- It’s important to agree a sound client LTV to appraise various growth initiatives against
- Another way, we need to ensure our Cost Of Acquisition (CAC) is lower than our LTV over time to be profitable
- The pior post and this post seek to create debate and discussion amongst Owls on this important topic, to hopefully reach alignment on a framework to use going forwards
- This framework should not be set in stone forever and can be revisited at a future date, once we have more data from growth experiments and product traction
- Hopefully the poll at bottom of the post will yield a clear, decisive vote and be a signal this proposed LTV framework is acceptable to fellow Owls. If this result is not achieve, more debate and discussion will add value and still move things forward
Proposed LTV framework
Based on the prior work on the model (Tab 2: “V1 ROAS MODEL”), followed by welcome feedback from the Owls mentioned above in the prior post, I propose we use these inputs in our initial LTV model:
- Average DPI units bought by client: 2.5 (as per data from @jdcook and discussed in first post)
- Average client holding period: 3 years
- Rate client is cross sold and buys other Coop products: 35%
- Average extra Coop products bought by client over 3 year holding period: 2
- Yield achieved via intrinsic productivity use cases: 1%
Hopefully 2-5 are conservative and we should run the numbers later in the year when we have more products live.
Example of LTV framework in action
If we use this LTV framework within a simple media spend scenario, we generate the implied results shown in Tab 1 (“V2 ROAS MODEL”) of the model and in this screenshot below. Note LTV framework components in green highlighted rows.
- Please either provide more critique and comments below
- Or, if you’re ready to vote in the poll, please vote FOR or AGAINST the proposal
This is an important thing to use in our day-to-day growth work, should be debated and scrutinized and be robust, so all new feedback is welcomed. Thank you.
- FOR proposed LTV framework
- AGAINST proposed LTV framework