What is Lifetime Value ?
The amount of money a customer will spend in their lifetime in a particular company. LTV is a method of determining the worth of a new user. To put it another way, how much is that user expected to be worth to your app throughout their association with it. LTV can be used for various objectives, including determining the success of your app, reminding you of the importance of customer loyalty, and anticipating growth. However, user LTV is what drives (or should drive!) your app marketing spend at its most basic level. It calculates the value of each new user and sets a limit on how much you should pay to get that user. There are three types of factors that make into LTV: The amount a user contributes to your app’s earnings is known as monetization (in the form of ad impressions, subscriptions, in-app transactions, etc.).
Retention refers to a user’s level of engagement with your app and how frequently they return to it over time. Virality is the sum of the new audiences that a user will recommend to your app. LTV can assist you in making the best choices for your app marketing strategies. Continuing with the previous example, if a customer has a $2.25 LTV and a $1.75 user acquisition cost, you should stick with your current advertising plan. If your app’s user acquisition cost stays below $2.25, you’ll make a profit on each new user and have a positive return on investment (ROI). It’s also true in reverse. If the cost of acquiring a user exceeds the person’s lifetime value, you should reconsider your app marketing plan.
The LTV measure aids marketers in adjusting their advertising budgets and determines how much money they can spend on customer acquisition while still profitable. When calculating LTV, the first step is determining how much income an app generates and from which sources. With plenty of data to work with, the marketer can correctly optimize revenue streams, such as in-app purchases, in-app advertising, subscriptions, and premium/paid-for apps. All of your in-app events may be accurately defined and analyzed with the help of a mobile measurement and attribution provider.
Even though the User Lifetime Value (LTV) metric is one of the most difficult to measure and track, once you do, you’ll have a far clearer picture of how to allocate campaign budget resources, as well as a whole new approach to perfecting your acquisition and retention techniques. Use tools like Google Analytics to calculate your LTV numbers and visualize them so you can observe the lifetime value trend among your users more clearly.