Traditionally LTV, customer or user lifetime value, is defined as ‘exactly how much each customer is worth in monetary terms’. However, what that definition is missing is the variety of ways customers can provide value besides direct monetary revenue. For example, take Bob and Sue.
From tradition LTV calculations, Bob appears to have a much higher LTV. However when you begin to consider other factors that affect customer value the true LTV calculation is revealed. When you consider the revenue from the friends that Sue invited, her LTV is actually much higher.
The diversity of mobile applications is expanding daily. This leads mobile app developers to continually explore new ways to make money and derive value from users. Calculating, predicting and basing decisions on LTV should encompass all avenues of customer value. We need to redefine how we think about mobile user LTV. As a marketer, by expanding your definition of LTV, you will challenge yourself to create new ways to derive value out of your users and increase your mobile revenue.
One of the most important factors that should be incorporated into customer LTV is ‘value from virality’ or the K-factor- with ‘K’ representing the coefficient for virality. The equation for virality is often written as: LTV= (1+K) x ARPU.
Virality, as portrayed in the example above, refers to users who socially share your application by word of mouth therefore leading to the exponential spread of your app. Getting your app to go viral and increasing your users’ K-factor is necessary for any app developer. Once you integrate virality into your app the way you will look at your users and calculate LTV will significantly contribute to making better data-driven decisions and more successful mobile apps. To learn about Medio’s latest product that enables app developers to unlock the virality of their mobile application please visit www.k-invite.com.