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How to calculate the Lifetime Value of memberships

Ronny Christensen avatar
Written by Ronny Christensen
Updated this week

📌 Method: MemberLifetimeValue

This article explains how we calculate total revenue per member over time.

How is lifetime value calculated?

  1. Finds active members

    • We look at which members are still active at the end of each month.

  2. Retrieves invoices and payments

    • We will deduct all purchases made by these members.

  3. Calculates the average lifetime value

    • Total revenue per month divide by the number of active members.

  4. Visualizes data

    • Data is displayed in an area chart so that you can follow the development over time.


Example calculation

Let's assume we calculate the lifetime value of a member group over the course of three months.

Month

Revenue from members

Number of active members

Average per member

January

50.000 kr.

100

500 kr.

February

48.000 kr.

95

505 kr.

March

52.000 kr.

110

472 kr.

  1. We sum up the total revenue:

    50.000+48.000+52.000=150.000 kr.50.000 + 48.000 + 52.000 = 150.000 \text{ kr.}50.000+48.000+52.000=150.000 kr.

  2. We average per member:

    150.000305=491 kr. (average per member)\frac{150.000}{305} = 491 \text{ kr. (average per member)}305150.000=491 kr. (average per member)


Why is this important?

The lifetime value tells you how much a customer contributes to revenue on average. It provides an indicator of long-term earnings and whether it's worth investing in member retention.

💡 Result: A graph showing the average revenue per member over time.

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