Why Measure the Lifetime Value of Members and Customers?

Associations analyze their data so they can better understand members and customers, and make confident decisions about programs, content, and marketing. But, Marketing General Incorporated discovered something strange while surveying associations for their 2018 Membership Marketing Benchmarking Report: only 10% of the participating associations measure and analyze the lifetime value of members, a drop from 16% in their 2017 report.

Why aren’t associations using this traditional membership metric? Doesn’t lifetime value (LTV) still have something relevant to tell associations about their members and customers? 

Traditional purpose of the lifetime value of members (LTV) metric

Membership experts have always advised associations to use the LTV metric to understand how much revenue an average member brings to their association. With this dollar amount in mind, you can make better decisions about your budget for recruiting, onboarding and engaging new members

Here’s a simple way to calculate LTV. 

Membership dues = $300/year
Average non-dues revenue per member = $700/year
Average membership tenure = 10 years
Lifetime value (LTV) of a member = $10,000 

When association leaders see how much revenue a new member can bring in over the years, membership staff have a greater chance of getting a bigger budget for first-year engagement efforts. 

Calculating dues revenue is easy. But non-dues revenue? Not so much. You can’t just take a year’s worth of event registrations, publication sales, PAC donations, and online course registrations and divide it by the number of members because many of those registrations and publications were purchased by non-members. 

If your AMS gives you the ability to separate member and non-member revenue, that’s great, you’re way ahead of the game, and should be able to come up with a fairly accurate number.
If not, don’t sweat it. A not-so-accurate number is better than no number at all. For example, make an educated guess that 75% of non-dues revenue (or whatever percentage you prefer) comes from members. Choose a number and stick with it. 

lifetime value of members

New LTV metric: monetary LTV + intangible contributions

But revenue isn’t the only value a member brings to your association, right?
Members contribute in many other ways to bring value to the membership experience, help your association achieve its goals, and take on tasks that would otherwise be assigned to staff or temporary workers, for example:

•    Volunteering as a membership ambassador during new member onboarding or as an event buddy for a first-time attendee.
•    Sharing advice in the online community.
•    Recruiting new members.
•    Dedicating time and expertise as a subject matter expert or instructor.
•    Helping to develop standards. 
•    Presenting at a conference or webinar.
•    Writing articles or doing peer reviews.
•    Serving on a board, committee or other national or chapter governance group.
•    Communicating or meeting with federal or state policy-makers.

The challenge here is placing a dollar value on these intangibles. You could look at the cost to hire someone to do the same work, but that only takes you so far. If your association uses an engagement score, you could put a monetary value on that score.

Once again, it doesn’t have to be an accurate metric, just a metric that’s accepted and used consistently. Having some kind of LTV is better than not having one at all.

Personal LTV for marketing purposes

The lifetime value of members is usually used to look at members in aggregate. But, you can also apply it to individual and company members. 

Some members are more valuable because they’re more likely to participate in association activities and programs. They’re more invested in their relationship with your association. They both give and receive more value than other members.

If you do a lifetime value analysis of a member or customer’s monetary and nonmonetary contributions to the association, you’ll learn where and how to use targeted marketing campaigns.

Like any data analytics effort, your ability to identify these members and track their contributions depends on your AMS’s functionality, its integrations with other systems, and the data analytics tools you use.

As fast as AMS technology is changing these days, a lifetime value report may be possible for you now or could be on your AMS’s product roadmap. Or, you may be able to gather this data using one of the business intelligence tools designed for the association market. 

Let’s imagine you can take a member’s dues and non-dues revenue, add in an “intangible” contribution dollar amount, and show a historic total as well as a yearly average based on their entire membership tenure, a yearly average based on the past three or five years of membership, and the past 12 months of membership.

When you look at that data, and compare it with other members, you get a sense of that member’s value to your association, and your value to that member. When you look at lifetime value metrics in aggregate and by membership segments, you learn what type of member gets the most from their membership experience—and what type of member is providing the most value to your association. You can do this exercise with non-members too. 

lifetime value of members

Applying the LTV marketing mindset 

Knowing the LTV of members allows you to segment individual and company members in a new way. With limited resources at hand (time and money), you can focus your marketing efforts on members and customers who are most likely to value and respond to what you’re offering.

LTV data has led some associations to adjust their membership model. They’ve designed membership tiers for different participation levels. Higher priced tiers deliver more value for high-value members, while lower priced tiers deliver less value for low-value members. Members can choose the type of membership experience they desire.

You can extend the LTV marketing mindset to your online education programs as well. Identify your high-value corporate or company members, those who already are spending a lot of money and have a high employee participation rate. 

Think about offering these high-value members licensing deals or special training programs. With a platform like TopClass LMS, you can use partitions to segment and show only relevant course catalogs and content to each company, and apply appropriate pricing.

Find out where your high-value members are getting their education now. It may not take much to get them to switch allegiance to your programs. Consider sweetening the deal. If you can get them to switch, any up-front loss will be offset by lifetime value.

In your engagement efforts, time is better spent on the high-value members and customers who are already financially or personally invested in the association. However, don’t ignore low-value members. Perhaps their lack of participation is an awareness (marketing) issue. Or, maybe they can’t afford anything beyond membership dues. Promote free and inexpensive programs to them. Don’t push high-dollar programs on people who haven’t even paid for low-dollar ones.

The loyalty of your medium-value members and customers is hopefully growing. Cement those relationships with targeted offerings based on their expressed interests and needs. 

Continue to learn about the needs and interests of your high-value members and customers. How can you become even more indispensable to them? What do they need that the market is not supplying? Capitalize on your strong relationship.

Let these high-value members and customers know you’ve noticed their investment of time and money in the association. You understand and appreciate their value. 

People like being special, so treat them special. Offer a complimentary program every now and then to your high-value members. Invite them to serve on an advisory board or give them more say in the association’s direction. 

Give these members more opportunities to contribute their knowledge and expertise to their professional community. Provide the kind of personal and professional value that will turn high-value members into lifetime members.

member engagement
membership model
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