Shining the Spotlight on the Lifetime Value of Members
Many boards assume, incorrectly, that if a member leaves, the only money the chapter is losing is their membership. The dollar value associated with a single chapter member is much more than the amount they pay to join or renew.
Can you quantify the dollar value your members provide over the lifetime of their membership? It’s significantly more than you think and, knowing it should drive you to find ways to not only bring in new members, but better engage the ones you have.
Membership value: It’s a simple calculation
To fully understand a member’s lifetime value, you need to understand (and quantify) all of those things you “get” from each member. It comes down to two equations:
(Membership value for one member for year) x (years of a lifetime membership) = the lifetime value of a single member
Let’s walk through an example and show you what we mean by direct value and indirect value.
We’ll say members join your organization and stay, on average, for 5 years. To keep the math simple, you charge $100 per year for both membership and renewals.
Direct value is easier to quantify, as it includes those things members do that you can assign a dollar value to. Your buckets may be different, but we’ll say that yearly, each of your members:
- Joins or renews: $100
- Attends a conference: $500
- Refers one new member: $100
- Purchases the results of one of your surveys: $1000
- Buys one book or t-shirt: $50
Adding these up, the total direct cost for one year for a single member is $1750. And when you multiply that by five (for the average lifetime), the direct value of one member over five years is $8750.
This still isn’t the whole picture, as it doesn’t include the member’s indirect value, i.e. those things they do at no charge to keep the chapter operating. How much do you save each year because members volunteer at events, on your board, as guest speakers? And how much more do you save with the administrative help they provide, like managing your website, writing your blogs, and overseeing your social media program. Without their work, think of what you’d be paying by hiring staff or outsourcing to freelancers.
Continuing with our earlier example, we’ll say that through their volunteer efforts, each of your members provides $200 worth of indirect services per year, or $1000 over the lifetime (five years) of their membership.
Now that we know the direct and indirect value, we can calculate the lifetime value of a single member:
Membership value for one member for one year = $1750 + $200 = $1950
The lifetime value of a single member = $1950 x 5 years = $9750
Here, you can easily see you could be losing as much as $9750, much more than a $100 membership fee.
Eye-opening, isn’t it? When you take the time to learn your members’ lifetime value, you see that the loss of just one member can be a blow to your chapter’s budget. And knowing this can drive your board to make changes, especially in areas like marketing and engagement, to both keep your members and keep them active for the long-term.