Demystifying Life Time Value (LTV) for visitor attractions
In visitor attractions, memberships and season passes provide recurring, higher margin revenue streams alongside single visit admission and upsells. In recurring revenue model, member or fan Life Time Value (LTV) is an essential metric to track to understand true, sustainable growth.
What is Life Time Value (LTV)?
LTV is a measure of the total revenue expected from a customer over the period of their engagement – often across multiple years. It is an important metric to track because it balances the customer value not just in membership growth, but in member visits and engagement, and offset by member churn. Because of the often higher and multi year nature of this value in memberships, larger per unit investments can be justified in the marketing acquisition cost of new members and ongoing cost to serve of the member base. Understanding LTV helps support a more aggressive level of investment in these areas and a more sustainable balance of this investment across attracting versus retaining members longer term. Beyond growth and retention, knowing and tracking LTV can also help attractions achieve higher levels of profitability by increasing the focus on member visits, engagement and spend. Having such a comprehensive view of value in a single metric is a powerful tool for leading growth in this space.
For members or season pass holders in visitor attractions, LTV takes into account:
- The value of the membership subscription
- Over the top admission spend, such as exclusive event tickets or accompanying passes
- Onsite upsell for each member visit, such as hospitality or retail
- Digital spend over the course of the membership, such as through ecommerce
- Member churn over time, which governs the duration of the average member lifetime
How to Calculate LTV
Simply put, LTV is measured by calculating the average revenue that each member brings, and dividing it by the revenue churn:
LTV = Total revenue per member / Subscription revenue churn
However, both of these components are more complex to calculate in their own right:
- Total revenue per member, a sum of
- Average price of the membership or season pass
- Revenue per visit (including onsite upsell such as hospitality or retail) multiplied by the average number of visits per member
- Total additional spend, such as ecommerce
- Subscription revenue churn, calculated as [1 – retention rate], where the retention rate is equal to non-new revenue from membership subscriptions, divided by the total revenue of the same from the last period (on a monthly basis, if revenue is recognized over the course of a year or on an annual basis if not)
What data you need
Getting all the data you need to calculate such a comprehensive measure can be tricky. Though you can start with a more basic measure, to achieve it in full, your venue will need the systems integration and data intelligence to track member visits and identify member spend across various lines of business.
- Average membership revenue, sourced from Customer Relationship Management (CRM), which should take into account freebies, discounts and special offers
- Total membership revenue, sourced from Customer Relationship Management (CRM) – you’ll need to subsequent periods of time (on a monthly basis, if revenue is recognized over the course of a year or on an annual basis if not)
- Average annual number of visits per member, sourced from your ticketing or CRM system, depending on how you track on site check ins
- Total spend onsite, sourced from your Point of Sale (POS) system, identifying member transactions
- Total spend online, sourced from your ecommerce system, identifying member transactions
Once LTV measures are in place, these become a powerful insight to analyze, monitor and goal improvements to increase member value through levers such as:
- Increase price of membership, balanced against any reduced demand from price sensitivity
- Increasing the conversion of member upgrades to higher priced tiers of membership
- Increasing the average annual visits per member
- Increasing onsite spend, including retail and hospitality
- Increase the frequency and basket size of digital spend, such as ecommerce
- Decreasing member churn
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