9 Key Membership Metrics to Track for Business Growth (with Tips)

The world has laid down a performance tracking and rewarding system since our childhood. Our growth as a child is tracked by at what age we start walking, speaking, rolling, and jumping. In schools, the report card system tracked our academic performance. In a corporation, each job role has KPIs to track performance of an employee. Now, what if you didn’t have that system? You would not know where you’re headed or how soon you would reach a specific goal.

A similar method must be applied to your membership business as well. If you just launch your online subscription website and keep running it without any specific metrics in mind, you would not know anything about your costs, revenue, or profit. Well, even if you do not like dirtying your hands in these techie things, you must know the basics of the important metrics to track.

This blog would help you understand the important and neglected business metrics in a very simple method. You would also get a simple formula to calculate it and steps to improve each metrics individually. Let’s get into it.

Common Business Metrics that Membership Sites Usually Track

• Total Number of Memberships
• Revenue Growth Rate
• Member Conversion Rate
• Customer Satisfaction Score (CSAT)

These metrics are equally important, however, commonly understood by every subscription model owner. They’re just the tip of the iceberg and we are here to help you explore more. Let us look at the underrated metrics that can help drive up your membership business.

9 Membership Business Metrics to Scale Up

1) Customer Acquisition Cost (CAC)

Meaning

The total cost that you bear to acquire a new customer is Customer Acquisition Cost. This includes all your marketing and sales expenses to drive users down the funnel to become a member.

Formula to Calculate It

Divide the total sales and marketing costs by the number of new customers acquired during a specific period.

Here, take into account that the Customer Acquisition Cost would differ in different time periods. Your CAC for the first quarter might be lesser than that observed in the second quarter. You can get an average CAC cost by taking into account the figures of each quarter or time period set by you.

How to Improve

• Understand which method brings in the most customers and prioritize it further
• Start implementing content marketing strategy to attract organic traffic to your Website
• Start referral programs and implement affiliate marketing strategies to encourage current members to bring in new members, it will be lower in cost.

• Provide diverse content so that your marketing game can be stronger

2) Customer Lifetime Value (CLTV)

Meaning

Customer Lifetime Value is the total revenue a business can expect from a single customer over their membership plan. You can estimate it based on their previous interaction with the business and their commitment to the membership. You can even estimate it based on their engagement and activity on the membership platform.

Formula to Calculate It

CLTV = Average Purchase Value × Purchase Frequency × Estimated Customer Lifespan

How to Improve

• Keep providing exclusive member benefits and special content for them to keep renewing
• You can aim at increasing the average purchase value by providing easy upgrading options and promoting cross-selling
• Set up certain loyalty programs to boost the renewal frequency
• Use the Drip Content Strategy to keep the members hooked up with your site for longer
• Provide impeccable customer service and engagement to increase customer lifespan

3) Churn Rate

Meaning

The percentage of members who cancel their membership plans or subscriptions during a given period defines the Churn Rate.

Formula to Calculate It

Churn Rate = Number of Customers Lost During a Period × 100 divided by the Number of Customers at the Beginning of the Period

How to Improve

• Obtain Customer Feedback and the Reason to discontinue a membership
• Offer options to solve the issue and provide a concession if required
• Improve onboarding process and customer support to deal with issues on time
• Keep updating and enhancing your premium content to keep up the value of your subscription

4) Monthly Recurring Revenue (MRR)

Meaning

As the name suggests, Monthly Recurring Revenue is a total predictable revenue that your business earns each month through different subscriptions

Formula to Calculate It

MRR = Total Active Subscriptions × Average Revenue Per Subscription

If you are providing different membership plans, you would need to calculate it separately for each plan as the number of subscribers and rate of each would be different. You can then sum it all up for a total monthly revenue projection.

How to Improve

• Provide separate membership levels ranging at different rates so that every member has something in their budget to buy a premium experience
• Try up-selling techniques on retained customers of lower plans by showcasing them the major benefits and creating a FOMO marketing if necessary
• The more you work on reducing the churn rate, the more your monthly recurring revenue would increase

5) Average Revenue Per User (ARPU)

Meaning

To understand the average revenue generated per user, this metric is used. The exact amount of a membership plan is not the exact number of revenue you get from a particular user. You have undergone some expenses to convert them to a member. Further, there are certain on-going costs as well that you do behind a member to keep them interested with your site.

Formula to Calculate It

ARPU = Total Revenue divided by number of users

To get a net revenue per user, deduct the acquisition cost of a user. You can even deduct the overall cost from the Total Revenue and then divide it by the number of users.

How to Improve ARPU

• Market your add-ons and premium features to the existing members to encourage them for an additional purchase
• Review your pricing strategies and understand whether it needs a change
• Use target marketing techniques to personalize your campaigns to a certain group of people

6) Engagement Rate

Meaning

Engagement rate is very important to measure the effectiveness of your content. Are people liking it, commenting on it, sharing feedback, discussing among the social community? You cannot put an exact number on this type of metric, however, you can observe and analyze.

Formula to Calculate It

If you want to pinpoint a number for the engagement rate, divide the total number of engagements, that is total number of likes, comments, shares by the total number of active members, simple.

How to Improve

• Understand where your content is lacking to spike up discussions. Try to create more engaging content.
• Create a separate form on membership sites to gain audience feedback on content. This will help you understand their expectations and tastes.
• Use interactive elements with MYCRED Integration on your Membership Site. Polls, Quizzes, Badges, Challenges will encourage more interaction among members.
• Plan user generated content and make your members participate in the process for them to feel valued and engaged.

7) Customer Retention Rate

Meaning

A retention rate is the percentage of members who renew, continue their membership plan after their initial plan is over. This lets us know how many customers continue their subscriptions over a specific period.

Formula to Calculate It

(Number of Customers at the End of the Period – Number of Customers acquired during period)

divided by Number of Customers at the Start of the Period

Multiply the above answer by 100 to get the percentage of CRR.

How to Improve

• Increase Customer Engagement with the help of targeted and personalized communication
• Offer various loyalty programs and exclusive member benefits for your long-term members
• Your customer support and problem solving must be quick, effective, and to the point.
• Gain customer feedback at regular intervals to stay at the top of their expectations

8) Revenue Churn Rate

Meaning

A Churn rate would let you know the revenue lost due to cancellation, refunds, or downgrades during a specific time period. This percentage of lost revenue should not be beyond 2-5% or in the case of big businesses, 10%. Let us look at how to calculate it.

Formula to Calculate It

Monthly Recurring Revenue (MRR) lost due to churn divided by Total Monthly Recurring Revenue multiplied by 100

How to Improve

• Retain high-value customers by offering personalized solutions
• After understanding the issues faced by the discontinuing members, plan to work on a solution. Post that, implement a win-back campaign to re-engage the lost customers by showing them that you’re actively involved in problem solving.

9) Average Session Duration

Meaning

How much time you spend on Netflix after opening it is your average session duration for the Platform. Similarly, the duration for which a user spends time on your platform during their single session will give you session duration which you can average afterwards with the following formula.

Formula to Calculate It

Overall Session Duration is to be divided by Number of Sessions

For instance, a user visits your membership site three times in a day for 1 hour, 3 hours, 2.5 hours, then you add 1+3+2.5 and then divide it by 3. Thus, we get an answer of 2.17 hours as the Average Session Duration. It is a simple mean formula.

How to Improve

• Your Content should be able to engage users for a longer duration, thus creating engaging content.
• Introduce challenges, quizzes, puzzles, and enough bonus content to keep the members stay for a little longer.
• Use gamification elements to make the experience more enjoyable.
• Keep your content fresh, updated, and consistent

Wrapping It Up

Just as promised, this is a list of some of the neglected metrics with easily understandable formulas to calculate it. There are many more metrics that are lesser known and underrated including Customer Effort Score, Stickiness Ratio, Time to Value, Activation Rate, Net promoter Score and so on.

Select a handful of metrics that you feel are the most crucial ones for you to keep in check and improve. You can start with only 2-3 metrics in the beginning and then add more to your review list. This will let you go towards a specific target in a faster way and equip you with strategies to optimize them.

Let us know your queries in the comments and we shall help you get through it.

FAQs

1. What are the key metrics for a membership business?

Few of the key metrics include Customer Acquisition Cost, Customer Lifetime Value, Churn Rate, Monthly Recurring Revenue, and Average Duration to name a few.

2. Why is Customer Lifetime Value (CLTV) important?

This metric represents the total revenue that a business can expect from a single customer. This gives the long term value of a customer and defines the relationship of the business with the customer. It also helps with marketing and retention strategies.

3. How can I improve my Monthly Recurring Revenue (MRR)?

Introduce various pricing plans, try to upsell or cross sell to existing members, and work on feedback to reduce churn rate of your existing members.

4. What is the Net Promoter Score (NPS) and how is it measured?

Net Promoter Score is the likelihood of your member’s promoting or recommending your service to others. It is directly related to their loyalty. You can measure it by surveying customers and providing them a scale of 1-5 or 1-10.