What is the lifetime value (LTV)? It’s the total value of all revenue generated from an individual customer. To calculate Lifetime Value, you need to know how much revenue each customer generates over their entire lifespan with your company.
Lifetime Value is a metric that helps business owners determine which customers are worth spending more time and resources on. It also allows them to identify expensive customers that they should probably let go of. This article will help you learn everything about calculating LTV so that you can optimize your marketing strategy for maximum profit.
LTV in Mobile Marketing:
What is LTV in mobile marketing? It’s a metric that helps business owners determine the financial value of their customers. In other words, its how much revenue they generate over time through different channels such as ads and purchases.
Mobile marketers like AppsFlyer use LTV to help them decide what marketing strategies will be most cost-effective for reaching out to new users while maximizing return on investment (ROI) from existing customers. For example, imagine that you’re driving a new campaign and running it on two ad platforms: Facebook and Google AdWords.
While your LTV across these channels is $12, you can spend up to $20 per customer with each platform before the cost outweighs the benefit of finding new users for your business. In this case, you’d want to prioritize Facebook over Google AdWords because it would generate a higher return on investment. You can reach more users for less money and get better results in the long term by investing in Facebook ads than buying clicks from Google’s platform.
LTV is also important when deciding whether or not to spend marketing dollars on a new user. If your LTV is low ($20), the cost of acquiring a new customer will likely outweigh their lifetime value to you. For such cases, it’s not worth spending money on them at all.
Once you know how much revenue each user generates over time and what kind of marketing channels they respond best to, you can begin to plan out your digital marketing strategy. In order to make the most of LTV and get accurate, actionable data that you can use for growth, it’s best to combine different types of customer information into a single metric.
Calculate Lifetime Value of Customer :
Calculating LTV requires several pieces of information about your customer base:
- Customer lifetime value (LTV)
- Churn rate
- The percentage of customers who stop buying from you over time
Calculate churn using cohort analysis or by dividing the total number of lost users in a given period by the total number of active users at the beginning of the same period.
Other measures that are needed to be known are:
- Marketing costs per customer
- The channels through which they’re most likely to convert
- Average revenue per user
- Your total number of users
- Cost per acquisition (CPA)
- How much does it cost to acquire a new customer
[Total Customer Revenue] / [Average Lifetime per customer] = LTV formula
Tips to Increase Customer Lifetime Value:
- Increase average order value (AOV)
- Encourage recurring purchases and subscription services
- Reduce customer acquisition costs through effective marketing campaigns
When you’re working on increasing LTV, it’s important to focus on new customers as well. Even though lifetime value is based on data from existing users, knowing how much revenue you can expect from new ones is integral to your marketing strategy.