Lifetime customer value, also called customer lifetime value (CLV), is one of the most important metrics out there. The logic is self-explanatory, so we won’t belabor it because you’re all smart people, but the bouncing ball goes like this:
Forbes has even called it “the only metric that matters.” And while it’s a few years old by now, we actually did a “Whiteboard Wednesday” on the CLV topic back in the day.
This can vary by organization and app monetization models, but here’s a general formula to consider:
Here’s what everything represents:
To get each of the inputs, you’d do this:
At the most basic level, you’d improve customer lifetime value by having an app user stick around longer and do more with the app. In order to get a customer to that point and not on a four-month churn, you would need:
Of these, personalization is the most important. While many brands still operate on broadcast messaging or broadcast with some degree of A/B work, customers are increasingly frustrated by that. If you’ve already bought a pair of jeans or a hotel in Cincinnati, who wants to get a push notification about that? It shows the app doesn’t know you and that can lead to disengagement, which kills customer lifetime value.
Also to consider: an omnichannel strategy. We talk about this with clients all the time, and one of the easiest ways to conceptualize it is this: Let's say you buy a pair of jeans on the web, then you get a push notification to buy those jeans on mobile. Are you frustrated right now? Yes. You just bought those jeans! Each functional silo of your business needs to be speaking to the other ones.
There’s another mathematical rub here, and we need to bring in more acronyms:
As a general rule of thumb, this is how you want CLV and CAC to interact:
Makes sense. If the lifetime value of a customer is below that of the cost to acquire the customer, your app will lose money -- and maybe even by the boatload. But if lifetime value is higher, it’s totally logical to spend on campaigns to drive install awareness.
What else have you seen done successfully around mobile CLV?
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