Applying a Lifetime Value Strategy

​A Lifetime Value Strategy is designed to increase your customer’s value during a certain period of time. For example, the lifetime value of your customer begins at the first interaction, their value increases at the first purchase, and their value further increases after repeat purchases and referrals. The total value of your customer shouldn’t end at the initial purchase, rather, your customer’s value should increase as time goes on. In this article, I discuss how to increase the value of your customer over a period of time.
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Enabling the Customer to Improve Your Company
Many marketing strategies that orbit around the idea of Lifetime Value (LTV) focus on the difference between how much it costs to acquire a customer and how much value that customer brings to the company. If it cost $10 to acquire a new customer, but that customer only spent $1 on their initial purchase and then disappears, your company is not going to remain a company for very long. The job of the marketing strategist is to figure out how to increase the value of the customer, so that over the long run, they spend more money than it took to acquire them. One way to do that is to enable the customer to help improve your company. 

​Taking a note from Michael Schrage’s article from the Harvard Business Review, he states that, “customers become much more valuable when…
• they give us good ideas
• they evangelize for us on social media
• they reduce our costs
• they collaborate with us
• they try our new products
• they introduce us to their customers
• they share their data with us”

To me, that almost sounds like a focus group on steroids. To collect that kind of information (without herding a group of customers into a closed room), you’ll need an LTV strategy integrated with your Marketing Content Strategy, which coincides with the fourth phase of the buying cycle, which is retention. Not only are you looking to retain your customer, but you’re looking for valuable feedback: how do we improve, what do you want, how do you use the product, what are your pain points, what are your comfort points, and so on. You will need to provide a means for your customers to provide that information, whether through a forum, a chat room, social media accounts, meet ups, interactive webinars, or an opportunity to be showcased in a case study; the avenues to obtain feedback are out there, you just need to implement them.

​Having an active community that provides feedback, suggestions, reviews, and input are vital to a successful Lifetime Value Strategy.

How LTV Applies to the Mobile Game Industry
The mobile game industry, as reported in VentureBeat, was worth $91 billion worldwide in 2016. It’s an industry that’s only going to grow as time goes on. And now, with Augmented Reality and Virtual Reality taking off, the mobile space is only going to keep getting larger—which means the competition is only going to get tougher. 

So, how does the mobile game industry look at the Lifetime Value of their customers? For some, it comes down to Cost per Install (CPI) and Cost per Click (CPC), which translates to: does it cost more to acquire a customer than it does for that customer to install the game, and when they do, how much do we earn through advertising (the value of CPC). If the customer does provide greater value through an initial purchase than it cost to acquire them, then you’re doing great! If not, then you need to look further on how you’re going to increase the customer’s LTV. The first step is to calculate the Lifetime Value of your customers. 

Lloyd Melnick, author of, Understanding the Predictable: How to calculate, understand, and improve Customer Lifetime Value to build a great company, lists “...three categories of variables used to calculate LTV:

Monetization is how much customers spend over their lifetime in the game; this includes ARPDAU (average revenue per daily active user), ARPPU (average revenue per paying user) and ARPU (average revenue per user).

Retention (which also includes engagement) is how often people come back to your game, how frequently within a certain period of time (e.g., every day, every week, every month) and how often they stay in the game when they play.

Virality is how many additional (free) users each user will bring in (also often measured over a specific period of time).”
Melnick goes on to say, “Live services and continued development should be centered on the fixes that will have the greatest impact on LTV.” In that way, “LTV…[becomes]...the driving force for all of your product decision-making.”

Conclusion
Hopefully, this article explained why the Lifetime Value of your customer is very important: not only does it provide a metric that compares spending to customer value, but that by implementing an LTV strategy, combined with your Content Marketing Strategy, you can increase the value of your customer over time—and at the same time improve your company’s product. The initial purchase is only the beginning, after that, you not only need to retain your customer, you need that customer to provide vital feedback. In that way, you can build a supportive community around your successful business.

If you are interested in applying a Lifetime Value Strategy to your Content Marketing Strategy, get in touch!