Black chalkboard with a green tailor measuring tape
March 3, 2016

Use Facebook To Measure The Cost Of New Members

You run a small nonprofit and/or membership-based organization and you’re looking for inexpensive ways to gain new members.

Have you thought of advertising on Facebook?

I know what you’re thinking: “We don’t have money to advertise!”

Hold that thought. I have no doubt that your organization, like many other nonprofits, is cash-strapped.

But, believe it or not, you’re already investing money into advertising. For example, How many events have you held where non-members could have attended? How much did it cost to host them?

An even deeper question: have you ever bothered to measure your return on investment (ROI) from the dollars you invest into getting one new member? Did you at least break even? Did you lose money? Do you not know this number (if not, it’s okay—not many people do)?

You need a model for advertising that brings in more money than you spend. First, let’s understand some simple calculations.

CAC — Customer Acquisition Cost

How much does it cost you to acquire a member?

This is the foundation of all marketing and sales conversations. In any business, in any industry, in any association, if you know this number, you’re ahead of most of the market.

Here’s a simple math question: If Joe finds a customer to whom he can sell a candy bar for $2.00, what is the maximum amount he can spend to buy said candy bar so that he can turn a profit?

Answer: $1.99

This is the math question you should be doing with your organization’s marketing and sales activities. If a member will pay $100 in membership dues per year, you can spend up to $99 on this member over the course of the year and call it a profit.

How to Measure CAC With Online Advertising

In the advertising world, there are two key ways you are “billed” as an advertiser:

  1. Cost Per Impression (CPM) — Remember the radio and TV ads we talked about? Under those formats, eyeballs or “impressions” (the number of people who see or hear your ad) are the units of value. The more people that come across your ad, the more expensive the ad is. This is why Super Bowl commercials cost into the millions.
  2. Cost Per Click (CPC) — This is the number you need to keep your eye on. This is how it works: If 100 people see your ad, but only 10 people click the link on the ad, you only get charged for the 10 people who clicked! Each person costs a certain amount—that amount is what we call CPC.

With Google AdWords and Facebook, cost per click is the big advantage. Who cares if one million people see a Super Bowl ad about your organization in Little Rock, Arkansas, if only 10 people out of the one million actually live in Little Rock and can feasibly join your organization?

Instead, think about this: What if you could show ads only to people in Little Rock?

Let’s take it a step further. Let’s say your organization was a professional association for nurses in Little Rock. What if you could show ads only to nurses in Little Rock?

And a step even further: What if you had to pay only if a nurse clicked your ad and landed on your website?

That’s the magic of targeted ads.

Wondering how to calculate your cost of acquiring a member using a cost per click arrangement? Here’s another simple math problem:

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If 100 nurses click your ad at a cost of $2/click, and 50 of them end up being members, what is your cost of acquisition of one member?

100 clicks * $2 per click = $200

50 new members acquired for $200 total = $200/50 members = $4 spent per new member

Simple.

Now what if each new member pays $100/year for an annual membership? You just made $96 that you can use to hold better events and provide more benefits for members!

You just used Facebook to measure the cost of new members! How cool is that?!

This is just the beginning of how to tackle a full Facebook advertising strategy. There are many other things you still need to address such as:

  • What should you say in your ad?
  • How will you find the right people to target?
  • Where should your ad link to?

I’ll be answering all these questions and more during this year’s Membership Growth Online Summit—a free online event focused on strategies to take small, membership-based organizations to the next level.

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Shiv Narayanan
Shiv Narayanan is the Head of Marketing and Sales at Wild Apricot. An expert in designing sales funnels, customer value optimization and copywriting, he has executed ad campaigns worth hundreds of thousands of dollars on Google AdWords and Facebook focused on converting visitors into paid subscribers