The MemberWise Network is focusing on the critical topic of enabling membership organisations and associations to offer improved member value. In this article (2 of 7) I introduce the concept of Member Lifetime Value (MLV) and how it can be used to calculate the true value of members to your organisation.
Membership organisations and associations should consider using MLV when compiling formal plans and proposals for new or improved member services. It provides a much clearer picture on the value of proposed future activity compared to more basic estimations.
It might surprise you to know that in the absence of MLV many organisations continue to calculate value of members only via the annual membership fee. How ridiculous is that?
The best way to understand MLV is via a case study/example –
Institute X is creating a proposal for the delivery of a new website. It is believed that the benefit will be an increase in new member acquisition (100 new members per year) and member retention (50 members per year).
It is calculated that members stay for approximately eight years and pay £300 per year in membership fees.
The calculation would therefore be:
- Recruitment: 100 x £300 x 8 = £240,000
- Retention: 50 x £300 x 8 = £120,000
The extra value to the membership organisation will be £360,000* (minus any costs) over eight years.
This calculation can be a powerful tool for membership and association professionals who want to request supplementary funding/budget and/or have been tasked to write a proposal/bid for future membership development focused activity.
I have used this calculation countless times during my membership career and it has enabled me to get a lot of proposals ‘through’. It is hard to argue with the maths if the projections are realistic and it focuses hearts/minds on the longer-term value of spending resource on member focused projects.
Action: Give it a go the next time you need to request membership development related budget or write a proposal!
I hope you enjoyed reading this blog article. In my next blog article I will outline why there is a major mismatch linked to current levels of member engagement and perceived member value.
Article content is taken from the #MV2025 Project best practice guide (delivered in partnership with Silverbear and Cantarus). This free resource is hosted on our dedicated Member Value and Engagement Hub and is complemented by regularly updated best practice lists, videos and related blog articles:
*Note: This calculation is a crude financial measure. It can be made more sophisticated if you factor in further variables, eg annual fee increases, event fees and membership upgrades, and advocacy. You can also work out the non-financial value of members as advocates for your organisation, eg recommending membership to others or being in positions of influence that may help you achieve your mission.