September 19, 2021
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In community, consider Lifetime Commitment (LTC) instead of Lifetime Value (LTV)

topics: strategy metrics
Rosie Sherry
Here's my Rosie thought of the day.

In business, there is LTV = Life Time Value

In community, there is LTC = Life Time Commitment
Lifetime Value (LTV) is a popular term in the business world that aims to define how much revenue an average customer brings in over their lifespan.

Here's a LTV formula (via ProfitWell). Baremetrics has a decent write up on LTV too.




Lifetime Value Formulas


Typically speaking, you don't want your Customer Acquisition Costs (CAC) to be higher than your Lifetime Value as that normally means you're running a loss-making business. As with all rules, there are exceptions to this — a company may have investment or a runway to support them, or perhaps they have other products that support less profitable aspects of the business.

I highlight the CAC vs LTV as its core to the survival of businesses. Whilst not everyone will go out of their way to be specific about the LTV of a customer, generally speaking, understanding LTV is important because it helps guide businesses to profitability. 

Businesses need to be profitable to survive, however when we think about it from a community perspective we need to change our lenses.

Community needs are typically not the same as business


We can borrow (business) ideas, adapt and evolve them to make sense for building community. 

And here is the thing — we can likely measure LTV of community members and then compare them against 'normal' customers, people who aren't active community members. I'm pretty sure, on average, that active community members will generate more revenue. 

In this context, it would be interesting to conduct analysis on these kinds of things. However, even if they don't generate more revenue, community provides value in so many different ways.

However, the value of community goes deeper than that — there is community value to be gained in so many areas that we should refrain from measuring community members (solely) on their LTV.

Lifetime Commitment (LTC) feels interesting to me because it focuses our energy on the commitment of the community journey rather than the transactional business value

When I think about LTC, I think of:

  • How long can we realistically expect members to commit to our community?
  • Are there different levels of commitment we can design for?
  • What's the minimum, maximum or average commitment that we can expect?
  • Can we create segments for different types of commitments?
  • Is commitment about time, community activity, or impact?
  • How can we seek to understand and co-design the goals or journeys people wish to go on?
  • What 'community activities' can we expect of them?
  • What is valuable to measure?
  • How can we explore data meaningfully?
  • Are committed community members always customers too? Can the relationship change?

Looking at how members can commit will force us to think about things that matter


These questions will then force us to design community accordingly. It will make us think about the segments. The timelines. The relationships. The community activities that need to be encouraged.

It will help us design a community journey. 

Not just the onboarding, but everything in between, and then also the offboarding at the end. It will make us think about the goals of community members and how the community can support them along the way. 

These are the things that can get exciting to think about.

So, let us imagine a 'school' as an example of a community:

  • Community segments could be: leadership team, teachers, catering staff, contractors, guardians/parents, students
  • But then maybe members could be further segmented based on talents, special needs, clubs, or subject matter interests.
  • Not all students will participate equally, for a huge variety of reasons.
  • There's a natural maximum time frame for students to be a member, 7 years for primary school, here in the UK, for example. Parents with more than one child may end up staying for a longer time. Some families will move away, or just choose to go to another school.
  • A community activity for a student could just be showing up, or handing in homework, going above and beyond to help someone or perhaps contributing to a student theatre production. For a parent, it might be being on the PTA, or helping out at an event.
  • What does impact mean for the school? Helping raise money? Becoming more inclusive? Improving test results? Do students have good mental and physical health?

Through the simple act of listing out potential segments and thinking about the length and type of commitment people may be able to give, it starts to fill me with ideas and ways that we could better cater for this school community.

A not very serious LTC formula 😅

If I was to take a stab at creating a LTC formula, it's a bit simplistic, but maybe it would be something like:

LTC = activities per month x activity weight x member lifetime

I went with activities as the main focus of measurement as communities are often defined by how people contribute and show up, or not. I view a community activity as something that happens when people show up in your community.

(Orbit also uses activities, I am admittedly, influenced by them for the obvious reason that they are my awesome employer.)

An activity
could be as simple as signing up for a newsletter, commenting on a post, all the way to speaking at an event. Not all activities carry the same weight, speaking at an event carries way more weight than subscribing to a newsletter.

Member lifetime can be tricky
, as often people remain a member of communities 'forever', unless they are cleaned up from inactivity. Having a definition of what an active member is could be important in this context.

A hypothetical example of LTC in action:


A typical and very boring member persona (someone who likes to come along for the ride):
  • Reads newsletter 4 times per month at activity weight of .5 = 2
  • Posts 4 times a month on Slack at activity weight 1 = 4
  • Comments 10 times a month with an activity weight of .5 = 5
  • Responds on Twitter 5 times a month with an activity weight of 1 = 5

Total: 16 (sum of monthly activities score) x 48 months (four years a member is expected to hang around) = LTC 768

And what does 768 mean? 

Well, perhaps that becomes the amount of community activity effort that:
  • committed members tend to churn at
  • means the member is an active participant, over an observer.
  • maybe it means that to become a builder or an advocate, the number of activities needs to double
  • maybe the 'committed number' means we can mix and match community activities as a general guide to help members get to where they want to be

By breaking community journeys down into parts will help us think about the practical day to day community activities that we need to lead with as community organisers.

How we get there is another question, or that's the story that I'm still pondering about. 😅

Where am I going with this?


I don't know, tbh! 🤣

This is all rough around the edges thinking at the moment, but I feel that perhaps if we can think of Lifetime Commitment of people in our communities, then maybe we can help predict and align their community activities better.

I'm not sold on the formula idea, more important to me is the idea behind LTC and how we can align community strategies with the concept of commitment over transactional value.

 

—Rosie Sherry