Online casinos use Player Lifetime Value (LTV) to measure their performance. LTV basically is a metric used by online gambling sites to detect the potential of retaining a customer to the platform. Keeping a constant check on Players Lifetime Value enables casinos to figure out the most effective marketing strategies and CRM plans and which are the strongest and most valuable player sections.
How to calculate Player Lifetime Value?
LTV depicts the net estimated value given by a player to an online casino from the date of possession until the separation of the players from the website. The LTV measures the revenue earned from a gamer and compares it to the lifespan of the player on the site. The more you dig in the more formulas you will find to break down this complex concept. However, we are keeping it simple for this blog.
A player's LTV is calculated by multiplying Average Revenue Per User (ARPU) of the casino by the average amount of time a player spends in a casino. And ARPU is obtained by dividing the revenue by the casino in a definite time period by the total number of existing players in the casino at that time. Dig in here to know more about ARPU.
In simple words, Players Lifetime Value is the total amount of money made by a player over the entire time of association with the casino.
The formula for LTV is as follows:
LTV = ARPU x Average time players stay on a casino
ARPU = revenue earned by a casino in a certain time period/ number of existing players in that period.
What is the importance of LTV in an Online Casino?
Customer retention directly depends on a precise and accurate calculation of the potential worth of a player. It is important to retain a player to a site, however, it is equally important to know what all is needed to be done for the retention and when to stop. There is no point in spending more than a customer retaining him at the site.
All customers hold different values, which means not all of them are equally worthy. For instance, if a customer places a bet of a big amount occasionally like every few months holds less value than the one who places bets on slot machines frequently throughout the year.
Experts suggest that online casinos need to balance a player's LTV against Customer Acquisition Cost (CAC). A player LTV must be equal to 3x the customer acquisition cost, most casinos follow a common thumb rule of 3:1. ROI of the casino completely depends on this ratio, which means, the better the ratio, the better the ROI will be.
Deep knowledge about LTV can help an online casino determine the value of different players and provide them customer services and casino bonus accordingly.
The casinos are competing with each other to increase LTV as high as possible. This can be done by retaining a customer to the site for as long as possible, which will be achieved by extending the customer life and increasing the revenue amount of each visit.