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Presentation given at Groundworks Labs on how to grow your company by focusing on customer lifetime value (LTV) and monetization.
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HOW LIFETIME VALUE DETERMINES YOUR SUCCESS AND HOW TO IMPACT IT
Monetization and Lifetime Value
Presentation Overview
Relevant background
Why Lifetime Value
Importance beyond social media
Virality
Retention
Monetization
LTV varies among customers
FROM START-UP TO BIGCO
Relevant Background
Been there, done that
• Grew to top-5 casual game company • Initiated and negotiated sale to Playdom, which was then rolled into $570 million
Disney acquisition
Co-founded Merscom CCO, led all marketing/sales/distribution
• Responsible for Europe, Latin America, Russia and India• Grew it from scratch to 25 percent of Playdom’s revenue
GM of Playdom’s International Publishing team
• Joint venture of EW Scripps and Capitol Broadcasting• Launched Facebook and mobile games
CEO of FiveOneNine Games
Currently consulting for The Jockey Club and Curious Sense, Chairman of Globalization Committee at NC Central’s School of Business
THE THREE MOST IMPORTANT LETTERS FOR YOUR BUSINESS: LTV
Why Lifetime Value
Function of three performance metrics
Monetization
Virality
Retention
Interdepence
Relationship between LTV and CPA
• Success
LTV > CPA
• Failure
LTV < CPA
Think of LTV starting day 1
Green-light
Design and develop
focused on LTV
Beta and other
testing to optimize
LTV
Post launch to focus on
improving LTV
CRUCIAL TO ANY BUSINESS
Importance beyond social media
Online offerings
NetflixEbatesFarmville
B2B
Square
Rackspace
Bronto
SaaS
SalesforceHootSuiteBasecamp
Retail
Restaurants
Department stores
Car dealers
WORD OF MOUTH’S EXPONENTIAL EFFECT
Virality
Definition of virality
K-scoreK=i*conv% (conversion percentage), where
“i” is the number of invites sent out by each new customer and “conv%” is the percentage of invites that convert into costumers
An advanced look
Importance of virality
Lowers cost of customer acquisition
Exponential growth
Improving Virality
K=i*conv%
• Generate virality quickly• Cater to Connectors
Increasing I
• Quality of communication• Provide value for virality
Increasing conv%
CRUCIAL AND HARD TO FIX
Retention
Definition of retention
Customer lifetime
N-day retention
Churn rate
Importance of retention
If they do not come back, monetization improvements are virtually useless
Improving retention
Product qualityGet in their headsMake it socialMake it globalUse email and
advertising for re-engagement
SHOW ME THE MONEY
Monetization
Definition of monetization
ARPU (Average revenue per
user)
ARPDAU (Average
revenuer per daily active user)
Percentage of customers
who monetize
Average transaction
Average number of monetization
events per customer
Importance of monetization
Improving monetization
Product quality
Value
More selection
Balancing
Shopping experience
Promotions and sales
THERE IS NO SINGLE LTV
LTV varies among customers
Cohorts
Time of year
Stage of product lifecycle
Holidays
Segments
Age
Sex
Income
Interests
Sources
Incentived ads
Targeted search ads
Television
Virality
Press Cross promotion
WWW.LLOYDMELNICK.COM@LLOYDMELNICK
Thank you