Understand and Measure Customer Lifetime Value
Does a low cost per install (CPI) mean you should pour all your marketing dollars into paid acquisition? Does a high average revenue per user (ARPU) mean your app’s sitting pretty in the black? The answer to either question is an unequivocal no.
When evaluating the health of their mobile apps, many marketers automatically turn toward ARPU and CPI. But while it may be common practice, relying on these two metrics alone provides just one side of the picture. What’s missing is a holistic understanding of the customer, which boils down to a single metric known in the world as Customer Lifetime Value (CLTV, or just LTV). That’s why we wrote our new guide, Understand and Measure Customer Lifetime Value.
Lifetime value is a simple yet powerful heuristic for assigning a dollar value to both the tangible and intangible value a customer contributes to the health of your mobile app over the duration of their time with your app (‘lifetime’).
The tangible comes down to what we already know: Average Revenue Per User and Cost Per Install. The intangible dives deep within the customer journey to extend the definition of value beyond its monetary connotation. Factoring in the intangibles of customer loyalty, satisfaction, engagement, and retention, LTV provides a truer assessment of how much a customer relationship is worth to your app.
In this new guide, we break down mobile customer lifetime value into its three parts and provide tips and best practices for calculating each component, including:
- Why understanding LTV is important
- The three main drivers of LTV
- How to measure and use LTV
In wrapping up, we bring everything back together in the form of one very meaningful metric to be used against the cost of customer acquisition (CAC) as a way to gauge the return on your marketing investment.
Success in the app business often comes down to knowing your numbers—and a firm grasp of customer lifetime value is what will ultimately differentiate your app from the sea of millions of other apps competing for your customers and revenues. Grab your copy of Understand and Measure Customer Lifetime Value and harness the power of LTV to your advantage!