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Turning $1,500 into $50,000

Posted by Jeff Davis on Wed, Sep 26, 2018 @ 10:15 AM

For more than a year now, we have used the Lifetime Value Calculator to impress upon YMCAs the need for a website that has the tool kit we call The Membership Machine™. 

We believe that a website should be seen as a revenue generator, not an expense. We designed these tools to show the YMCA community the value of a single sales lead on their website.

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In the default example on our website, we show that the average monthly membership rate across the wide variety of YMCAs that we talk to is $53. And the average member stays for 6 years. This means that the average Lifetime Value of a single new member is worth $3,816 ($53 per month x 6 years x 12months per year).

But you can use this calculator for a number of other purposes. Recently we were on the phone with a client who was sharing the results of an advertising campaign that brought in 21 new members. "How much did the advertising campaign cost you?"

"$1,500" 

Let's see what the ROI is on that campaign assuming a $50 monthly membership fee and a retention rate of 4 years.

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So $2,400 per new member times 21 new members yields a Lifetime Value of $50,400. That is an ROI of... Well it is a lot.

The point is that we frequently look at the "cost" of a program like advertising. In fact most businesses have departments and committees to keep the cost of advertising under "control". But few businesses take the time to quantify the revenue brought in by their advertising. (And yes I know this requires effort.)

The Lifetime Value of a YMCA member is huge. I would much rather be advertising for a "sale" of $2,400 than a sale of $100. One sale of a new membership using the numbers shown above ($2,400) would pay for the entire $1,500 advertising campaign with $900 left over.

How would you like to be selling a $100 pair of shoes? You need to sell 15 pairs just to break even (assuming a $0 cost of goods). 

As marketers, it is our responsibility to measure and quantify the results of our advertising efforts. And just because the free calculator on the Thrive website says Lifetime Value of Potential Revenue on the top doesn't mean you can't use it for other purposes. 

If you are running a campaign to add new family memberships and the family monthly membership rate is $75 and families in your YMCA stay for six and a half years, up front you know that a single sales lead is worth $5,850. 

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 At the end of the campaign you have signed on 12 new families. That means the Lifetime Value of your campaign is $70,200. 

If you are campaigning for singles who pay an average of $35 per month and stay for 3 years, then you know each sale is worth $1,260. How many conversions did you close? If you are running campaign targeting existing members, offering a Zumba class that meets for 6 months and costs $25 per month. you know each sale is worth $150. 

 So feel free to use our calculator to help quantify your advertising expenditures. The more we can quantify these expenses by showing the revenue potential, the easier it becomes to ask for an increase in your advertising budget.

And it is good business.

Questions about quantifying your advertising programs? Email me jeff@thriveim.com.

 

 

 

Topics: ysites, digital advertising

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