What is lifetime value?
Lifetime value, LTV, is the total revenue one member pays you over the time they stay. The gym formula is monthly dues divided by monthly churn, and it tells you what a member is worth before you buy one.
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Lifetime value for gyms
Ask a gym owner what a member is worth and most will guess, because the honest answer needs two numbers that live in different places: what a member pays each month, and how long members stay. Churn is the share of members who leave in a month. Divide dues by churn and you have the average number of months a member stays, expressed in dollars.
That is the number to hold against customer acquisition cost. A campaign that costs more per member than the member is worth loses money however good its cost per lead looks. And LTV is not one number for the whole gym. Members from one ad source can stay far longer than members from another, which is what Bobby and Maria Gasdia at Big Day Fitness found once they could see it by source.
Where LTV misleads: dues divided by churn assumes the churn rate holds, and a gym that just ran a discounted intro offer will see churn spike when the offer ends. Use a churn figure from members who joined at full price, and recompute it every quarter.
How Adsu uses lifetime value
Adsu does not stop at the first payment. Renewals are carried as recurring value for that member, credited to the click that started the relationship. So every ad, campaign and source shows the revenue its members have paid to date, which is a lifetime value you can watch growing rather than one you estimate. Adsu counts verified stages only: if a stage cannot be verified, it is not counted. Every report is one line per campaign per location.
Adsu credits the last eligible touch inside the 30 days before the payment. Because renewals stay attached to the ad that started the relationship, you can see which source produces members who stay and put next month’s budget there. It is the difference Big Day Fitness describes on the proof page: lifetime value by source, not one number for the whole gym.
Questions, answered.
Divide monthly dues by your monthly churn rate. Dues of $150 and churn of 5% give $150 ÷ 0.05 = $3,000. For a more careful figure, use the margin on dues rather than the full price, and separate members who joined at full price from those on an intro offer, because the two groups churn differently.
Nothing. Lifetime value, customer lifetime value, LTV and CLV all mean the total revenue one customer brings over their relationship with you. Gym software tends to say member lifetime value, which is the same idea with the customer named.
Because it sets the ceiling on what you can pay for a member. If you know what a member is worth over their stay and you know what a campaign costs per paying member, the gap between the two is your margin. Without LTV, cost per member has nothing to be compared with.
Related
ROAS, return on ad spend, is the revenue a campaign produced divided by what it cost. The gym formula, an example, and Adsu’s verified-payment rule.
Customer acquisition costCustomer acquisition cost, CAC, is what you spend to win one new paying customer. The gym formula, an example, and why CPA is a different number.
Show rateShow rate is the share of booked appointments where the person turned up. Why it decides whether a cheap lead is cheap at all, with a gym example.
Attribution windowAn attribution window is the number of days after an ad click or call during which a conversion can still be credited to that ad. Adsu uses 30 days.
The proof
- Net members
- +21
- Lifetime value added
- $67,000+
Bobby & Maria Gasdia, Big Day Fitness, 2 locations
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