Grace Periods for Membership Renewal: How Long is Too Long?

Today on an ASAE listserv thread, there was discussion about the length of grace periods, and whether or not members who pay after the grace period are reinstated or considered "new."

I used my experience as a Board member of American Independent Writers (AIW) in my response:

"Formerly, we had a 90 days grace period. Last year, we changed it to 15 days. After that, all communication and information is suspended (along with member rates).

We found that having a 90 days grace period seriously skewed our membership report numbers, making it look like we had twice as many members as we actually did because those in the "grace period" were counted as members in good standing. This negatively impacted retention rates, and further eroded our membership base because we had bad information.

Since switching to 15 days, we have had no real complaints, and it encourages our members to renew more promptly. When you look at it from a fiscal perspective, a 90 days grace period gives people an extra quarter of membership for no additional dues, without rewarding those who are paying on time.

The perception of AIW's membership value was severely eroded because of detrimental policies like these. We are now working double time to rebuild value perception for membership. I support up to 30 days to renew, but beyond that causes problems financially and erodes data quality."

I was surprised to see how many organizations have a 90 day grace period, and now I'm starting to wonder if this is having a stronger detrimental impact now that the economy is in such bad shape. 

What it comes down to for me is that members who pay on time should rewarded, and those who do not pay should be strongly encouraged to pay promptly. An entire quarter of membership becomes an incentive to not pay your dues, and if the organization doesn't think their membership has value then why should a member?

Let's continue the discussion here; share your comments and thoughts on grace periods and the impact on the bottom line and member value.  

Comments

[Belinda Busoli]

Great topic! It seems to be a bit of a hot issue at the moment. So here's my 2 cents ...

For many members, the decision to renew or not to renew has been made well before the renewal is sent out based on their experience with the association throughout the year. Renewals themselves are simply a referendum on member satisfaction.

However, the way in which you set up your renewal process can still have a significant impact on your retention rate. In particular, long grace periods can be problematic. If you continue to provide services to a member after their membership has lapsed it does you very few favours.

At the very minimum, you are conveying to a member that they can still get services even without paying. It rarely appears as a generous gesture. More often it comes across as the association being lax in keeping up to date with membership statuses. At worst, word gets around and members start rorting the system and lose respect the association in the process.

A well put together renewal process can abolish the need for all but a small grace period and effectively convey the perception of your organisation as a professional, proactive and efficient organisation.

First of all, it is necessary to give members ample opportunity to renew prior to their membership lapsing. Start sending renewal notices out about three months before the membership lapses. Give member as many opportunities to rejoin as possible before the expiry date.

For example, if a members' expiry date is June 30 the process would be:

* February - Member details update - contact members to get their details update. This is particularly appropriate if your pricing model is based on information sourced by members. Provide an incentive to respond by the end of the month.
* 1 April — Renewal Notice - include an incentive to renew. You may want to put an explanatory note on the early renewals – such as “This renewal notice is a little early. By sending it out early we ensure that those who need to budget for the payment have ample time to do so. We do appreciate early payment as it assists us to budget for member services.”
* 1 May — Reminder Notice
* 1 June — Urgent Reminder Notice - including notice that service provision is about to cease.
* 30 June - Membership expiry date
* 1 July — Friendly phone call to member to see what's happening and advise that service provision is about to cease.
* 15 July — Resigned Notice and cease provision of all services

Members who do not renew should not be deleted from your mailing list unless they are no longer a valid prospect for membership. All resigned members should go straight back into your prospect management process because they have become prospective members once again - although be sure to tag them so they can be treated differently.

Some of the most successful membership campaigns I've ever run have been into resigned member lists. A resigned member doesn't need to know about the history of the organisation, the total range of services or the type of events you run. All a resigned member needs to know is what's changed since they were members.

Marketing to former members is so successful that it should be planned into your renewal process. Consider adding in a process 6-8 months after the member has resigned where they receive a "We want you back" email or letter followed by a personal phone call. Of course, campaigns such as this will only be successful if they are not still on a grace period and receiving services like several associations I've recently come across.

[Cecilia Sepp]

Hi, Di.
Thanks for posting this very practical question.

This is a challenge for all membership departments, especially since it is not the individual member's decision of when to pay (if the company pays the dues).

Since we want to provide good member service, we have to work with our members and not against them. In situations where it is known that the company has 60 or 90 day terms of payment, it is best to send the dues invoice to coincide with this schedule, rather than invoicing just one month prior to expiration.

When I was a membership director, we used to send out three invoices via US Mail: 90 days prior to expiration, 60 days prior, and 30 days prior. Then, a fourth notice indicating that membership had expired -- which usually got the dues paid!

However, in these economic times, most associations are trying to save money and conserve resources.

Sending electronic invoices at these marks would help to resolve the issue, and then following up with a fourth paper notice via US Mail with the expiration notification.

What it comes down to is that at some point, dues have to be paid, despite the payment rules of a given organization.

However you decide to schedule invoices, I suggest you keep in mind two things:

1) Reward the members who pay in a timely fashion; and

2) Don't give away a whole quarter of membership!

I'd like to hear other people's suggestions for dealing with dues payments and accounting departments.

[Di Thomas]

It concerns me that many members have their subscriptions paid by their companies, who often have 60+ or even 90+ payment terms. Any suggestions on how to combat this? We already invoice a month ahead of when the subs is due.

[David M. Patt, CAE]

I like your suggestion - I was actually expecting to read the opposite. If you offer value, people will want to re-up to keep receiving that value.

Perhaps, it's the associations that don't offer enough value that keep members on the rolls for too long, as if letting them go would hurt the association more than the member.