How churn converts to lifetime value

In this episode, I take a deep dive into one of the most debated topics in the membership world: why member lifetime value is actually more important than focusing solely on churn rates.

I share my insights on reframing how we look at member retention and challenge the idea that churn makes the membership model less viable than courses or other digital products.

Whether you’re struggling to boost retention or just questioning your business model, this episode is packed with practical advice and a fresh perspective on what really impacts your bottom line.

Get ready for a mindset shift that could transform how you approach your membership strategy!

In this episode:

1. Why is member lifetime value a more valuable metric to track than churn rate in a membership business?
2. How should membership owners reframe their thinking when faced with member cancellations and natural churn?
3. What’s the real financial impact of churn compared to other business models like selling courses or client services?
4. In practical terms, what steps can owners take to improve the overall value of each member rather than just fighting churn numbers?

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Key Quotes & Takeaways:

"If a member only stays for X months, then what's the point? Usually that's followed by, I might as well do X. So why would I run a membership? Because if members are only going to end up canceling after 10 months, then I might as well just sell online courses."

"We debunk the whole myth that industry average churn rate is 3 months, and we actually debunk the idea of industry average at all. Now, if you had to pin it down and you absolutely had to give a thumb in the air industry average, it's more like 8 or 9 months."

"If you get exactly the same amount of sales of a $500 course, the end result financially is still the same. Each sale of that course to you is worth $500 for the lifetime of your relationship with that person who buys the course. In the same way that the lifetime value of every individual person who joins your membership, that's $50 a month, 10% churn rate, is $500."

"Churn rate is merely a factor in determining the end point after which you get no more money from that person. So when you use that definition, courses have a churn rate. It's just that churn rate is instantaneous because you get no more money from the sale of that course after the initial sale goes through. So it has a 100% churn rate."