Guide

The Sales & Growth Guide for Membership Websites



Sales metrics are the informant of a strong growth strategy for membership website. They help you establish what KPIs or lead metrics you should be focusing on. However, knowing which metrics to focus on at which stage of your membership website can be tricky.

Here’s a quick guide on when and where to focus your efforts:

  1. Pre-revenue / Startup Stage: $0 to $1k MRR
    Focus metric = Lead Generation
  2. Early Adoption Stage: $1k to $5k MRR
    Focus metric = Early Customer Adoption
  3. Sales Stage: $5k to $10k MRR
    Focus metric = Customer Acquisition Cost (CAC)
  4. Analysis Stage Stage: $10k – $25k MRR
    Focus metric = Churn & Retention
  5. Growth Stage – $25k+ MRR
    Focus metric = Customer Lifetime Value (CLV)

Pre-revenue / Startup Stage: $0 to $1k MRR

Focus metric = Lead Generation

If you’re just starting out with zero or little sales, you’re key metric should be leads. Don’t let anything else distract you. Your goal should be driving as much traffic and awareness to your site as possible in effort to create lead volume. As the leads come in you’ll be able to see how much traction your membership offers create.

Here are a few ways to generate early leads:

1) Google/Facebook Ads

The fastest way to drive traffic to your site is by paying for ads. Two very common platforms for advertising are Google Adwords and Facebook. Both have massive reach to give you a quick and effective way to reach your audience.

However, they have slightly different targeting mechanisms. For example, Google Ads let you target people by “search term” – i.e. what people are searching for. Whereas Facebook allows you to target people by demographic – i.e. what traits or characteristics people have as part of their profile.

So decide [how] you want to reach your audience and then test out a few ads to see which drive the most traffic to your site.

2) Blogging

A free alternative to paying for traffic (ads) is to create some content yourself through blogging. Not only is blogging a great way to capture organic search traffic, but it helps you establish an ongoing content strategy which can only help the business long term. That said, be mindful of where you focus your blog efforts. Tools like MOZ and SEMRush allow you to do initial keyword research and analysis before jumping into blog post creation.

3) Social Activity

Another free way to drive traffic to your site is via social networks. There are advantages of posting to social networks like Facebook, Twitter and LinkedIn because that’s where people already are – i.e. you don’t have to advertise to reach them. By creating relevant posts and hashtags you can try to pick up interactions. However, this is not a simple task since social networks have fairly advanced algorithms. So be ready for some research and experimentation if you plan to craft an organic social strategy.

Early Adoption Stage: $1k to $5k MRR

Focus metric = Early Customer Adoption

Now that you’ve got some leads it’s time to turn them into customers! Your focus at this stage should be sales to early users, which we call “early adopters.” These are the first people to use [and pay] for your memberships. There are a few reasons these customers are critical for growth:

1) Validation

When people pay for your products or service it gives you validation that you’re providing value worth paying for. This is crucial for any new subscription business. Most people will try something out for free, but few people will actually pay for a product/service, especially if it has a recurring subscription.

2) Early Revenue

The sales and revenue from your early adopters set the foundation for early P&L (profit and loss) analysis and allow you to continue growing. Plus, I can tell you from experience that it feels “damn good” to get those early sales! 🙂

3) Early User Feedback

These early customers will also provide initial feedback on your product or service that is extremely valuable. Listen to these customers closely and dig into their feedback. Not only will they likely be willing to share it, but they will probably spot things you may have missed with your initial launch.

Sales Stage: $5k to $10k MRR

Focus metric = Customer Acquisition Cost (CAC)

Once you’ve established some sales and revenue it’s time to turn your sights to customer acquisition. Drill down into your lead sources and then find out which source is most profitable.

How do you identify a profitable customer acquisition source?

Let’s use Facebook ads as an example:

1) Figure out how much you spend on FB ads each month.

Example = $500 total ad spend

2) Figure out how many leads you get from FB each month. You should be able to use their pixel tracking to identify this number, or some other conversion metric of your own.

Example = 25 leads

Figure out how many of those leads became customers.

Example = 2 customers

Now we can crunch some easy math to identify our customer acquisition cost for Facebook:

500 / 25 = $20 per lead
500 / 2 = $250 per customer

Do this same process for any other advertising or growth channels you’re investing in.

Analysis Stage Stage: $10k - $25k MRR

Focus metric = Churn & Retention

I always congratulate startups and early stage businesses on passing the 10k MRR mark, since MOST people never get here. To be honest, most people never generate a dollar. So pat yourself on the back if your business is doing 10k MRR+, especially if you’re bootstrapped.

By now you’re at a healthy MRR that’s proven your business can scale. So your sights should be set on how to grow and retain existing customers. A common rule of thumb in subscription businesses, and any business, for that matter:

It’s much easier to sell to existing customers than acquire new customers.

With this in mind, here are some common strategies for better user engagement and retention.

1) User data & event tracking

First, it’s essential to recognize how your members and customers interact with your content. Some useful information might include:

  • What pages are they visiting?
  • How much time are they spending in different areas of the site?
  • What things or elements are they clicking on?

This kind of data can be captured in various tools such as Google Analytics, Mixpanel, and FullStory to name a few. Once you have this data, you can start analyzing it to answer some of the questions above.

**Tip – we like FullStory for full user event tracking. Their software gives you insight into what users are doing via screen recordings.

2) Member surveys

I know “surveys” sounds static and boring but with the right approach they are an effective way to gather critical feedback. Some fun ways to enhance or modify surveys include:

  • Create quizzes instead of surveys. People love being quizzed. So find a fun way to challenge them and offer a grade on their submission.
  • Offer giveaways or incentives for user feedback. Tools like King Sumo provide an easy way to build and manage giveaways.
  • Establish a way to show that you’re serious about implementing user feedback. If members think you truly value their opinions they are way more likely to offer it. Tools like Survey Monkey make it easy to post a log of user submitted responses.
3) Community tools

Most thriving membership sites have some type of community aspect that draws and retains members. This fulfills our basic human desire for social interaction. It’s also an added bonus of paying for a recurring subscription.

Some common examples of community tools include:

  • User comment threads
  • Member forums
  • Member quizzes and polls
  • Member spotlights
  • etc.

At the end of the day, your members just want to be heard and/or recognized. This is a natural human desire – to feel like you’re part of a community. So give them a reason to feel welcome and part of the group.

Growth Stage - $25k+ MRR

Focus metric = Customer Lifetime Value (CLV)

Once you surpass the 25k MRR mark you’ve probably created a proven sales strategy with profitable customer acquisition channels and some idea of your churn/retention rates. You’ve established that the business has legs and is doing over 250k ARR. Again, if you’ve made it this far, congrats! This is not an easy feat, so make sure you’ve celebrated your win before digging into the next phase of your business.

At this stage it’s time to focus on your customer lifetime value. This is the total value an average customer is worth to your business, and arguably one of the most important metrics you’ll ever track. By knowing this, you’ll have a sense of a long-term growth model – i.e. the ability to scale your business.

How to calculate CLV

Calculating exact customer lifetime value can be tricky, especially if you have multiple subscription options or product offers. However, the formula for basic CLV is easy.

*Note – there are much more advanced ways to calculate CLV. However, for the purpose of this guide, I’m going to show you a simple way to calculate CLV so you can have base metrics to operate from.

Here’s some simple math for you to use:

Total membership revenue / Number of members = Simple CLV

Monthly Membership #1 CLV

$25,550 / 115 = $222

Annual Membership #2 CLV

$67,220 / 449 = $149

So in this example case, the monthly members ($222 CLV) are worth more to the business than the annual members ($149 CLV). Knowing this is essential to your growth strategy.

Now that we understand CLV, let’s talk about how we can grow it. Two effective ways to increase CLV and grow your customer base include:

a) Additional Product Offerings

The quickest way to increase CLV is to offer your customers move value through additional product offerings. Chances are if they found value from one of your past products they will likely find value from something else you produce. So think about what [other] things you can create and sell to them.

Some common examples:

  • Premium subscriptions
  • Subscription Add-ons
  • One-time offers
b) Partnerships

Another strategy to drive higher CLV and overall growth is to invest in partnerships. The idea is to find partners that promote your products and/or send potential customers your way. This is arguably the best way to truly scale your business without a lot of internal resources (e.g. your own people and capital). However, this can also take time and involve significant effort. Building great partnerships is not something that happens overnight.

Here are a few tips for building effective partnerships:

1) Find partners who operate in your specific market niche.

If you both solve similar problems for the same customers there will be instant alignment.

2) Look for partners at similar business stages.

For example, don’t go after an industry giant if you’re just getting started. You won’t have any leverage or reciprocal value to exchange. You’ll also move at very different paces. Instead, focus on businesses that are very close to you in size and revenue.

3) Identify partners that advocate the same core values.

Investing in partnerships is a long-term strategy, so make sure you partner up with people you would stand behind. The synergy and collaboration will be much stronger and more effective if you work with people who have the same core values.

Summary

And that’s the conclusion of this guide! Hopefully you can resonate with one of the stages above and take something away from this to execute in your business.

If you want help or assistance with one of these stages we offer some coaching packages that you can apply for. Just contact us with “Coaching Packages” as the subject line.

Ali Jafarian

Ali is the founder of MemberDev. He's a serial entrepreneur and software engineer with over a decade of experience building technology. Ali's spent the last 5 years focusing on membership websites and the subscription business model. He loves helping start-ups and small businesses with early stage development and growth.

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