McKinley Marketing, Inc.

Determining the Lifetime Value of A Member
(How much can I really spend to recruit a new member?)

By Sheri Jacobs

Originally Published in in Associations Now , October 2005

You’re by no means alone if you don’t have a pat answer to the question “What is the lifetime value of a member at your organization?” In fact, if you picked up the phone and asked five colleagues at different associations, in all likelihood, you would receive the same answer “I don’t know. Is it important?”

Whether you are the CEO of an association, work in the membership department, or simply take part in the marketing planning for your organization, knowing the lifetime value of your members is critical to planning and budgeting for any marketing campaign.

For example, if you know that on average, each new member will be worth $1,500 over the lifetime of their membership, then you may justifiably spend any amount below that figure on recruitment or retention tactics.

To determine the lifetime value of your members, you will need to know the following:

• Average length of time your members belong to your organization. If you have different membership categories, you may wish to determine this number for each category.
• Average yearly membership dues
• Total non-dues revenue earned by the organization. This figure should include advertising dollars, subscriptions, publication sales, sponsorships, registrations, anything that involves revenue related to a membership offering.
• The cost of servicing the member over the lifetime of their membership (multiply the cost of servicing a member by the average number of years). This figure should include all expenses including overhead, administration and direct expenses incurred while servicing members.

Below is an example of how you calculate the lifetime value of a member with the following assumptions:

• The total number of members equals 2782
• The total membership expenses for one year is $1,371,222

Calculate the average length of time a member belongs to an organization.	6 years
Calculate the average yearly dues that a member pays.	$207
Multiply the average length of time a member belongs to the organization by the average yearly dues. (Step 1 x Step 2)	$1,241	Lifetime Dues Value of a Member
Calculate the total revenue earned from member purchases of products and services during the previous year.	$1.5 Million
Calculate the value of a member’s non-dues purchases for the year by dividing the total revenue earned from all member purchases of products and services during the previous year by the number of organizational members (Step 4 divided by total number of members)	$539
Multiply the results of Step 5 by the average length of time a member belongs to the organization. (Step 5 x Step 1)	$3,235	Lifetime Non-Dues Value of a Member
Add the lifetime dues value of a member and the lifetime non-dues value of a member together (Step 3 + Step 6)	$4,476
Cost of servicing a member over the lifetime of their membership	$2,957
Subtract the cost of servicing a member from the lifetime value. (Step 7 – Step 8)	$1,519	Lifetime Value of a Member

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