What is user LTV?

The goal of every business is to retain its customers. But just retaining existing clientele will not help a business grow. That's where we ask the question, "How much will I pay for a new customer?"...

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  1. The goal of every business is to retain its customers. But just retaining existing clientele will not help a business grow. That's where we ask the question, "How much will I pay for a new customer?" This is quite an interesting subject and involves a lot of opinions, charts and graphs.

    The first thing which you need to do is determine the user LTV (Lifetime Value). In simple terms, this means the amount of money you need to spend to acquire a single new customer. This figure will be different for every business. Depending on whether you are a car dealership, restaurant, chiropractor, etc. your user LTV will be very different.
  2. Mobile App Tracking by HasOffers
  3. So how do you decide on the amount of money to spend on advertising, promoting and marketing every year? Some of the common options include newspapers, television, radio, referrals, Facebook, etc. It is very important though that you keep a track of how every new customer gets to know of you. Then you need to put all of this information onto a spreadsheet so that you can determine which method of advertising is most beneficial for you. Perhaps you could increase that kind of advertising while removing the type of advertising which is least beneficial? This will help you increase the Lifetime value of each new customer.

    But how do you find your potential customer base? That is the big question isn't it? Well, you could use the age old method of trial and error. But that will take a lot more time and will burn a whole in your pocket as well. The important question you need to answer here is how much can you earn in one shot off a new customer. For example, if you can earn around $ 100 from each new customer you sign, you can look at a maximum advertising expense of $ 5 to $ 10. You can look to spend between 5 % and 10 % for every new customer you gain. This is one of the best ways for you to ensure you keep getting new customers while not spending too much money on advertising.

    But when it comes to mobile app developers, LTV is calculated in a very different way. The biggest reason for this is because it is impractical for you to try and derive a discount rate (adjusted for risk) for money earned through a mobile app. It is only the large corporations who can afford this and most small time developers end up spending all their earnings on the development of their apps for which you can't really predict the future earnings with any accuracy. The other problem that mobile app developers face is that discount rates aren't consistent for app developers. This is why mobile app analytics tools use a probabilistic revenue contributions sum calculated separately for each individual user. So you see calculating user LTV for mobile app tracking tools is quite different from your regular run of the mill user LTV.
  4. Eileen Wang of SponsorPay Discusses Mobile User LTV
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