Must-know LTV benchmarks for app marketers

Lifetime Value (LTV) is a metric you cannot afford to get wrong. It determines a user's worth over their entire engagement period with your app. LTV serves multiple purposes, making it crucial for predicting commercial success, forecasting business growth, gauging user loyalty, and ensuring long-term profitability. Essentially, LTV guides your marketing budget and strategy. However, calculating LTV, which is predictive and based on probabilities, is mathematically complex and requires a deep understanding of user behavior.

In the third part of our metrics series, we shift our focus from retention rates and sessions to another crucial metric — LTV. We'll explore its importance, examine industry benchmarks across regions and verticals, and share best practices to improve LTV performance.

Lifetime value (LTV), or customer lifetime value (CLV or CLTV), estimates the total revenue a business can expect from a single customer group over their entire relationship with the app.

Though LTV and CLV are often used interchangeably, CLV is typically used to refer to the value an individual customer brings over their lifetime. However, LTV is used to consider the average value across all customers.

LTV is an essential metric for assessing the financial health and growth potential of an app. Here's why LTV is so important:

• Indicator of overall business health: The ratio of LTV to customer acquisition cost (CAC) is a vital indicator of a business' health as it scales. LTV > CAC signals is perhaps the most significant measure to benchmark. Although it seems straightforward to calculate this, achieving accurate numbers can be challenging. Despite extensive literature on LTV, the underlying issues affecting accuracy are often overlooked.
• Accurate budget allocation: LTV allows marketers to allocate budgets more efficiently. Knowing the potential revenue of a user helps in deciding how much to spend on new user acquisition, ensuring profitable marketing focused on high-value users.
• Enhanced forecasting: LTV, combined with metrics like ARPU and retention rate, provides a predictive model to forecast your app's financial performance, allowing better planning and minimizing the risk of overspending or underspending on user acquisition.
• Improved user acquisition strategies: Understanding LTV helps tailor user acquisition strategies to attract the most valuable users and enables profitable expansion of acquisition efforts.
• Boosting user loyalty and retention: A higher LTV indicates strong user loyalty and retention. By focusing on users with higher LTV, you can develop strategies that encourage ongoing engagement, reduce churn, and increase the likelihood of referrals and positive reviews.
• Driving recurring purchases: LTV helps measure user engagement over time, allowing you to  increase repeat business by optimizing in-app purchases, subscriptions, and other revenue streams.
• Profitability and growth: Ultimately, a higher LTV leads to greater profitability. By retaining users longer and encouraging them to spend more, your app can achieve a healthy return on investment (ROI) and sustained growth. This metric helps in refining revenue models and optimizing every aspect of your marketing and user engagement strategies.

Calculating LTV is essential for understanding the long-term profitability of your app users. There are two critical figures needed to calculate LTV: average revenue per user (ARPU), which is the total revenue divided by the number of users over a specific period, and  churn rate, which reflects the percentage of users who stop using an app within a specific time frame.  Here’s the formula to calculate LTV:

We've analyzed the average LTV across all our verticals, broken down by platforms, to offer a detailed performance overview. Use this data to evaluate how your app's LTV compares with global industry standards.

When analyzing overall app user LTV across regions, North America clearly stands out. Starting at $0.26 on day 0, it increases to $0.54 by week 0 and reaches an impressive $0.91 by month 0. This demonstrates North America's high revenue potential, suggesting that mobile app marketers should focus on user acquisition and retention efforts in this region to maximize returns. Even if it is comparatively pricey, the payoff is evident.

We also analyzed cumulative LTV by industry, and app verticals differ substantially. Travel and food and drink apps have the highest median LTV, with travel apps reaching $12.36 and food & drink apps climbing to $11.49 by the first month. Travel apps can enhance their LTV by offering personalized recommendations and exclusive deals to stimulate more bookings and in-app purchases. Meanwhile, food & drink apps can raise their LTV by partnering with popular restaurants, offering loyalty rewards, and ensuring a smooth ordering and delivery experience.

Travel apps have the highest LTV across all regions. Europe leads with an LTV of $13.94 in the first month, followed by LATAM at $12.88, and MENA at $9.28. The high performing LTV for travel apps can be attributed to high transaction values, frequent in-app purchases, and seasonal usage.

Shopping apps also show impressive performance, particularly in LATAM, where the month 0 LTV hits $12.17, exceeding Europe's $5.74 and APAC's $5.7. The high LTV of shopping apps in LATAM can largely be credited to the region's rapid e-commerce growth, mobile-first consumer base, and localized adaptations such as language support and regional payment options. Additionally, the region also benefits from the strong influence of social media in promoting shopping apps, enhancing user engagement, and boosting overall LTV.

By focusing on increasing LTV, app developers and marketers can create more captivating and profitable apps. Drawing from data and trends across different regions and app categories, here are some key strategies to retain loyal users and boost revenue.

Enhance user experience

It's important to prioritize delivering a smooth, enjoyable, and stress-free experience across all touchpoints. This involves ensuring your app is intuitive, visually appealing, and provides a consistent experience across all devices. Excellent customer service is also vital, characterized by quick responses and effective solutions. Regularly updating your app with new features, addressing bug fixes, and making improvements based on user feedback is key to maintaining user engagement and satisfaction.

Improve onboarding

A robust onboarding process is integral for retaining new users and encouraging higher engagement. It's crucial to keep this process simple and direct, ensuring users can easily navigate through your app. Overloading new users with excessive information can be counterproductive. Instead, providing clear instructions and guidance on utilizing the app's key features can be more beneficial. Additionally, incorporating  interactive elements such as tutorials and walkthroughs can captivate users from the beginning.

Bonus: Building an ATT opt-in strategy into your onboarding is an excellent way to increase consent rates on iOS. Read more on getting the opt-in.

Implement effective loyalty programs

Loyalty programs can greatly enhance user retention and spending. Consider offering rewards for frequent purchases or long-term subscriptions. You can establish tiered loyalty programs and tailor rewards according to user behavior and preferences.

Optimize purchase experience

Streamline the purchasing process to decrease cart abandonment and  conversions. You can reduce the number of steps needed to finalize a purchase by providing various payment options to accommodate diverse user preferences. Additionally, utilize follow-up emails or notifications to remind users about their abandoned carts and motivate them to finish their purchases.

Leverage push notifications

When used properly, push notifications can effectively remind users of your app's benefits and encourage regular use. However, to ensure they are beneficial and not bothersome, these notifications should be relevant and timed appropriately. Always respect user preferences by ensuring they have opted in to receive these notifications.

Let's explore how you can optimize your LTV measurement in three steps to maximize value from all your users. Not all users will contribute monetarily, but there are alternative methods for marketers to derive significant value from users, depending on how they interact and engage with your app.

Comprehensive event measurement

Measure all valuable interactions within your app, not just default events like sessions and purchases. Customize event tracking to capture a broader range of user behaviors. For example, retail apps should track events like applying discount codes, saving items to a favorites list, or abandoning a cart. This holistic approach allows you to include non-monetary interactions in your LTV calculations, offering a more comprehensive understanding of user value.

Valuing non-monetary interactions

After broadening your tracking, assign a value to each non-monetary interaction. For instance, a gaming app might award points for actions like inviting friends. By factoring in these point values into your LTV algorithm, you can accurately capture the significance of user interactions.

Leveraging data insights

With comprehensive measurement and a customized LTV algorithm, your data can be leveraged to refine your marketing strategies. Identify which channels and creatives attract high-LTV users and adjust your campaigns accordingly. Continuously review and update your predictive algorithms to adapt to changing user behaviors, ensuring a positive ROI.