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Last update: July 2021

5 mins to read - 2021/07/02

How to Use Push Notifications to Boost Customer LTV for Your Mobile App

It’s common knowledge among marketers that it’s far more cost effective to optimize retention of existing customers than it is to acquire new ones. According to Outbound Engine, acquisition is around 5x more costly than retention. There is a 60-70% success rate of selling to a previous customer, as opposed to a 5-20% success rate with a new customer. Moreover, veteran customers are 5x as likely to re-buy from your brand, and 4x as likely to refer your brand to a friend. The longer a customer stays loyal to you, the more value they provide over the long-term course of their lifecycle. And when it comes to your bottom line, a 1% retention rate translates to an 18% increase in annual revenue. Keeping this in mind, a considerable part of your mobile marketing budget should go towards a robust customer retention campaign. Use push notifications to boost retention and impact high revenue growth, ultimately improving your customer lifetime value (LTV) in a big way. 

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What Is Customer Lifetime Value (LTV)?

Customer Lifetime Value (LTV) is exactly what it sounds like: the total value a customer brings to your company over the course of their relationship with your brand.

This is a worthwhile metric to track for many reasons. For one thing, as you continue to keep an eye on trends and user purchase patterns, you will better be able to point out similar patterns in newer customers. Based on common factors you recognize in LTV journeys, you’ll have a better idea of whether newer users are likely to become repeat customers. Being able to ascertain early on whether users will repeat buyers – as opposed to someone who will make one in-app purchase and then needs regular nudges to keep engaging with your app – gives you a better understanding of how much to invest in your customer retention campaign.

You can calculate your average customer LTV with the following equation:

Average Order Value x Purchase Frequency x Average Customer Lifetime = Average LTV

How to Look at LTV in Relation to CAC

The two mobile marketing metrics LTV and CAC (Customer Acquisition Cost) are best looked at in tandem. CAC is the amount of money invested in acquiring customers. (For example, in marketing, promotions, deals, etc.) And your LTV should far outstrip CAC, otherwise your brand is losing money. For example, if the CAC of your mobile game is $100 per player, but players are only paying $10 on average before they churn, then you have a serious problem. You will likely have to do one (or all three!) of the following:

  • revisit the amount of money you’re sinking into CAC
  • improve your user retention campaign to lengthen users’ lifecycle
  • address core aspects of your mobile game’s UX that may be driving users to churn at a high rate.

in-app purchases ecommerce

Using Push Notifications to Boost Your Customer LTV

We’ve explored in many past blog posts the wide range of use cases for push notifications when it comes to boosting user retention. When it comes down to it, whether your mobile app is only one extension of your brand or whether the mobile app is the full endeavor, push notifications are the best means of improving engagement. Push notifications are a direct line to your user’s pocket. And by leveraging the data provided by their on-device behaviors, previous purchases, preferences, etc., push notifications give you the ability to communicate with them at the exact moment and in the way that’s most likely to influence them to take action.

The positive effect push notifications have on LTV is twofold:

  • Notifications improve retention, which lengthens your customer’s runway for making potential purchases
  • Notifications are the most streamlined way of driving purchases

We will take a look at the two different tracks below, and how they intertwine. (This is not an either/or scenario!)

retention curve android apps
Source: Quettra mobile intelligence

Improve Customer Retention to Improve LTV

If your LTV is unsustainable for your brand to grow, shortcomings in retention are what you should address first. Locate your pain points. What’s a healthy level of user retention for apps in your industry, and how does your app measure up? Why are users churning?

Short of addressing any UX concerns in your app, a personalized push notification campaign is the best way to plug the retention leak and drive users back into your app. Use notifications to build habitual usage of your app early on. According to Mike Molinet,

“The importance of the first 3 days cannot be overstated, apps win/lose the user retention battle at this stage.”

With OpenBack’s reliable delivery, you can set your notifications to deliver at the same time every day. This gets your user in the mindset of thinking about your app regularly, and is a key step in building regular, organic app usage.

Push notifications are also your #1 best tool in churn prevention. You can effectively use notifications to lengthen the lifecycle at risk of churn, and by extension drive higher LTV. If you see regular app usage drop below average, you can kick your push campaign up a notch: try sending notifications at the time they’re more likely to click, or request feedback to spur in your user a feeling of being invested in your app. You can also try to woo back churning users by sending them deep links to bonus content or possibly a tutorial of features in your app they haven’t explored yet. If all else fails, you can offer discounts or freebies. But make sure you’re not spending more in your retention efforts than a particular user is likely to earn you in revenues.

Use Notifications to Drive Purchases and Boost LTV

The most obvious way of using push notifications to increase revenues and overall LTV is to ping users with items they will likely want to purchase. There are plenty of tips and tricks for closing a sale via push notification. Never send a push notification suggest a user buy something almost-or-exactly the same as a recent purchase. Suggest complementary purchases, or purchases that will improve their experience of your app. (For example, you can invite them to move to a VIP subscription for your mobile game, or to purchase a bundle of currency and consumables that will allow them to beat levels more efficiently.)

Another rule to live by is that customers who make early purchases tend to make more frequent – and costly purchases – down over the course of their lifecycle. And a surefire way of clinching an early purchase is by sending push notifications. Once they’ve onboarded, send them a notification welcoming them to your app, with a limited-time discount code. As they continue to make purchases, track their preferences – both in terms of what they buy and what types of notifications they respond positively towards – and use this to infom your micro-segmentation strategy.

Ultimately, push notifications are the best way of increasing your overall customer LTV. Both in terms of driving direct purchases, and in improving your communication and overall relationship with customers. Remember, lifecycle longevity and user retention feed into your overall revenues. So make sure you’re following the Golden Rule of keeping your customers happy and providing a great UX, and your app will see massive growth.

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