Member Lifecycle Value & Retention

The Economics of Retention

Acquiring a new customer costs 5-7x more than retaining an existing one. A 5% increase in retention can increase profits by 25-95%.

Calculating Member LTV

Simple LTV = Average Order Value × Purchase Frequency × Customer Lifespan

For a fashion retailer: $85 AOV × 4 orders/year × 3 years = $1,020 LTV

Loyalty members typically have 2-3x higher LTV than non-members due to higher frequency and AOV.

The Retention Curve

Customer retention follows a predictable curve:

• Month 1-3: Critical engagement window. 60% of churn happens here.
• Month 3-6: Habit formation. Members who survive to Month 6 have 80% 1-year retention.
• Month 6-12: Loyalty deepening. Cross-sell and upsell opportunities peak.
• Year 2+: Advocacy stage. These members become your referral engine.