Understanding the long-term value of your members

One of the best things about running a membership site is that your success isn’t necessarily all about the number of new sales you make, or even member churn. The truth is, your growth and success can be measured by the long-term value of your members – but what does that entail?

In this post, we discuss the significance of long-term member value and how you can tap into it to maximize your membership results.

Member lifetime value

Lifetime value (or LTV) is a common metric used in many kinds of businesses, often compared with the costs of acquiring new customers and used to make budget and marketing decisions. When it comes to memberships, this metric is essential for determining if you’re getting an adequate return on your investments – whether in terms of finances, resources, effort, or time.

Member lifetime value (which we will talk about as a component of long-term member value) helps you identify what’s working and what’s not, reveals particularly high-value member segments, and helps you make decisions going forward. All of this is crucial if you want to grow a profitable membership business.

The calculation

To calculate your member lifetime value, multiply:

Your monthly membership price

x

the average number of months your members stick around

Once you have a number to work with, you can use it to help you decide where to allocate more or less resources, assess the effectiveness of different pricing tiers, or implement changes to your content strategy, for example. Member lifetime value is illuminating; it’s a critical measurement of your membership site that shows you the real results that your efforts are producing.

A different perspective on churn

Churn is a not-so-fun, but unavoidable element of running a membership site, but member lifetime value is often missing from the churn conversation. The reason this is important is because churn alone is simply not enough information to assess how your site is doing.

Let’s look at an example using the member lifetime value calculation: If your membership is $40 per month, and your new members only tend to stay 3 months, your member lifetime value comes to $120. While it’s easy to focus on, and get discouraged by the 3-month churn in this case, your member lifetime value actually comes out to $30 more than that of a $10 membership where new members stay three times as long (a $90 member lifetime value).

Your churn rate is the percentage difference between the number of members you have at the start of a certain time period, and the number of people who have left / cancelled their membership by the end of that time period. First, choose a time frame to use, such as one month (commonly used), a 3-month period, or one year.

Now, calculate your churn rate by dividing:

The number of members who left during that time frame

÷

your total members

Of course, any time your churn rate is higher than you’d like, it’s worth looking into. Just remember that it’s important to view the complete picture, and see things from the perspective of member lifetime value as well.

The significance of member retention

The very essence of memberships is their recurring nature – and successful memberships are all about the long game. The truth is, depending on your member lifetime value, retaining existing members can actually produce a better return on your investment than acquiring new members.

Retaining members can save you marketing and onboarding costs that you’d otherwise spend, for example. Long-term members also get to know your brand and products, and are primed for future content, marketing messages, and general brand loyalty.

It’s not that new members aren’t as important as existing members; it’s just that the benefits of retaining members gives additional weight to the concept of long-term member value. Don’t forget: Memberships are subscriptions, and subscriptions must be renewed!

Business benefits

There are also some often overlooked benefits your current members can provide, and these benefits can have a compound effect over time. For example, having a pre-qualified audience for marketing your new content, products, and services gives you fertile ground for testing new ideas on an ongoing basis. This allows you room to experiment, grow, and refine your methods over the long-term – that’s some serious value!

The information you gather from your members can give you brand new insights, as long-term members are a useful, ongoing source of data, feedback, and inspiration for new content. Plus, social proof and customer confidence for your brand tend to increase as you retain loyal members, who can turn out to be some of the best brand ambassadors around.

Every member who stays has the potential to be a walking testimonial, and nothing is as compelling to potential customers as happy members – especially ones they know. Word of mouth can be extremely powerful, and people generally look to community approval to gauge a product’s legitimacy and quality.

Just consider reviews and ratings on platforms like Google, Facebook, Yelp, and TripAdvisor, for example. You or someone you know might swear by these common forms of social proof. The same principle applies to memberships; in fact, members who stick around are more likely to be happy with your product and willing to recommend it to others.

Your membership community

Building a community around your memberships is worth mentioning as well, because it’s one of the best ways to grow your membership business. Although it can take time, the good news is that both members who only stay for short periods of time and members who are loyal for years can add to your community in significant ways.

Think about it: Even short-term members who engage with your brand, ask questions, or otherwise contribute are ultimately helping you grow – and nurturing your membership ecosystem. If you have a member forum, Facebook discussion group, or some other kind of exclusive area where members can interact with each other, the value can add up over time.

Long-term members can become experts on topics related to your content and products, offering help to other members (and potentially relieving you of extra support requests). Additionally, your member community can be such a useful source of information, guidance, and connection, that new people are attracted to it and start to see you as an industry authority. This can easily snowball into a self-sustaining system with your paid memberships at the center of it all.

Cumulative growth

At the end of the day, one of the great things about memberships is that they are usually always growing, and always expanding. The process of delivering content, acquiring members, engaging your community, building momentum, and attracting new members is cumulative. It feeds back into itself, with the long-term value of your members permeating every aspect.

From member lifetime value and churn, to the significance of member retention and the business benefits your members provide, there’s more depth to understanding the long-term value of your members than it may seem. Hopefully this post has shed a little light on the subject!

Now it’s your turn. What has been the most enlightening for you when it comes to long-term member value? Did we miss something in this post? Let us know in the comments below!

Mandy Jones

About the author: Mandy is a content writer at Sandhills Development, singer/songwriter/musician, and founder of Looplicious. Originally from Minneapolis, Minnesota, she's a frequent traveler and animal lover with a passion for creativity and maker culture.

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