Calculating lifetime value (LTV) is relatively easy. You need two numbers: your retention rate and the “average annual spend” by a member (which is the annual dues plus how much an average member spends at the association annually).
Your retention rate tells you how long the average member stays. By subtracting your retention rate from 1, then dividing 1 by that result, you’ll get the average length of time a member stays at your organization.
For example, if you have an 80% retention rate, you calculate the length of tenure as follows:
1-.08=0.2 1/0.2 = 5 so the average member stays for five years.
Your “average annual spend” is how much an average member spends each year, including dues.
To calculate your LTV, simply multiply the average annual spend by the average length of membership.
For example, if annual average spend is $250 and average tenure is 5 years, then
LTV = $250 x 5 = $1,250.
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