Do You Know the Life-Time Value of Your Members?

I am working with a membership organization and can’t figure out how they survive. Their membership fee is so low that it’s trivial and yet their service costs are high. At almost every touch point, significant human resources are expended to serve their members. How can they afford it?

Every time you sell a new membership it is not a single transaction. It is an annuity. This annuity is the life-time value of a member.

This calculation is an important input to making effective management and resource allocation decisions.

What can you afford to pay to attract a new member? To retain an existing member? What about how you serve them? Can you afford to provide personalized service for a membership that only costs $100?

It depends. How long does a typical member stay with you? How much do they typically pay the organization over that period? Is there a difference in the life-time value of one member versus another?

If you have different classes of membership, do the calculations separately for each class. If you have a certification program, calculate the life-time value of both certified and non-certified members. The latter will almost certainly be higher. That tells you what you can afford to spend to sell members on becoming certified.

In order to do this calculation you need to be able to track how long your members typically stay and you need to be able to track every expenditure they make with you. If your database doesn’t collect that information, then start tracking it.

QUESTION: How strong is your member value proposition? Are there some simple ways you can make your member value proposition stronger?

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Filed under Association Management, Association Management Issues

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