds like some kind of association Shangri-la. But is it realistic or a pipe dream?
That’s what I wondered before exploring the topic of membership auto-renewal for the November/December issue of Associations Now. Indeed, auto-renewal via credit card is on the rise in associations, as shown in benchmarking data from ASAE and Marketing General Inc. About 25 percent of associations offer automatic-renewal payment via credit card in 2013, compared to 6 percent in 2006, and those that do so collect about 15 percent of their dues, on average, via automatic billing.
But I’m bearish on how far associations can go with automatic-renewal billing. A list of complicating factors makes me think the upper limit may be lower than we might might hope:
Payment method. You can’t set up automatic credit-card payments if members aren’t paying dues via credit card in the first place. ASAE’s benchmarking data shows that the average portion of associations’ dues collected via paper check was still 43 percent in 2012. You’d have to wean these people off checks first. (Though there is an alternative: The “bill me later” model, in which the member is automatically renewed and invoiced each year unless the member withdraws. See the membership application [PDF] of the American Galvanizers Association for an example.)
Payment authorization. Employers’ financial support of their employees’ memberships in professional associations (or organizational memberships in trade associations) is a positive for associations, but it may be a barrier to automatic-renewal payments. It’s doubtful that many companies are keen on permitting employees to set up automatic payments on company credit cards. Or, members who pay with their own cards and get reimbursed may worry about future cuts to professional-development budgets beyond their control. ASAE’s Decision to Join studies found that 40 to 45 percent of association members are reimbursed for their dues; that figure at your association may vary, but it’s likely a significant portion of your membership.
PCI compliance. Following payment-card-industry security standards is already a necessity for processing one-time credit- and debit-card payments, but storing those numbers for future use is an additional layer of complexity and security to establish.
Technology versus human management. In the words of Ron Popeil, “Set it and forget it!” That’s part of the allure of auto-renewal, and, fortunately, many association management systems and e-commerce platforms have developed automatic billing features, but that may not equate to a decreased workload. As Desri Lashley-Rogers, member services operations manager at the American Urological Association, told me, overseeing its auto-renewal program adds an extra step during renewal time for one of AUA’s membership staff. Much of that comes from following up with members whose cards either expire or become invalid for other reasons. Lashley-Rogers estimated that about 25 percent of the cards on file in its most recent auto-renewal round were expired or found invalid.
Convenience isn’t a leading motivator. Research from NACHA—The Electronic Payments Association shows that direct payments via electronic transfers and recurring direct billing are rising in popularity, but consider the types of payments people are most likely to automate: monthly utility bills, rent, insurance, and so forth. These are all frequent and steady bills that are both a chore to pay manually every month and unlikely to change over an extended period of time. In other words, you don’t make a decision every month whether to renew your electricity supply. Association membership, on the other hand, is a more discretionary purchase, and all but the most loyal members will likely prefer to have a yearly, conscious decision point on whether to continue as a member.
Trust (or the lack thereof). As tech-enabled as the world has become, we are increasingly concerned about privacy and all the various ways it can now be infringed. For an association to ask members for permission to automatically handle their money is to ask for a high level of trust, and it must come with clear assurances of exactly what will and won’t be done with the member’s info. (State laws may even make specific requirements about such disclosures.) A lot of people have been burned in the past by shady automatic-payment schemes or have heard horror stories from others. No doubt your association is a trustworthy organization, but many consumers may simply have a psychological barrier to automatic payments that is too high to overcome.
So, where is the ceiling on automatic dues payments? Could the industry average for dues revenue collected through automatic payments climb from 15 percent to 25 percent, or to 40 or 50? Or is it likely to stay low? With just a quarter of associations even offering the option, it’s too early to know, but it will be an interesting benchmark to watch.
If your association offers automatic renewals, how has it affected your renewal rates and staff workload? And how high have you set your goals for adoption? Please share your experience in the comments.