Wednesday, February 10, 2010

Auto-renewal—Holy Grail or Holy Fail?

During my career working for and in associations I have heard regular conversation about how to get members onto an auto-renewal program. Fortunately I have worked at a few large associations (AARP, National Geographic and American Association for the Advancement of Science) where we tried really hard to make auto-renewals work. We knew there were obvious benefits in that you could better project membership numbers, save money by cutting down the number of renewals notices being sent and better project cash flow to name just a few. My experience showed it was a very tough thing to make work. Here is a little about why I am curious to know if you think automatic renewal is the Holy Grail or the Holy Fail.

There are two types of auto-renewal: 1) credit card auto-renewal where are member gives you their credit card number and allows you to hit it at some agreed upon time and 2) what I like to call bill-me auto-renewal where a member basically agrees they are going to renew so you then bill them for their membership instead of sending them a renewal notice.

I know that bill-me auto renewal might sound like you are just changing the name of what you already send from a renewal notice to an invoice but it is not. For whatever reason, getting people to commit and then sending them more of a "you committed to renewing" notice instead of a "please renew" letter has shown to increase response rates. There is a lot to think about as you implement auto renewal. Some of the biggest things include:
1) How obvious are you going to make what they are signing up for? For some time, orgs were basically hiding the details of their auto-renew program .Personally I think it is better to disclose to members that they are signing up for auto-renew so you lessen the number of complaints/questions you receive.
2) What sources are you going use to implement auto-renewal? From my experience it is much easier to introduce auto-renewal in retention activities as opposed to acquisition. Members seem to be more comfortable giving a credit card number to an organization they are already involved with and know and trust.
3) Are you going to use a link-letter? A link-letter is basically a short letter that reminds people they have signed up for auto-renewal and that you are getting ready to hit their credit card.
4) Is your system set up and ready for auto-renewal? Most systems can handle this these days but before you jump into it make sure your system is ready. 

Most of us now pay our cable bill, our newspaper subscription, our cell phone bill, our ISP and more by auto renewal yet getting people to agree to auto renewal for their membership seems to be a challenge. So do what you think? Is auto-renewal the Holy Grail or Holy Fail?


What is more important? What I say or what I do?

Test, test, test. That is the mantra of many traditional direct marketers. People like me believe that if you are not testing then you are not pushing the envelope in a way that allows you to make data based marketing decisions. Basically you are marketing in the dark and that is not beneficial for any organization.

Testing is a way to determine what will make your audience response. It is a way of listening to your audience so you can utilize that knowledge to attract more people in as cost effective manner as possible. Direct response tests, where the recipient is actually purchasing something whether it be a membership or a book or a meeting registration, provide the sender with actual potential purchasing behavior. This is great information to have because the sender can actually see what a recipient is willing to actually put money down to purchase.

In contradiction to this is trying to understand your audience through market research. Market research is very valuable so please do not think I am saying it does not have its place in any strategic marketing program. Ask my colleague Kevin Whorton if I know the value of market research, and I know we will agree. One of the shortcomings of testing potential purchasing behavior through market research methods such as surveys and focus groups is that it is primarily theoretical and there can be inherent biases. Participants are not asked to literally plop down a credit card, check or cash, so their actual purchasing decision may be different than if they were to literally "feel the pain" in their pocketbook or wallet. Participants may also be biased in that they want to provide a "strategic response"—they will try to tell you what they think you want to hear, not what they would actually do. This could be due to peer pressure, personality traits, or many other things that could lead to their not being 100% accurate in their response in the research study.

I will never forget an example from one of our CAM groups at a focus group the client association sponsored a few years back. The focus group was designed to help a publisher better understand what type of magazine participants were most interested in purchasing. The facilitator put out a wide range of magazines for attendees to review, ranging from “trashy” to “intellectual” magazines. During the focus group almost all participants said they would most likely read the more intellectual publications. At face value this could be very valuable information and a good predictor of future purchasing behavior. Before attendees left, they were told they could take any magazines home with them that they wanted to read later. Almost every person took the “trashy” magazines they just said they were not interested in reading. This is a great example of the bias inherent in some research that you should be aware of.

To me both ways of getting at customer/member/purchaser preferences are valuable. As long as we understand the type of information we are receiving, and know how to combine them to get a complete picture of current and potential purchasers, then we are headed in the right direction. Do you agree?