Why Customer Lifetime Value is the Most Important Metric for App Developers
How do you measure the success of your mobile app marketing? App developers live and die by their rank in the Apple and Android stores. As a result, it is easy for many developers to get caught in the trap of thinking about success in terms of generating download spikes and rising in the app marketplace ranks. In reality, the most important metric for app developers to think about is customer lifetime value. For app developers, customer lifetime value (LTV) is basically the amount of money that a user will generate over the entire time that he/she uses your app.
Customer lifetime value is often much higher than you might initially expect. And it’s this number – the lifetime value – not the value of a single sale – that should determine how much you should spend on app marketing to acquire a new user. Gaining a better understanding of the lifetime value of an app user can also help you decide how to segment your users so you can find out which customers are most valuable to you and decide where you should focus your mobile app marketing.
Here are a few ideas for how mobile app developers can increase their revenue by focusing on the lifetime value of a customer:
- Increase monetization of your apps through a blended app marketing approach: Keep in mind that not every customer is going to respond to the same marketing approaches, but that’s OK because there are many ways you can keep putting special offers in front of your users and making money from your growing audience – whether it’s with mobile ads, in-app purchases (IAP), virtual goods, cross-promoting your other apps, marketing to your users via social media, or selling real-world merchandise related to your apps. As an app developer, the most important thing you can do to boost revenue is to create an all-encompassing brand experience that goes beyond a single game or a single download. You want to build a broader relationship with your users so that they will want to keep hearing from you over time. And every point of contact with your audience is another opportunity to make money and build on your long-term relationship with your customers.
- Focus on customer retention: The longer someone uses your app the more money you will make from them – but too many apps get deleted because users lose interest. Once you’re guiding your mobile app marketing by the principle of lifetime customer value, you’ll put a new focus on holding on to the customers that you already have. Part of increasing mobile app customer retention is a matter of timing your releases of new content and making smart usage of notifications to keep people coming back – but a big part of improving your customer retention is building a more compelling app from the beginning, by using game dynamics to keep building a stronger relationship with your users over time – by testing them, challenging them, rewarding them, and making them feel like they are “growing” and getting smarter and more fulfilled each time they use your app.
- Don’t find more customers – find more of the “right” customers: One of the appealing things about mobile app marketing is the idea that any app can get really popular and downloaded by thousands or millions of users. But not all users are equally profitable for your mobile app business. Take a segmented approach to find the “right” customers for your app. Don’t just try to add as many users as possible. Instead, try to track the sources of your customers and determine which ones make the most money – analytics solutions such as Flurry, Apsalar and Kontagent can help you here. If you notice that customers from a particular ad network tend to be particularly loyal, spend more money with that ad network. If customers who find your app through social media are more likely to make in-app purchases, look for ways to more aggressively promote your in-app purchases via social media or purchase additional installs from Facebook or Twitter. Always keep analyzing and re-aligning your app marketing tactics to put more emphasis on acquiring the best users.
What’s your take on this? What is the best way for app developers to calculate (or estimate) the lifetime value of a customer? Is lifetime customer value easy to overrate, or underrate?