What Can You Do to Increase Your App’s Customer Lifetime Value?

No business owners know how long a relationship with a customer lasts. But businesses can predict the revenues and profits a customer is going to bring-in in the future, be that months or years. They use this data to know the health of their businesses, limit spending, and set future goals to grow their businesses. In this post, we explain how you can use this data and what you should do to retain your customers.

CLV or the customer lifetime value is a metric that gives an idea about the total amount of money a user is going to spend throughout the engagement with your e-commerce app.

There are two ways to grow your revenue and the brand. And, both must happen:

  • Acquire new customers.
  • Retain the existing.

These two come at different costs: It is cheaper to retain than to find new ones. And, the chances for generating revenue from existing customers are many times higher than the new ones. But it doesn’t mean that you should avoid acquiring new customers, who will be your existing customer’s; one day.

Whether you are going to spend on acquiring new customers or retaining your existing customers, both need strategies and investments. And, to know the right investment your business is capable at this moment without breaking anything, you need to know the CLV.

Increasing your CLV means you are trying to generate more revenue from your existing customers. And, when you have a higher CLV, you can spend more to acquire new customers. So, in this post, we talk about how you can increase your CLV.

There are several insights, including bounce rates, conversion rates, CTRs, overhead to measure the dimensions to help you find out how your e-commerce business is doing. However, they won’t reveal the true value of your existing customers or forecast it unless you know about this key metric.

What Is LTV, and Why It Matters to App Users?

LTV tells you how much a user is worth so you can better decide on what you should be spending to acquire a user, then turn into a customer’s; or how much you should spend on retaining existing users’; your marketing budget. It also tells how your app is doing in terms of revenue making, brand loyalty, and provides a forecast of how it would be doing in the future.

Remember, it is not only the users who spend in your app are worthy, but the users who don’t purchase anything, but refer your app to the others who spend, are very valuable too. 

Plus, it is crucial to understand the LTV of your users to strategize your marketing campaign to make sure you get the best ROI, return-on-investment.  And, it also helps you take careful steps when investing in acquisitions because acquiring new users needs bigger budgets, that is many times higher than retaining existing ones.  It is not wise when your LTV is low.

You are better off focusing more on strategies to retain your existing users & remarket your app’s products and services because the probability of an existing user purchases is likely more than 60 percent while the chances a new user purchases is only 5 to 20 percent. The LTV hints where you should limit your spending on acquiring new users, and how much you should spend on retaining your users – when it is more profitable to prioritize the latter.

Retaining existing users starts with improving user experience or UX, and you need to understand the things your users don’t like and the ones they like through various insights within your app. And, when you improve those areas, your revenues too will improve because they go hand in hand always.

Let’s Calculate Lifetime Value of Customers

There are different ways to get the CLV, each with its purpose, your business model, and the resources available to you. Let’s see how we can calculate this crucial metric in a simplistic and noteworthy way.

You need the three vital statistics in the first place:

1.   Average order value 

2.   Average purchases for a period (week, month, or year)

3.   Value for a period (week, month, or year)

a.   Take a few users.

b.   Get the total revenue from them for a period.

c.    Get the average per user (ARPU)

d.   Multiply the average (ARPU) into X number of periods.

Let’s see this with an example that we need to calculate the CLV for a year.

a.   Let’s take 30 users.

b.   Say the total revenue from them is $2500 for 3 months.

c.    $2500 / 30 = $83.33

d.   $83.33 X 4 = $333.32 (We know the value for 3 months, so we multiplied that into 4 to get 12 months)

So, the CLV for the year of 30 users is $333.32.

How an App Increases Customer’s; Lifetime Value?

Many things can contribute to customer lifetime value, and your app tops the list. To yield the maximum return of your investment (ROI) on the marketing campaigns, you need to increase your CLV.

Quite a lot of measures that you can take to increase your CLV, and we cover some of them that are proven successful.

1.  Use Mobile Deep Linking.

You send out your promotional links to users via notifications, SMS, email, or through social media; the “deep linking”; takes the user directly to your promotional page inside your app, and not to your app’s home screen – so no navigation involved.  And, if a user doesn’t have the app installed, it will suggest installing it.

  • Deep linking is a highly effective tool to run your promotional campaigns to existing users, where you can take the users straight into the area that they are interested in based on the insights you have about them in your app.
  • You can also use it to reengage your idle users by sending personalized links on incentives, special offers, or new features. There are more chances that they might re-engage when they instantly see the difference.
  • On another angle, a new user landing on your deep-linked content gets the chance to test the look-and-feel of your app, appealing to install/sign up.
  • Moreover, with Google’s app indexing, your deep-linked contents show up in the mobile search results just like the website contents, giving your app wider visibility and increasing the installs, which is an ideal tool for your acquisition campaigns with virtually no costs involved.

2. Simplify Your Onboarding Process

Onboarding is the first impression an app user is going feel with your app. Keep it simple and be straight to the point.

  • Use skip, back buttons, so the user feels he is in control, giving him the confidence in your app that he is yet to see.
  • If your app requires showing them around with how important things work, do it briefly, keep it easy and intuitive. Test different flows, UI with A/B testing, and pick the best one.

Check out Zappter App Builder, that has one of the best on boarding processes.

3. Take Push Notifications Seriously

Picks from localytics:

  • Push notifications boost app engagement by 88%
  • 65% of users return to an app within 30 days when push is enabled
  • 50% of users opt to push and find push notifications useful

Source: https://uplandsoftware.com/localytics/back-to-basics/push-notifications/

Push notifications are an excellent marketing tool that can instantly reach out and put your message in front of your users, whether they are active or inactive.

  • But always remember, the users who have your app installed are receptive to communications from you, so avoid going overboard the users to an extent they switch off notifications from your app.
  • Personalization is the key to your successful push notification strategy. Segment the users by age, gender, location, preference, product purchase history, and anything applicable to your business needs.
  • Use the segments to target the users. Use user’s; first names to personalize. Segmentation adds value to users because you send push notifications on subject users are interested in. Localytics survey finds out: 54% of conversion rate using segmented notification, while it is only 15% conversion for generic broadcasts.
  • Never send generic bulk push notifications, because they are not effective and sometimes look offensive considering different demographics.
  • Timing, language, length are very important factors for better user engagement.

Zappter App Builder has smart plugins for handling your push notifications strategy as described.

4. Be Customer-focused.

What is being customer-focused; with apps? Remember, adding a mobile app to a brand itself is to increase the CLV of a business unless you are running a business that can’t exist without mobile phones such as game apps.

  • When you offer an app to a user to enhance the overall user experience of your brand, the app has to meet all user expectations and be scalable to meet future demands.
  • If you are developing an app from the ground up, make sure your design accommodates all your user requirements and expandable. Or, if you are using an app built by an online builder like Zappter, subscribe to the additional features that your users need.
  • Include features that increase user engagement, such as marketing, surveys, ratings, insights, and other stats. Importantly, your app should be able to create user personas with the data it collects. If possible, work with third-party tools to collect that data, because you need a deeper understanding of user needs before trying to solve them.

5. Improve UI

Today, the app market is overcrowded with millions of apps on the app stores. Some are successful, and others are striving to reach there.  But what is that ‘common thing’ among all those successful?  They’re visually attractive and engaging to the users; meaning, they have the great UX (user experience). You might want to check our Zappter blog on the best app design tips.

  • A successful app UX begins when the designers and developers give a thought at best UI. Simply said, a great UI attracts the users while a great UX retains the users. You need to have these both going together to see a long-lasting success that will improve the CLV.
  • Apps can never be perfect, use Google Analytics constantly to understand detailed user interaction with your app, and find out lurking friction points affecting your UX, which could be linked to a bad piece of UI element. The take here is, to use analytics as much as possible and relate that to your UX/UI issues.  
  • If you are to use one of the app builders to create your app, choose the one that offers excellent UI. Some of them have plenty of design templates to pick, while more advanced ones like Zappter App Builder let you design the UI for your brand.

6. Strategize Mobile Advertising

Your user acquisition (UA) should start after knowing CLV, or you would end up with limitless spending. Once you know it, strategize your campaign using Social Media, Google, Mobile Ad Networks, PR & Press, Organic Reach.

  • Facebook ads are a very effective tool that can target specific demographics of people. It also has the AI-backed, Value Optimization Campaigns which targets FB users, who are high potential, instead of wasting your campaign money.
  • Google UAC (or Universal App Campaign) is a powerful advertising tool specifically designed to increase app downloads by showing your ads in all Google-owned channels, Google Search, Google Play, YouTube, Discover, and the Google Display Network.
  • Importantly, never underestimate the organic discoverability of your app. Optimize your app listing in the app store.

You might want to Google for details on some of the other channels we mentioned here to create a strategy that yields the best results for you.

7. Be Accessible to Your Users

Engaging with your users doesn’t end with sending them the push notifications and promotional offers. Users need to feel they have the best support team available anytime to resolve an issue, be that technical or billing. 

  • While standardizing your support only through your official channel, be active and available for them on a couple of social media channels. Your users need to feel that their voice is heard; reply to their reviews on the online channels, especially negative ones, answer their comments at least with a-like.
  • When you are actively engaging with your users on social media channels, you are also giving a positive outlook to other potential users.
  • There can’t be a better way to impress a potential user with instant replies to his questions.  Similarly, there can’t be a better way to satisfy an existing user than to resolve his issue instantly. Use a live-chat with human, not bots.
  • Use a support ticket system, because when you issue a support ticket to a user, it increases the confidence in them that the issue will be resolved and looks professional.

The Upshot

If you are starting a business, say e-commerce, you can’t avoid spending on marketing for acquisitions. But then you know what is allocated for marketing in your startup budget. If you are running a business, you should focus more on retaining your existing user’s; that’s where you can increase your customer lifetime value while spending carefully on acquisition keeping with your current CLV. As you can see, the logic is too simple; to find new users, you need to keep the existing ones happy.