Hey everyone! Welcome to part 2 of my Ultimate Guide to LTV where I go deep on all things LTV. In case you missed it, last week I shared how to calculate LTV and how to avoid all the pitfalls companies usually fall into. It was one of my highest read emails at a 60%+ open rate so it’s clearly something people were interested in.

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Today, we’re going deep on how to increase LTV. Vamos!

I hope you’re ready for this knowledge bomb. It’s going to be the craziest thing you’ve ever heard. I literally can’t overhype how game changing this is going to be so get ready… There are only 2 strategies to increase LTV:

That’s it. 🤯 . I know. I know… I should just stop the article here. But seriously, when you frame increasing LTV in that lens, it helps simplify decisions. Every action a company takes should do one of these 2 things or it’s not beneficial to the company. Over the course of my career, I’ve seen 20+ levers that were used to increase LTV and all of them fell into one of these 2 categories. So, without further ado, here are 18 different examples of how to increase LTV that will hopefully inspire you to go run some fun experiments:

Increase the positive

Decrease the negative

Elena Verna is one of my favorite growth leaders and continuously produces highly valuable and highly entertaining (meme queen) content. She’s also spot on with her quote above. Why?

The biggest drop on ANY retention curve is within the first period (days, weeks, months, etc.) That’s the single largest point of failure. And yet so many companies don’t focus on making that first experience magical and valuable. It needs to be otherwise you’ve got no shot of a second order.

If you’re going to spend 90% of your effort in one place, it’s fixing activation. Get more people to see value in your product as quickly as possible.

While activation rate and conversion rate are obviously connected, they are different things. Activation rate refers solely to the how quickly new users are activated (depends on your definition) while conversion rate is generally through a specific “funnel”.

Increasing conversion rate at any step in the funnel should increase LTV. It still boggles my mind how many companies feel like they don’t need to A/B test or continuously work on finding new global maxima. Shocking.

Increasing frequency of a user is one of the HARDEST actions you can take, but if you can crack it it instantly makes LTV shoot up. It’s hard because you’re fundamentally changing a person’s behavior. Buy groceries 1x a week? How can I get you to do 2x a week? To buy 2x a week you’d need to have run out of groceries or have a new need…

Here are 3 ways to increase frequency:

Adjacent use cases are cross sells that help a user buy more from the same company but not the same product category. A good example is what travel sites do when you book a flight. You don’t need a car but it’s an adjacent use case and so worth the shot

Companies spend billions on loyalty programs. Airlines have been doing it for decades. It’s because it increases frequency and frequency increases LTV. They both make buyers buy more but also increase switching costs. You’d be really hard pressed to find someone making a switch when they’re already ingrained into a system.

If you’ve noticed, streaks are one of the most impactful ways companies are looking to bring back users and increase frequency. They tap into a core part of the competitiveness of humans but also a bit of social proof. Duolingo’s streak is extremely popular and they have an entire team dedicated to it, but other companies do it as well.

Snapchat (as seen in the example below) also uses streaks.

Caution: it only works on high frequency products. Saying I booked a AirBNB 2 years in a row isn’t as cool

Have you noticed why every ecomm site has a “You may also like?”. They’re trying to increase your basket size and AOV. Plain and simple. With social proof + personalization, you’re sold into believe you “may” also like something when odds are the company knows you will like it. Increasing AOV through upsell + add ons is a fantastic way to increase LTV. But, you have to account for returns / cancellations otherwise it doesn’t count.

So far, the examples have been quite tactical, but there are other ways to increase LTV that rely on being more strategic. One of the ways is to shift your Marketing mix. Most companies begin by focusing on one paid channel but over time you should shift your marketing mix to more organic channels while also identifying the most efficient paid channels. This shifting of marketing mix will effectively increase LTV and lower CAC (which also increases LTV) by targeting more high quality users and paying less to acquire them.

Along the same strategic lens is shifting geo mix. If you have a country where the LTV is 3x higher than another country, then you should look at investing more in this country. This shift in a portfolio approach will make your total cohorted LTV go up as well.

Another strategic option is to shift product mix towards products that have higher AOV / Value.

A good example of this is a decision we made at a previous fashion ecomm I was consulting at where we complete eliminated items < $X. The reason we did this is because from a marketing / ads perspective, we were bidding (and winning) and selling these items but the returns would be high and eventually eroded our margins. By killing this entire product line, we shifted the product mix towards significantly higher AOV items and brought profitability back into line.

CRM campaigns when executed right can be huge for increasing LTV. The generally low fixed costs / tech costs as well as ability to influence thousands / millions (depending on your customer base size) of customers makes this a perfect channel.

The mistake many companies make though is assuming this will have instant benefits. It takes time to test into this channel and if you’re a low frequency product, it’ll be hard to measure.

From my example of how to calculate LTV that I shared last week, you’ll see we’ve covered how to increase AOV and Frequency. What’s left is how to increase margins. Many of the margin line items will be covered under “Decrease the negative” but the biggest one you can influence under “Increase the positive” is margin / take rate.

When you increase basket size, like I shared above, you still have to pay COGs. However, if you were to increase something like service fee or marketplace fee, that goes straight to your bottom line and increases margins (assuming the drop in conversion isn’t as bad).

It’s why many companies sneakily add that line item (although AirBNB has now rolled this back to full price transparency):

So, this is going to be the most controversial and everyone LOVES to hate on it, but I’ll throw it out there. Increasing Brand Spend increases LTV. In the long run it:

However, startups need to be careful as to when they start investing in this. As Casey Winters puts it, "Brand marketing is a force multiplier, not a life preserver." But it’s one of the most impactful and large scale force multipliers because it works at scale. However, it’s the last one many founders should focus on.

That’s it for the 10 examples of how you can increase LTV by increasing the positive. Now, it’s time to flip the script and focus on decreasing the negative.

For the longest time, Uber sustained itself on viral referrals and an abundance of promotions. That works in a ZIRP era and when funding was abundant. That combination isn’t likely to happen for a while (unless your an A.I. company) so reducing discounts is a great way to increase LTV.

When you’re offering discounts, ensure you’re A/B testing them as much as possible to understand incremental impact.

It doesn’t matter which metric you pick, but optimizing your marketing acquisition journey is a crucial way to improve LTV. Whether that’s optimizing campaigns, landing pages, or even channel mix, you need to focus a lot of attention here. If your acquisition costs are too high, it’s going to be very difficult to have your LTV in a sustainable place. More importantly, it makes your payback period longer which makes runway untenable. Here’s a good example of the impact of running incrementality tests.

Run incrementality tests. Please. I beg you.

Support costs are a key line item that you should explore automating (at the right time). This drives up LTV by increasing retention (hopefully the answers are satisfying) while also reducing the headcount required to staff supporting which again increases LTV. The key here is to balance which type of interactions require human intervention vs automation.

It’s easy for me to casually say “Decrease churn”, but I should set the expectation that it’s extremely complicated to do it. If it was easier then you’d see more companies thrive and survive.

Step 1 is to define churn (here’s an article to help you there). Step 2 is to do as much as you can to ensure your UX is solving a problem and providing value. Inevitably things will still go wrong (Driver canceled, Sizing doesn’t fit, order wasn’t delivered, can’t find anything to watch on Netflix), so here’s 3 ways you can try and winback customers:

Tech costs are often overlooked and the bigger the company gets the more it’s overlooked. You can find ways to reduce querying costs, server costs, and even vendor costs (do you really need 1000 vendors?). All of these costs when unnecessary erode margins and therefore LTV. Sometimes these costs are fixed and sometimes they’re variable but in both cases, the impact is the same.

Especially for ecommerce, returns are a huge line item because there are shipping costs, restocking fees, and generally lead to higher churn. It’s why many companies have started to pivot to less free returns. Another way to reduce returns is to have great sizing and better product descriptions so that buyers can make better decisions.

I have spent my whole career trying to work on this point and oh is it satisfying when you know you’re taking money back from the Meta and Google gods. I see a lot of inefficiency in 3 places:

There’s no magic bullet here so the important part is to give your teams space to run tests here. It’s never fun when you’re asked “why the f did we turn off spend…”… It’s called a test. Embrace it.

Again, easier said than done but you should have core funnels being tracked and alerts when these funnels break. Having a person go through 6 steps only for payment to fail is a collosal fuck up.

Increasing LTV has 2 strategies:

Under those 2 umbrellas, you can find 18 examples of levers to pull and countless more depending on your business model. One of the ones I didn’t include are fixed costs optimization which includes headcount but I prefer to not discuss hiring and firing people.

So, if anyone tells you “We need to increase LTV”, then send them this article!

P.S. I would have loved to gone into more detail on every one so if there are specific levers you want me to go deeper into, Let me know!

Thanks for tuning in and I’ll see you next time!

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Here it is: Ultimate Guide to LTV Part 1: How to calculate LTV