How Understanding Lifetime Value Powers Your Membership Marketing

It is true, without an adequate budget it is a challenge to grow membership.  So how do you make the case for additional marketing dollars?

One effective way is to present the economic argument based on a lifetime value analysis.

Unlike the purchase of a book, webinar, or some other product or service provided by your organization, membership has a predictable, ongoing revenue stream.  Because membership is renewable, there is an economic value provided by a member beyond the initial first year dues payment.

Here is an example using data provided by hundreds of associations in the Membership Marketing Benchmarking Report.

Based on survey responses, the average association will receive $175 in annual dues from an individual member.  And the average renewal rate for a member is 80%, so this translates to a tenure or length of membership of five years.  In addition, members are typically an association’s best customers.  So perhaps and average member will spend an additional $50 per year.

Based on these numbers, the revenue stream or lifetime value of a member is a fairly substantial sum of $1,125 ($225 x 5).

So in order to achieve this revenue stream, how much do you think associations report spending to acquire a new member?

Surprisingly, individual membership associations told us that they spent on average only $24 to acquire a new member.  Of course there are costs to serve the member in addition to the acquisition costs, nevertheless, most organizations when presented with an ROI of spending $1 to produce $47 ($24/$1,125) of long term revenue, will understand that additional investment makes good economic sense.

As one respondent to our research shared, “Measure your results with lifetime value of a member.  It’s the primary metric.”

When understood, lifetime value makes a powerful case for investing more aggressively in membership marketing efforts. Use it to support the level of funding needed to grow your membership.

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