Measuring Membership Metrics Is Not Just Counting The Smiley Emojis Your Members Use In Communications Within Your Site. Keep Your Members Happy Viably.
Serious number crunching is unavoidable if you really want to know how well your membership site is performing. The question to ask is: Are you earning enough and keeping members happy viably?
With membership sites, it’s easy to see success as the number of people who join – but if you don’t compare this with how many people leave you, your ship may soon sink. Similarly, it’s easy to look at your overall turnover, and not see that your costs are too high and your actual profit is close to nothing.
Many membership site owners get so close to the nitty-gritties of acquiring and keeping members, and creating content at speed, that they forget to look at the macro picture of their businesses and their profitability and sustainability.
At Solohacks Academy, we believe in measuring ten indicators of true success, and we rely on these, because numbers don’t give us false illusions of growth. We also set apart review time once every quarter to plan how to improve on the numbers we see.
1. Traffic Rate – without adequate site visitor traffic how will you get members?
Traffic is the lifeblood of any membership site. Without enough traffic on your site, how will get conversions of a percentage of that traffic into members? Both metrics of traffic are important: the actual traffic you get on your site, and the identification of the sources that bring you the most traffic, and their costs.
Almost all marketers of membership sites have their traffic coming from organic sources or from paid ads. These sources of traffic can be from Google and other search engines, or from social media sites – or even from the sites of other bloggers who have linked to your site. It’s imperative that you have your finger on your different sources of traffic, as well as the quantity and quality of traffic you get from each traffic source.
Don’t ever make the mistake of seeing traffic quantity as the only barometer of your first level of site success. The traffic you want – your ideal target audience – is what you want droves of. You don’t need large numbers of traffic if you get very targeted, quality traffic that is exactly who you are aiming at to become your members.
Also, you can gauge your traffic better if you know exactly the path site visitors take through your site. There are three tools to measure this. Two classic tools are the Google Search Console (which tells you the keywords – the intention – people use to get to your site from search engines), and the Google Analytics Tool (that tells you what the demographics and other descriptors are of your traffic).
Further, there is a wonderful tool called Hitsteps, which we use a lot, that traces the exact path every single visitor takes inside our site – the pages visited, the heatmaps of page content consumption, the pages of visitors’ arrival and exit, the bookmarking that some people do to make repeat visits – this tool is a goldmine of nuanced information about the traffic we get.
With traffic, always look for more than just the bare numbers – see if you can get a granular feel of the traffic you get, its intent and behavior, and the number of touches of your site that repeat visitors make before they decide to sign on. All this is “deep insight”
2. Conversion Rate – are enough site visitors converting into potential members?
Conversion rate is the measure of how many people from your total traffic sign up to take a trial of your membership. Or if you want them to at least become email subscribers, then how many people do take you up on that. The idea is to see how much traffic your site needs to convert a percentage of that traffic into interested potential members, who take some actions towards becoming full-fledged members.
There are many theories about what conversion rate number is a good one to aim for. For instance, I came across this benchmark on the MemberMouse site:
Even with a conversion rate as low as 0.3% (three-tenths of one percent) you can still make money if your traffic and customer value are high enough. But typical conversion rates for successful direct response campaigns range from 0.5 to 1.5% across a broad range of traffic.”
In my experience, every site has a different conversion rate. Also, your site’s conversion rate may not be healthier than another just because you have more traffic – and therefore your fraction of traffic that converts sounds larger. I would tend to think that if you are getting lower traffic but are able to convert more of your ideal targeted members from that traffic, you’d be a healthier site – because you are spending less effort to gain more results.
What factors contribute to better conversion of your ideal potential members? Here are three important ones:
- Great audience-to-site fit is the most important factor for conversions to take place. If you are promoting your site to the wrong people, they won’t find your site living up to what they expected to see … so they may visit you but not want to become your members.
- Testimonials and social proof add a layer of authenticity and validate your site to visitors. If they find enough on your site to show them that other people have signed up to your membership, and are finding it mighty useful, and you are the genuine niche authority you purport to be, you will be able to turn up your conversion rate.
- Availability of a trial is another factor that creates better conversion rates. There has to be some way people can hedge their bets and not lose money in trying out your membership site, and seeing what it has in store for them. Look for a way to offer trials that don’t expose all your content to unethical people, but gives genuine people enough content to show them your site is worth signing up for, with its valuable and differentiated advantages.
3. Trial Retention Rate – how many people stay on as members after your 30-day trial?
Assuming your membership site allows a 30-day trial period before you start charging your monthly subscriptions, you may want to check how many people complete the full trial period with you and then go on to give you the thumbs up (by not canceling the trial and allowing you to charge the subscriptions). This Trial Retention Rate is a very important metric, for two reasons:
- The Trial Retention Rate can show you whether the fare you are offering for people on trial is a good reflection of your total site content – or is a bad sample of your site. If tweaking the trial content you offer helps increase the Trial Retention Rate, you will know that you have to improve your trial content offerings a lot.
- The user experience during the trial period – including usage of your site and the service you offer via customer care – can both tilt the Trial Retention Rate in your favor or against you. People may find your content good, but the service extras may not up to their expectations. Or the user experience of your site may not be fluid and smooth, and satisfying.
When you look at the Trial Retention Rate, ask yourself deeper questions on why more people may not be progressing to the membership stage, and may be walking out on you during or after the trial period. You may need to acutely study their behavior, or even survey them, to get to the real reasons for their reluctance to sign up.
The Trial Retention Rate is actually where the rubber hits the road. If you’re not doing well on this number, there may be lots of experimentation needed to see where to improve your site content and customer service, going forward.
4. Refund Rate – what percentage of people ask for refunds within the trial period?
If you offer the 30-day trial period on your membership site, there are two ways you may offer this. In the first method, you may say, “You can start using the site after giving us your credit card details but we will not begin billing you till 30 days are over.” In the second method, you may say, “You will be billed today when you sign up, but if within 30 days you want to cancel out, we will refund the full amount and bill you no further.”
If you are using this second method, you have to keep an eye out for the Refund Rate. Normally people would cancel the membership after going through the 30 days of free trial. They would probably cancel on the 29th day or so, just to ensure they are not being billed and can still ask for a refund.
But sometimes, you may find people signing up today and asking for a refund tomorrow. This may surprise you, because it would look like people have not even had time to log in and look at your site properly. They seem to let no time pass before they take a snap decision to request a refund pronto. Why does this happen? There could be two reasons:
- One, some people know, instantly, that the site is not at all suited to what they were looking for. The site-audience-fit may be completely wrong. They may have assumed your site offers something else, only to find it is not at all what they thought it to be. This could be one reason for the quick decision to cancel and get that refund.
- Two, there is a curious psychological phenomenon known as Buyers” Remorse. People who buy big-ticket items, or items that require steady monthly commitments, may suddenly be beset by pangs of self-doubt. They may balk at the actions they have taken, and start feeling acute remorse that they hastened with a money commitment. In fact, they may have made a wise decision, but they may need some serious reassurance that they have not acted recklessly.
If you find the Refund Rate of your site very high, you may have to re-examine whether your site is promoting itself properly so the wrong people don’t buy into it and just as quickly realize it’s not for them.
You may also have to see if the price of your site is causing a lot of people to go through this Buyers” Remorse syndrome. If the price is a tad too high, you may have many refund requests appearing quickly on the heels of subscription purchase.
If on the other hand, refunds are being asked for after people have had time to visit your site and look around it properly, you have to ask people to tell you why they are preferring to cancel. Don’t try to hold the people back, but do hold their opinions at the back of your mind, so you can improve your site.
5. Churn Rate – what percentage of members leave your membership per month?
What is Churn Rate? It is the number of members who leave you every month, expressed as a percentage of the total members you have. Churn is an inevitable part of any subscription business. Memberships sites need to first accept this truth and then develop strategies to reduce churn – because to dream of completely stopping churn would be foolhardy.
There are three important things to know about member Churn Rate, to be able to handle it with smart strategies:
- Understand the impact of churn on your business profitability. Let’s say you have 100 members on your site, and lose 10% of your members every month. That would leave you with 90 members for the next month. Then 10% of those may go away, leaving you with 9 members less. If you want a profit, you have to find more new members than the numbers going away. And it costs 6 times more to find new members than to retain old ones from going away. That is the equation.
- Aim to keep churn at below 5% of your average monthly membership levels. Membership site owners swear by the “5% or less churn rate rule”. They believe that if we can keep the churn rate at 5% or somewhere below that, we can somehow sustain our businesses. The costs of finding new members will be easier on our pockets, and the loss to earnings from members going away can be bearable. In fact, the lower the churn percentage you maintain, the more profitability you can see from your business, despite the costs of getting new members.
- Churn can happen at all levels of the member lifecycle, so be careful. Most marketers imagine that members may churn after they have been on your site for, say, a modicum of time. But that’s not how churn happens. There are five stages to the member lifecycle – The SignUp Stage, The Onboarding Stage, The Engagement Stage, The Flaking Stage, and the Renewed Interest Stage. At any of these stages, members can walk out. So don’t think they all have to wait to tire of your site before they go.
As always, the more granular the details you can get about when members tend to leave and why, the better you can control Churn Rate. Also, always decide on how much to spend to get new members after getting a proper fix on how many members leave. You should aim to be on the positive side of the equation, with the maximum cost-efficiency you can manage.
6. Member Engagement Rate – how do you measure member activity on your site?
Experts say you should be monitoring and measuring how engaged your members are. But that’s easier said than done, because there is no one metric that can tell you this. You have to aggregate a lot of different activities, and prioritize the ones that are important as indicators that your members are active and engaged with your site.
Some of the indicators people use are the number of times people log in and out, or the completion rate of courses, or the downloads of ebooks or course takeaways, or the frequency with which people post on your community forum, and so on.
The important thing is to decide which of your programs, products, or services on your site is the core of your site – and see how many people use that item, and how much, in relation to the other products or features of your site. That will give you an idea of whether people see your core item as more valuable than the rest of your site, or vice versa. You can check if your idea of the value of your site is mirrored by the engagement pattern of your members.
The other types of measures that can help you gauge engagement are responses to your email marketing, and the attendance levels of your webinars or workshops or Q & A sessions. Yet another measure you could check on is how much people use the live chat feature, if you put this on your site.
The way to use your insights on member engagement is to see if previously active members have suddenly gone down in their engagement levels. This is often a sure signal of waning interest, leading to an eventual cancelation of membership. The time to react is before a member decides he has had enough. So, if you are steadily tracking engagement levels, you will know which members are most likely to be leaving soon. You can then take timely and appropriate action to increase your engagement with them to hold them back.
7. Upsell Rate – how many other products are you able to sell to your site members?
You can earn a lot more money from your membership site if you can get members to buy other related products you sell. From time to time, you may like to make offers to them for these other products, labeling these as exclusive deals for “members only”.
What is upselling? Well, upselling is a sales technique used to get a customer to spend more by buying an upgraded or premium version of what’s being purchased. In other words, when you sell a membership site you can suggest other products that can help the member get the most of his investment on the membership. It’s like saying, “Would you like more icing on the cake?”
Getting members to spend more with you than just their monthly subscriptions should be a vital part of your earning strategy. Like all other metrics to measure success, the more “upsells” you can achieve the more you can uplift your site performance and profitability.
Some experts believe that a very easy way to increase your customer value is to make a one-time offer for some product after the initial sale of a membership subscription. As soon as someone joins your membership site for the first time, make an offer to them for a related product – but make sure you offer this at a good discount. People are vulnerable to additional sales immediately after a purchase. You will not get a better time or opportunity to sell them more than just a membership.
Some research indicates that you can aim to get at least 15% of new members to go in for the upsell-product. Whether the 15% rule works or not, it’s always a good idea to get a spending customer to spend a little bit more at the time of buying – it’s easier than selling anew to him when he is not in a “buying mood”.
8. Customer Lifetime Value – what are your net earnings on average per member?
When it comes to membership site marketing there is no measurement of greater importance than average Lifetime Customer Value (LCV).
Lifetime Customer Value is defined as the “profit you gain from your entire relationship with a customer”. As a simple example, if a customer pays you $50 per month for his membership, and stays with you for 6 months, his Lifetime Customer Value would be $50 X 6 = $300.
But this may not be the sum total of earnings a member can bring you. There can be additions to this number in four ways:
- One, a member could be attracted to upgrade his membership tier and thus bring you more money than he started his membership at.
- Two, the member may buy other products from you, during his membership time with you.
- Three, while browsing your content, the member may click on affiliate links and buy affiliate products that earn you commissions.
- Four, the member may refer his friends and collegaues to your site as new members, thereby increasing your earnings as a result of his word-of-mouth marketing.
Why is knowing the Lifetime Customer Value important? This is because it can help you decide how much you can spend to get customers. Your marketing and advertising budgets are more easily decided, if you know how much a customer can be worth to you on average.
You get a fix on how much each new customer acquisition may cost you, how much you’ll likely earn from every new customer, and therefore how profitable each new member can be to your kitty. This is the classic “Return On Investment (ROI)” argument that validates your membership business.
9. Turnover and Profit Rate – is your membership making good money and profits?
I know I am telling you something every businessperson obviously knows, but your business “turnover” is entirely different from your “profit”. Turnover is all the money you make selling your memberships, and other goods and services. Profit is the money left over after all expenses you need to make have been deducted from the turnover.
Even knowing all this though, many an entrepreneur tends to think of all the money he makes after selling his memberships, goods, and services as his earnings. The reality is that he has to spend from what he has earned to advertise and market his site to get his earnings next month. Only what is left over after all expenses are paid is profit, and that is the real earnings.
Talking of turnover and profit, there are a few things to know to make your business grow more and more successful over time:
- The only three ways to make a big profit are either to increase your turnover, or to reduce your spending – or do both. As an entrepreneur, your battle is to constantly try to increase your turnover, and cut your expenses, so that you increase your profit.
- If you want your business to grow fast, you have make a bigger and bigger profit with every billing cycle. That means working hard to increase your members, their spending, and your sale of related products … and at the same time, lowering all the expenses you make with some long-term and short-term cost-cutting strategies. Growth comes from trying to increase your turnover and profit numbers all the time.
- The way sharp and successful marketers act is not to cut all expenses to bare bones. You do have to spend on promotion and advertising if you want to get more members, and give your growth spiral a boost. So do spend – but every time you spend, you have to see if that spending will beget more gain in earnings. The spending has to look like a small fraction of the earnings it creates. Spending is OK on things that raise earnings many times over. Spending is not OK when the spending results in no earnings – or worse, wipes out previous earnings of profit.
All this means your business should have a solid accounts-keeping system that shows you the real numbers in real-time. What are you really earning? How much of it is earning-related spending, versus wasteful spending? And, what can you retain in the end as profit?
Further, what are you going to do with the profit? Are you going to invest it so it can earn more money? Or are you going to use it to expand your business in new directions that can earn more money? Unless you know your real numbers it’s hard to make any such decisions, let alone wise ones.
10. Member Referral Rate – how many new members enroll via old member referrals?
One thing you can always do to increase a member’s spending with you is to encourage him or her to get you new members. People actually love doing this, because it makes them look good to be referring great programs to their friends, colleagues, and social circles. But all this is provided they value your site highly and believe it will give them more credibility to recommend your membership to their ilk.
That’s one of the important reasons why retaining the loyalty of your existing members is so highly recommended by experts. The more happy, satisfied, and loyal your members are, the more they feel good to be roping in new members for you.
Don’t, for a moment, think that if you offer a big financial incentive – a fat referral fee – your members may do the promotion of your site for you. People are very conscious of what other people will think of them when they recommend something. Will others disdain them for recommending something of poor quality? Or will others think highly of them for recommending something of top-notch quality?
No amount of referral fees paid can make members vouch for your site if they themselves feel a bit cagey about its value.
One thing to remember is that referrals cost you little or no money on advertising and promotion. They are a beautiful way to get new members without much cost. So whenever possible, treat customer-care and retention of your existing members as doubly precious over any other strategy.
Getting strong numbers on referral rate also shows you how happy your existing members are. It’s better than any satisfaction survey you can send out to members to ask them to rate your site on a scale of 1 to 10. If they are genuinely thrilled with your site, you’ll see it all in the numbers of new members they bring in.
A CFO, of a huge venture-capital company I know, once told me how he decided on the right businesses to invest in. He said, “I ask them how many of their new customers have come from old customer referrals, and how many such old referring customers are still with them. These two numbers tell me all I need to know about a business being really healthy to invest in. You’d be surprised how many entrepreneurs don’t even know these numbers. Some do, but they don’t take them seriously. The ones that really grow big, though, are very conscious of keeping their “referring customers” happy, and they keep them referring new customers all the time.”
So What Are Your Thoughts? Do Share!
This post is incomplete without your input. The community of Knowledge Commerce solopreneurs would feel galvanized to hear from you … so do share your thoughts on this topic with us, in the comments field below this post.
Related Articles From Our “Creating & Promoting Memberships For Knowledge Commerce: Guide”
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- How To Choose A Membership Model … 10 Smart Options
- How To Launch Your Membership Site … 10 No-Fail Tips
- How To Mix Your Membership Site Content … 10 Must Haves
- How To Improve Your Membership Retention … 10 Easy Ways
- How To Price Your Membership Profitably … 10 Sound Methods
- How To Handle Customer Service In Memberships … 10 Savers
- How To Use Email Marketing For Memberships … 10 Best Tips
- How To Grow Successful Membership Sites … 10 Vital Traits