LTV ,in other words user lifetime value, is a crucial metric for app marketers. LTV is the average value of a user until the user ends his life cycle on the app. But, it is more than a number. LTV informs marketers about how much they can pay to acquire 1 user and keep ROI positive. If the average user generates $2,35 in LTV, the marketer can spend up to $2,30 CPI and still remain ROI positive. Simply put, the difference between the LTV and CPI is the either profit or loss from the new customer.
LTV is calculated based on 3 metrics: ARPU, Retention Rate and Virality/Referral Rate.
LTV = ARPU * 1/(1-Retention Rate) + Referral Value
So when you are looking for the ways of improving LTV, you need to dig into development of these 3 metrics. Today, I am going to talk about improving LTV by focusing separately on those metrics.
1) Improving ARPU
ARPU is calculated by dividing the revenue by the number of users in a specific period of time.
Segmenting app users is a good start in order to improve revenue. By clustering them, you will be able to not only detach the high valuable users who tend to spend in the app, but understand what your users are tapping, watching and purchasing in the app. You need to create as much as personal and continuous with valuable users. Scheduling rich media campaigns and promoting app without making them frustrating will encourage them to spend more on the app.
Segmentation also reduces costs by showing extra spends without any session and revenue. Analyze these users who cost you but haven’t started your app. Are they unavailable users? Check if your target users are able to use your app on their device. If you try to attract users whose devices are not able to work your app correctly, it would cost extra. Try to set your targets also based on operating systems of users devices that your apps are available for.
After you decide on target users, test different ad formats and creatives for your engagement campaigns. Do not only stick with static campaigns, in fact they are even considered as old-fashioned. Test more attractive and dynamis ads such as video, playable. Playrix (mobile game app brand), after their Facebook playable ad test in 2018, their Facebook received 2X lower CPI, 1.7X higher ROAS and 1.5fX more IAP.
Last but not the least, revenue is not sourced from in app actions and ads in app. Therefore, if you publish ads in your app, you need to optimize them as well as IAP’s. Choosing appropriate places in the app is an important consideration. Frequent long ads and wrong spots would irritate users and cause left outs. For instance, for the games with multiple levels, a better option would be to place ads after or before a new level than in the middle of a level. Or as another option, ads can be placed in order to offer an option to users to get extra live, reward.
2) Improving Retention Rate
Retention Rate is an active lifecycle of an app user.
Smooth onboarding process is an important part to keep users engaged longer. The first image of an app provides the app quality for users. Showing your app’s unique advantages by benefiting visual images such as progress bars helps users not feel lost on the onboarding. Keep users informed, enthusiastic and engaged without exhausting them.
Reengagement campaigns and push notifications could be used as a reminder for your existing but not active during the last 3 days. These campaigns shouldn’t be considered as regular install campaigns. Using these extra shots intelligently and without tiring the users out quite matters. For Matt Goldhill, Creative Strategist at Mobile 5 recommends to marketers: “Focus on the thing you want your app to achieve and then commit to it wholeheartedly. The trend at the moment is for an app to do one thing really, really well, and that’s what it’s there for. Make it as easy, compelling and as rewarding as possible to use. By focusing on that, it’s going to be engaging no matter what.”
Content is very important: it should focus on reacquiring users not only once but constantly. For instance. irrelevant app notifications, rewards, gift vouchers or free lives that aren’t easy to redeem, can put off valuable users. So keep focus on your product goal and how to repromote it within the app. Additionally, depends on your app structure and product, deep links become worth trying for re engagement(and for retargeting) ads.
Deep linking turns retargeting or re engagement campaigns into personalized ads by linking users to specific pages within the app. As such, when a user searches for a flight to London and then later clicks on an ad with a London flight offer, a screen appears displaying that relevant content when the app opens, ensuring much higher conversion rates. Users who arrived from a deep link had a 75% increase in 1-day, 89% increase in 1-week, and 103% increase in 1-month retention.
“According to average statistics, even a 2% retention increase can cause a 10% cost reduction.”arpubrothers.com
3) Improving Virality(Referral Value)
Virality can be defined as the number of new players an existing player recruits (for free), and is often referred to as a “K-score”. As virality boosts organic downloads, in turn increases overall campaign ROI.
Virality is calculated by multiplying “the number of invites a players sends out” by “conversion rate of the installs”. As long as you improve any of these, the virality rate will increase.
One of the popular way to encourage players to send out more invites, leverage tactic: causing a mutual advantage for both sender and receiver. Ideally, both the player and the invitee will benefit from sending the invite. You can reward the player with free life, coupon, discount and the same—or different—awards to recipients, so the user feels they are actually helping their friends rather than disturbing them.
All of the options above are related to each other. Every change occurs for any of them, you will see its reflection on other metrics as well. When you evaluate A/B test for your ads, it doesn’t improve not only your ARPU but also retention rate. It is a continuous process since the app market is very competitive. LTV guides you about your cost limits and is still one of the main KPI in the app industry.