Lifetime Member Site Value And Its Effect On Your Business Decisions

The concept of lifetime customer value is an important factor in determining what your subscription prices are. You will not be able to accurately determine your lifetime member value until your site has been up and running for some time, but using educated assumptions to work out a potential lifetime customer value can be a very beneficial part of your business plan. In simple terms each member’s lifetime value is the average profit they will generate for you during the time they are a member of your site. Each of your members can create revenue for you in a number of ways:

· Initial subscription fee

· Repeat subscription fees

· Product purchases

· Affiliate purchases

· AdSense links

The more complex your site, the more factors there are to take into account. To calculate the lifetime value of a member you need to take the average initial subscription, plus the average revenue from further purchases (these include repeat subscriptions, purchases, click-throughs etc.), multiplied by the average number of repeat purchases in one time period (a month, a year etc.), multiplied by the average number of time periods a customer remains a member. Here is a simple example:

· Your members pay $50 for their one time subscription.

· They spend on average $20 twice a month on purchasing further products etc.

· Your average customer remains a member for 6 months.

· Your lifetime member value = 50 + 20 x 2 x 6 = $290

Don’t forget the power of loyalty. A loyalty scheme will encourage your customers to maintain their membership. Recognizing and rewarding your members’ loyalty is a great way to keep them subscribing to your site. If you choose to follow a loyalty scheme, you can publish details on your site, and you can enable your members to track their progress through your scheme in the same way as they can access their personal details.

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