Ultimate Guide to LTV Part 2: How to increase LTV

👋 Hey, it’s Sundar! Welcome to a 🔐 paid 🔐 article of experiMENTAL: a weekly newsletter on B2C Marketing & data science how-to guides, frameworks, and stories from 15 years including early Uber.

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The Ultimate Guide to LTV

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.

1. How to calculate LTV

2. How to increase LTV ← today

3. How to identify high value users *

4. How to leverage LTV in Marketing *

*For paid subscribers only

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

The 2 strategies to increase LTV

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:

1. Increase the positive

2. Decrease the negative

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

1. Increase activation rate

2. Increase conversion rate

3. Increase frequency

4. Increase basket size

5. Shift marketing mix

6. Shift geo mix

7. Shift product mix

8. Proactive comms

9. Increase take rate

10. Increase brand spend

Decrease the negative

1. Reduce discounts

2. Optimize CACs / Payback Periods / ROAS

3. Reduce support costs

4. Reduce churn

5. Reduce server + tech costs

6. Reduce returns + shipping costs

7. Reduce non efficient marketing

8. Reduce product errors

Increase the positive

1. Increase activation rate

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.

2. Increase conversion rate

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.

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