Influx Metric: Cost to Acquire Member (CAM)
The achievements of an organization are the results of the combined effort of each individual. – Vince Lombardi
Influx Metric #5: Cost to Acquire Member (CAM)
Here is the next article in our series of ‘Influx Metrics’. The series covers the metrics that help you analyse your business data. This article introduces the Cost to Acquire Member (CAM), and builds on metrics covered in previous articles, which you can find here:
- Influx Metric: Retention
- Influx Metric: Average Revenue per Member
- Influx Metric: Customer Lifetime
- Influx Metric: Member Lifetime Value
What is the Cost to acquire member (CAM)?
CAM is the average cost to the business for each new member to join your gym.
Why is it important?
CAM helps you assess your marketing efforts, and is needed to compare the average benefit each member brings to the gym with the average cost to get them.
Understanding this cost versus benefit of each member is crucial in understanding your business finances.
How do you measure CAM?
Let’s imagine over a month you spend the following on marketing:
- $6000 on a full time marketing person (staff costs)
- $500 on an advert in a local newspaper
- $500 in cash to members for referring their friends (five lots of $100)
- $1500 for a new sign outside your gym
- $500 rent on a billboard a few blocks away from your gym
- Total cost: $9,000
Note: we don’t include ‘fixed’ expenses in this amount – for example fixed staff costs, power, buildings (rent or mortgage), cleaners, admin staff, or any staff costs you would have to pay for regardless of any marketing.
Let’s assume over this month that 20 new members joined.
We can now calculate our CAM for the month:
CAM = $9,000/20
This means, that it ‘costs’ the business $450 for every new member you get.
It is useful to measure the CAM over both the short term (e.g. month by month) and long term (e.g. over 6 or 12 months). This is to ensure you notice any short term changes (for example in response to a specific campaign), and any long term changes (for example marketing spend this month which results in members joining some time in the future).
To help with this future analysis, it is critical to measure how you acquire your members. This is most commonly done with a question on any waiver form, such as: “How did you hear about us?”
In our next article, we will starting putting the metrics we have covered so far together to do some detailed analysis of your business. Then we’ll show how you can improve your marketing to increase profits.