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How Growth-Driven Design Can Influence Customer LTV

Increasing customer lifetime value is about retaining customers for longer periods of time and increasing the average amount each customer pays you. 

A simple way of equating your customer LTV is to take the average revenue per customer and divide it by your customer churn rate. 

A more accurate way of doing this calculation would be to take your average revenue per customer and multiply it by your gross margin %. Then divide it by your customer churn rate. 

To begin to use growth-driven design to positively influence your customer LTV you have to first understand the current picture. 

And to understand your current picture you have to understand your churn rate and what it costs to acquire new customers

Start by analyzing when are you losing the most customers. After month 1, after month 4? This will indicate where along the way customers get lost so we can do a better job of getting them back on track.

Also look at whether or not your churn rate levels off after so many months. Do customers stop churning when they reach a certain point? A milestone inside your product? 

With a cohort analysis you can get a clear picture of how "groups" of customers behave, looking for widespread similarities and differences. 

Now you can begin to apply growth-driven design to test different theories for different cohorts. 

This post breaksdown the simple calculation of customer lifetime value and include a worksheet you can download


How To Use Growth-Driven Design to Influence Customer LTV

The objective of growth driven design is to continuously learn and improve, and customer lifetime value depends on retaining customers and increasing average spend. 

In other words you want to continuously learn how to retain customers, learn what they value most and improve by closing the gap to delivering what we learned. 

Consistently making changes to your website, based of what you're learning, to boost conversions, improve the experience, personalized for them and produce marketing assets, are all things that will positively influence your customer lifetime value.

Boost Conversions

Most of the activities focused on boosting conversions revolve around adding value to the right audience and creating a friction-less funnel. 

Always ensure that your users can easily get what they are looking for and more. 

Focus on asking them what value you are providing. Using software such as hotjar, you can ask questions on specific pages. 

Use a rating scale or NPS score to study the perceived value across different assets. 

Improve User Experience

To improve the user experience we want to focus on usability and stickiness. 

Usability focuses on readability, language, and device, as well as specific events. If you want to improve the navigation and overall flow of information, you have to look at events completed. 

An event is any specific action on your website that you want to track the completion rate of. 

For example, if you put a new call-to-action at the top of your product page you would want to track, out of the number of people who visited that page, how many of the clicked the CTA in question? 


By persona, lifecycle, interests, device, geography, actions

Being able to personalize your user's experience is quickly becoming mandatory. User's expect you to know and remember them, anything less would be inconvenient and annoying.

But the real art comes with on-going personalization that adapts to that users's profile. changing interests, different customer lifecycles, different industries and so on. 

Produce Marketing Assets

The ongoing transfer of what is being learning to marketing sales. Your website can directly guide how marketing drives new visitors and converts existing users and help sales pick up after marketing with the same experience. 

Creating marketeering tools and sales enablement content are two examples of efforts that benefit greatly from learning about user behavior. 


Final Thoughts

Growth-driven design is built to continuously improve your website to closer align with your user's behavior - ultimately creating an exceptional experience they'll rememeber. 

Customer lifetime value is negitively effected by churn. When customers churn you no longer can make money from them, so the objective is to retain customers for long periods of time. 

I'm sure everyone has heard the old saying, "It's more expensive to acquire a customer than it is to retain them. 

This is true, but it doesn't mean it's easier. 

Don't fall victim to thinking you've got them in the bag once the deal is closed because you will lose customers faster than you can blink. 

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