Lifetime Value

Lifetime Value (LTV) measures the total revenue a customer generates during their relationship with a business.

Why it matters

Helps in understanding customer profitability.
Guides marketing and retention strategies.

How to measure

Calculate average purchase value and frequency.
Consider typical customer lifespan.

Details

Lifetime Value (LTV) is a critical metric for mobile engineers and growth teams as it provides insights into the long-term value of acquiring and retaining users. By understanding LTV, teams can allocate resources more effectively, focusing on high-value users and optimizing marketing spend. In a mobile context, LTV can be influenced by app features, user experience, and engagement strategies.

To calculate LTV, consider the average revenue per user (ARPU), purchase frequency, and the average lifespan of a user. These factors help in predicting future revenue streams and adjusting strategies accordingly. Mobile apps can enhance LTV by improving user engagement through personalized content and timely notifications.

Examples & formulas

A simple formula for LTV is: LTV = ARPU × Purchase Frequency × Customer Lifespan.

LTV = ARPU × Purchase Frequency × Customer Lifespan

Common mistakes

Ignoring customer churn rates, which can lead to overestimated LTV.
Failing to segment users, resulting in inaccurate LTV calculations.