The document discusses the concept of Lifetime Value (LTV) and its calculation methods, emphasizing that averages can be misleading. It outlines factors that influence LTV, such as revenue per user, user lifetime, and acquisition costs while recommending a thorough approach to understanding customer acquisition and churn rates. Additionally, it advises against relying on automated reporting and stresses the importance of detailed insights into acquisition channels and customer retention costs.

1. Optimizing for
LTV
Sharath Bulusu

2. LTVis simple

3. LTV
=
revenue per user per time
x
user lifetime
-
customer user cost

4. LTV
=
average revenue per user per time
x
expected user lifetime
-
average user acquisition cost

5. LTVis not simple

6. Averages are misleading
(and the preceding slide has 3 of them)

7. LTV
=
average revenue per user per time
x
expected user lifetime
-
average user acquisition cost

8. average revenue per user per time
• how many product / service categories do you
offer?
• do you attract different user types in different
seasons?
• how much does purchase frequency, volume &
value vary over time?

9. expected user lifetime
• expected user lifetime is easy
• 1 / average churn rate
• are churn rates really constant?

10. average user acquisition cost
• easy. Marketing spend / total customers acquired
• or not.
• do you know your acquisition cost by channel?
• do you use channels that have varying seasonal
cost?
• how competitive are your most important channels?

11. some recommendations
• don’t fall for automated, generic reporting
• build your LTVreports the hard way
• understand your acquisitions channels deeply
• understand churn, acquisition stats by (time)
cohort

12. what I didn’t talk about
• how much does it cost you to retain customers?
• what is your cost of capital?
• … and a lot more