As an association, you greatly depend on members and their continued commitment to growing your organization. Consequently, it is immensely important to be aware of membership trends, especially when planning out your association’s financial future and how you will allocate resources towards growing membership. Thankfully, member lifetime value or MLV is a straightforward way to measure the actual value that each member brings as part of your organization. Knowing this number will guide you in making the necessary decisions when initiating and sustaining growth. The following information will cover what member lifetime value means and how to use it to track and grow engagement:
What is Member Lifetime Value?
To put it simply, member lifetime value is the monetary value or measurement that is placed on each member based on their projected membership behavior (or past as outlined more below). Other businesses might label this measurement differently and instead call it customer lifetime value or CLV. Either way, it is basically the value each member or customer brings to your organization over the course of their continued membership. It is an important metric to track and understand as this provides key insight into maximizing membership engagement strategies.
Why Member Lifetime Value Matters for Associations
Member lifetime value matters for many reasons. It can help forecast revenue, which is immensely helpful when planning for the future as an association. It also helps identify stronger retention strategies that enable your association to maintain memberships and continue on an upward growth trajectory. Finally, it can help guide your resource and engagement planning towards more effective strategies.
How to Calculate Member Lifetime Value
The easiest way to calculate the member lifetime value is the basic formula below:
MLV (Member Lifetime Value) = Average Annual Revenue per Member x Average Membership Lifespan
For an association, the revenue aspect of a membership can be made up of event costs, dues paid, and educational program charges paid for by the member. Of course, this would also include the basic fees paid by a member to remain part of an association or their dues.
The equation listed above gives you a general idea of how to best calculate your MLV rate for any individual customer. However, knowing this number becomes more helpful when it’s put to use in real world scenarios. One example can be found in the airline industry. When trying to enhance their loyalty or customer service programs, this airline used their customer lifetime value (or member lifetime value in the case of an association) to determine which passengers should be offered additional perks or upgrades to enhance their loyalty and overall experience.
Another example can be found in a membership-based organization that uses MLV numbers to identify which of their members are most likely to renew their memberships and are more likely to engage. This allows the organization to focus its resources on high-value members who are more likely to maintain their memberships long-term. In essence, this gives an association a more focused target to aim at and keeps them from wasting resources on members who are not good candidates for lifetime or continued commitments.
Types of Member Lifetime Values
The following are the two basic types of customer lifetime values or member lifetime values. They look at two different measurements relating to membership data, and they are each important for various reasons. The types of member lifetime value are outlined as follows:
- Historic Membership Value: Historic value of a membership is what they have spent over their lifetime as a member of your association. A good example of this is if a customer pays for a membership each year, then the historic value would be the amount of money they have spent on the dues or other membership-related expenses.
- Predictive Membership Value: Another type of customer or member lifetime value is predictive customer or membership lifetime value. This makes note of the historical data and then considers smart predictions about how long a relationship is likely to last and what that value will be over time. It can even consider the general cost of membership acquisition and more. It can be a bit more complex to calculate. However, it can also help you get a more accurate picture of customer loyalty going forward.
How to Increase Member Lifetime Value
Now that you understand the importance of measuring MLV for your association and how it can effectively help your organization grow overtime, and understand there is a historic and predictive way to look at this metric, it’s helpful to know practical ways to improve your existing numbers. The following are some actionable ways any association, including your own, can increase your current members’ lifetime value and enjoy more robust membership growth, increase engagement, and promote greater loyalty overall:
Improve Retention and Renewal Rates
The first way to boost your MLV rate for any individual member is through improving retention and renewal rates. It’s important to remember that your member’s experience begins the moment they encounter your association. So, your first impression is in fact the most important. Therefore, from the very beginning, you should offer a seamless onboarding process. It’s also wise to make sure that this process is optimized for each member and is simple and as easy as possible. If a member gets frustrated simply trying to sign up or to understand how to utilize a membership, this is bad for retention and renewals. Instead, you should aim for an onboarding process that showcases all the benefits of being part of your association, succinctly.
Another important way to improve retention and increase renewal rates is by checking in with members on a regular basis and offering open lines of communication. Ideally, you will check in on your members through multiple channels several times throughout the year, not merely during renewal time. As a picture of this, think about onboarding or orientation when a member has first come on board, and then communication (emails, calls, etc.) in the future, to address any concerns or get feedback. Communication should also include invites to events and more.
Offer Tiered Membership or Add-On Options
Another way to improve MLV overall is by offering tiered membership or add-on options within your membership system. This can include job boards, event bundles, additional education access and other add-on options. Everyone wants to feel special, and your members are no exception. When offering add-ons for loyal members or tiered memberships that can either be achieved through an increased cost or earned through loyalty, this gives members a way to set themselves apart from the crowd. This effort in creating perks and tiers will go a long way in increasing MLV in many loyal members and even entice new members to come on board to earn or pay for these add-ons.
Boost Event or Continuing Education Participation
Make sure that your members are given opportunities for continuing education. Also, make sure your events are promoted and highlighted. This includes promoting or boosting not only in-person events but also offering webinars and educational certifications. After all, many times, members initially join an association for the benefits they can derive from the membership, such as continued education and event invitations. Therefore, it’s important to not only offer these types of programs regularly but to also promote them well among your members.
Identify and Reward Loyal or High-Value Members
Last but not least, when it comes to improving your MLV, it’s important to offer recognition programs and even leadership or volunteer opportunities. This will encourage members to remain active and engaged as they are able to earn higher levels of rewards or even recognition for their loyalty. This is especially important to high value members, which are those you identified with the MLV metric. Those, of course, are the members who are most likely to remain loyal, as well as participate in events and in continuing education when offered.
Common Pitfalls to Avoid
While unlocking member lifetime value is a great way to track and grow engagement overall for all the reasons outlined above, it does come with some pitfalls that can make it less effective as an overall growth strategy. The following are some of the most common drawbacks associated with using MLV. Knowing these will help you identify them and avoid them:
- Using only membership dues to calculate member value. While the dues a member pays is one aspect of their value, it’s not comprehensive. It doesn’t include the event fees they might pay or the continuing education costs. It also doesn’t cover any additional costs that might come with membership add-ons or even merchandise.
- Not segmenting member types. Some algorithms for ascertaining MLV look at memberships overall. However, that does not give an accurate picture. A more accurate algorithm, which is more helpful in terms of actually highlighting the segment of membership you want to focus on, is found when you segment those member types into high-value memberships, and then put your marketing efforts toward those members.
- Ignoring engagement metrics. The last most common pitfall related to tracking member lifetime value is ignoring engagement metrics. Factors like member acquisition cost, average membership duration, member churn rates, member retention rates, member satisfaction, and more should be considered as part of MLV, as leaving them out of the process will not create an accurate picture of true MLV.
Takeaway: Understanding and Growing Member Lifetime Value
MLV matters because it is a helpful way to track growth and overall membership engagement. There are many ways that it can be improved upon or enhanced, such as boosting retention and renewal rates, offering tiered membership levels and add-ons, promoting continuing education and rewarding loyal and high-value membership. At MemberClicks, we offer many tools and resources to help you grow and measure your MLV. Contact us to book a demo and learn more about our services, as they are key to growing and maintaining engaged members within your association.
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