If 76% of the average app’s new users will fall away within three months, how do developers know where to concentrate and maximize their marketing dollars? The Apps Alliance Business and Revenue Working Group released a best practices guide for measuring and maximizing customer lifetime value (LTV), which may increase revenue and ultimately lead to a successful, sustainable business.
LTV, defined as the total revenue generated by a single customer from app download to deletion, can be calculated in various ways, but is only valuable if the company retains benchmarks for measurement. For example, comparing LTV to customer acquisition cost can be especially helpful as companies strive for sustainability. Giving a more holistic view of the customer and revenue, LTV demonstrates the need for engaging users beyond the typical “churn and burn” strategy.
Rather than focusing solely on total revenue, LTV helps developers identify more lucrative customer segments and provides an insightful glimpse into future profits. With an emphasis on integrating LTV into a business, the paper explores the importance of LTV, details various methods for calculation, and outlines best practices for optimizing LTV.
Again, LTV focuses on quality over quantity. There is no silver-bullet technique with LTV, and there are lessons to be learned as to how this metric fits best with any given business. Regardless of calculation method, the paper demonstrates how LTV is becoming a required metric for gauging the health of a business.
So, is LTV worth the time and effort if your company isn’t already utilizing this metric? The short answer is yes, and the App Developers Guide to Measuring Customer Lifetime Value will ease the learning curve as businesses begin to truly understand the value of understanding their customers in a different way.
Is your business calculating LTV? If so, are you taking full advantage of this metric to gain a holistic view of your users and revenue?
You can read the App Developers Guide to Measuring Customer Lifetime Value in full here. The Application Developers Alliance held a Google+ Hangout discussion about this paper on October 16th, 2014. You can view the video here.
Apps Alliance Business and Revenue Working Group Members