Most people overlook this *crucial* metric
This post is going to cover:
One of the most important metrics to focus on when you’re trying to grow revenue
why increasing this metric even by just a few dollars can have a HUGE impact on revenue
A metric most people overlook
There’s a metric that’s SO important, it’s one of the main focuses of every company’s quarterly updates, it’s one of the ways that marketers judge their performance, and one of the most frequently asked questions by investors.
Despite how important this metric is in normal business life, I’ve never seen anybody talk about it regarding OF. It’s totally overlooked. My guesses why are:
not everybody here has previous marketing/business knowledge
the analytics provided by OF are so minimal and terrible
The metric I want to focus on today is “LTV” or “lifetime value”. This number represents how much money a customer spends during their entire relationship with you.
This can be measured as an individual metric: “Jack’s LTV is $40” —> this means he’s spent $40 total during his entire relationship with you
This can also be measured as an average across all users: “My LTV for my business is $65” —> this means on average, users spend $65 before unsubscribing.
How do you calculate LTV?
To see LTV of a specific user: You can click into each user’s profile and manually add it to their nickname every time they write in. This won’t give you an indication of EVERY subscriber, but it’s helpful to see the LTV of people who are chatting with you. (Note: I use an app that actually displays this information in the chat under their name - you can find tools like this out there on Google. I don’t want to promote them because they’re a Google chrome extension and I’m not 100% sure how safe it is lol).
To see your average LTV across your page: Take your total revenue (net or gross is up to you) and divide it by the number of subscribers you have. For example:
$25,032 revenue / 504 subscribers = $49 —> this means on average, each person who subscribes spends $49.
I made a calculator that helps you calculate your LTV :) just plug in your numbers into the blue cells and the results will calculate automatically! You can make a copy of this Google Sheet here - just make sure to not change anything except the blue boxes!
Why does LTV matter?
Let me take a step back and connect this to your overall business purpose and goals. All of us know we want fans to spend money - that is, in fact, why we are all here selling spicy things.
But “I want people to spend more money” while casually looking at the statistics page is a very vague and non-specific way of measuring how things are working, right? Sure, you know how revenue fluctuates. But do you truly see the relationship between revenue & subscriber count? I find that when things are too broad and you’re not actually focusing on LTV, it’s harder to focus on specific things to work on in order to see revenue improve as a whole.
When you calculate your average LTV, you have a specific number that you can keep track of and experiment with what you can do in order to improve it. The incredible part is, even if your LTV goes up by just a few dollars, it can have a huge impact on your revenue as a whole.
Here’s an example of how revenue can increase with incremental increases in LTV, while the number of subscribers stays exactly the same:
In the chart above, you can see how even just $5 increase in LTV can make somebody with 500 subscribers see a huge change in revenue. Now, imagine that those increases aren’t just $5, but perhaps are $10 or $20 instead! Look at what happens with a $15 increase:
The change is huge! Go back to my LTV calculator and plug in LTVs that increase incrementally from what yours currently is. Pick an increase that feels achievable and not super overwhelming for you.
Once you have your current LTV & goal, what do you do next?
Once you’ve already figured out where your baseline is - emotionally take a pause. Now, you have cold hard data that tells you EXACTLY what you’re looking at in terms of average spending per customer, AND you’ve projected future goals based on an LTV that you believe you can reach.
Now, it’s time to run some experiments to see how you can actually get that LTV to increase each month. There are so many ways to do this, and now you have a consistent way to track your progress.
The big question you should be asking yourself is: What can I do to improve LTV?
Here are more narrow questions to help you brainstorm:
What are other pages selling that I could try selling too? Look at other people’s tip menus, Reddit posts, find inspiration from others you admire.
What are totally original ideas for services that I could try selling too? Think about things you genuinely find fun, or things that fit within your niche.
Should I raise the price on any existing services? Is there anything that gets purchased often that you could simply charge a little more for?
Are there any add-ons you can attach to existing services? If they’re inexpensive, people might be quick to say yes if they’re already purchasing something from you.
Are there any super easy, low-effort ways to monetize 1 more time per week? This requires you to be creative because the emphasis here is “easy, low-effort”
Are there any more expensive services I can try pushing? Expensive things increase LTV a lot, and you don’t need too many people to purchase in order to see a difference in revenue!
To help illustrate the above, here are some of my personal thoughts when brainstorming how to increase LTV for the page I’m working on:
I should try scheduling more (free) mass messages encouraging people to book a phone call session. Maybe if I attach a video, it’ll compel more people to buy.
I should try running a sale on X item, to see if that gets more people to buy it.
I should try brainstorming an inexpensive add-on to a service that gets purchased often (ex: $15 polaroids as an add-on to $90 panties).
If I think most of the highest-paying customers come from X, I should really focus on marketing to X for the next 4 weeks.
Some “low effort” things I can sell are: custom voice memos moaning your name, re-sending old content, sending out a mass DM to people who are online at that moment, sending out a cute photo and a request to tip to buy boba
When you have a super specific goal of getting your LTV to go from X amount to Y amount, you’ll be surprised at how much more optimized your work will be. I find that looking at revenue alone is simply too vague and not focusing on the details is such a missed opportunity. There’s a reason why LTV is one of the most important metrics period in any business :)
Thank you for reading!
Next week, I’ll write about the exact experiments that ended up working, that increased LTV to the point where overall revenue increased by ~10%! stay tuned!