Total $903 $3,725 $7,669 $14,698 $22,111
PRETAX PROFIT (LOSS) ($254) $866 $1,208 $6,023 $15,437
Pretax margin (39%) 19% 14% 29% 41%
WHAT THE EXPERTS SAY
OBSERVER/FINANCIER
GEORGE TUNICK
Investor in the National Association for Female Executives, a for-profit membership organization founded in New York City in 1974. Publisher of NAFE's bimonthly magazine, Executive Female
Silver expects to make money on the membership fee, which may be incompatible with keeping renewals at 50%. Most legitimate associations lose money on members the year they join. If they're not losing money, they may not be delivering real benefits or giving members enough reason to renew. And renewals are critical. He should be spending the entire membership revenue to recruit and serve members -- at least half of it on benefits. Otherwise, he'll face such high turnover and marketing expenses, he'll never become profitable. Plus, it takes a lot of money to roll out nationally and bring in thousands of members. Direct mail is a pretty expensive way to go. He won't get far spending only $200,000 to $300,000. It may take him years to figure out which lists really work.
OBSERVER
WAYNE HAEFER
Director of membership for the American Association for Retired Persons, based in Washington, D.C., a powerful nonprofit organization providing insurance benefits, discounts, and other services to 33 million Americans 55 and older
The first thing you have to do in building a membership association is identify a fundamental need that is not being met anywhere else. For AARP, the needs were compelling: older Americans lacked insurance and health-care benefits. I'm not sure the needs that Mothers' Network addresses are quite as critical. Silver plans to grow the organization very quickly. In the process he may stretch his resources too thin and compromise the quality of the benefits he offers. It took AARP nearly 40 years to reach its current size. And the life cycle of a membership is long. To retain members, you must provide services that meet their needs as they move along the age continuum. That means constantly developing new products or services. I would think about adding modules for parents as their children age.
COMPETITOR
PAT CALDERONE
Marketing director for the Child Care Group of magazines, owned by Cahners Publishing in New York City
Thirty dollars (Silver's membership fee) would buy a lot of disposable diapers. It's a high price to ask a mother to pay for something that is unessential. He'll definitely have to drop his buy-in fee to capture the market share he wants. He should target a far more upscale demographic -- well-educated, upper-middle-class, first-time parents. His primary market will not be parents of children under 5. It will be first-time parents within the first year of their child's birth. Parents with more than one child won't need the network. They know how to do it. He'll lose half the market right there. His hope of renewing half the members from year to year is exceptionally high. He'll be up against the local parenting papers -- many of which are free -- and the national magazines, which sell for far less than $30 a year. If he can position the network as a quality provider straddling both, he might compete well. But it's a tall order.
VENDOR
BRUCE GOLD
Executive vice-president of Madison Direct Marketing, based in Greenwich, Conn., an agency targeting the new-parent and young-family markets
He may find keeping his recruitment costs to $9 a member difficult outside the new birth market. The cost of recruiting parents of older children will be much higher. Their interest in products and services of this kind dwindles as their inexperience and the novelty of having a child wear off. Silver's attempt at grass-roots marketing is admirable. But building real strong local organizations that are far removed from headquarters won't be easy. There's a danger that commercializing meetings and services will alienate mothers. And getting large sponsors interested without offering them very high penetration (50% to 75%) is unlikely. I doubt Mothers' Network can offer exposure that a sponsor couldn't get on its own or in a tie-in with another, more established company. Large packaged-goods companies are selective about the partners they choose. They would expect a prospective partner to show more financial stability than Silver can.
POTENTIAL CUSTOMER
MEGHAN KEITH-HYNES
Writer and new mother, living in Newton, Mass., with her husband and daughter, age six months
Silver's premise is true: you can feel really isolated when you first have a child. It's the toughest thing about being a new mother. But there are so many resources out there that I'm not sure Mothers' Network offers me anything I can't get or don't already get from lots of other sources. Usually, free. I've got books; I've got magazines; I've got catalogs. I meet other mothers at exercise classes. I read a local parenting paper, where I can find ads for local events and services. I get discounts through the mail. Even my diaper service sends me a newsletter. When you have a child, marketers really come out of the woodwork. Something like Mothers' Network faces plenty of competition for my attention. If I were really convinced I could save money through this organization, I might consider joining. But I'm still not sure I'd pay $35. Maybe $15.
