Ultimate Guide to LTV Part 2: How to increase LTV

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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.

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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:

Increase the positive
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

Increase activation rate
Increase conversion rate
Increase frequency
Increase basket size
Shift marketing mix
Shift geo mix
Shift product mix
Proactive comms
Increase take rate
Increase brand spend

Decrease the negative

Reduce discounts
Optimize CACs / Payback Periods / ROAS
Reduce support costs
Reduce churn
Reduce server + tech costs
Reduce returns + shipping costs
Reduce non efficient marketing
Reduce product errors

Increase the positive

1. Increase activation rate

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Fix activation, and suddenly monetization improves, retention goes up, and acquisition loops actually start to work. Truly, like magic.

Elena Verna

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.

Link

3. Increase frequency

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: