When it comes to running a successful casino or sportsbook, understanding the lifetime value (LTV) of your players is crucial.
LTV is a metric that estimates the total amount of money a player will spend at your casino or sportsbook and the net profit their deposits deliver through wagering over the course of their relationship with your brand.
By understanding LTV, you can make better financial decisions and negotiate better affiliate commercials with your affiliate partners to improve your program profit margins.
Why is LTV important?
Knowing the LTV of your players is important because it allows you to make informed decisions about how much to spend on marketing and affiliate performance campaigns to acquire new players. If you know that the average player will spend $500 over the course of their relationship with your brand, for example, you can determine how much you can afford to spend to acquire that player and map it back to a CPA or Rev Share or Hybrid incentive that ensures profitability on campaigns is always delivered for relevant traffic sources. If the cost of acquiring a new player is more than $500, it doesn’t make financial sense to do these deals and you could be losing out on profit for your business.
Additionally, understanding LTV allows you to identify which kinds of acquired players are most valuable to your business. If you have two players who have spent the same amount of money at your casino or sportsbook, but one has been a customer for six months and the other for two years, the player who has been with you for two years is more valuable to your business because they are likely to continue spending money with you in the future.
Finally, understanding LTV is important when negotiating affiliate commercials with your affiliate partners. If you can demonstrate that your players have a high LTV, you can negotiate better commission rates with your affiliates.
How is LTV calculated?
Calculating LTV can be a complex process, but it generally involves estimating the average revenue per user (ARPU) and the average customer lifespan (ACL). ARPU is calculated by dividing the total revenue generated by your casino or sportsbook by the number of active players during a specific period of time. ACL is calculated by estimating the average amount of time a player will remain active with your brand.
Once you have these two figures, you can multiply them together to calculate LTV. For example, if your ARPU is $100 and your ACL is two years, your LTV would be $200.
It’s important to note that LTV is not a fixed number. It can change based on a variety of factors, such as changes in player behavior or changes in your business model. It’s important to track LTV over time to ensure that you are making accurate financial decisions.
How can reporting and tracking help?
To accurately track LTV, you need to have access to detailed reporting and tracking data. This data should allow you to view customer value from first click throughout the entire purchase cycle over time.
Your technology stack should enable you to track key metrics such as customer acquisition cost (CAC), churn rate, and customer lifetime value (CLV). By tracking these metrics, you can identify areas where you can improve your business operations and increase profitability.
For example, if your CAC is higher than your LTV, it may be time to re-evaluate your marketing and advertising strategies. If your churn rate is high, it may be an indication that your players are not satisfied with your products or services. By identifying these areas of concern, you can take steps to improve your business operations and increase profitability.
Additionally, tracking LTV over time can help you identify trends in player behavior. For example, if you notice that LTV is decreasing over time, it may be an indication that your players are not satisfied with your products or services. By identifying these trends early on, you can take steps to address them before they become bigger problems.
What technology stack do you need?
To effectively track LTV and other key metrics, you need a technology stack that includes a robust analytics platform, a customer relationship management (CRM) system, and a marketing automation platform.
Data Collection
The first step in calculating the LTV of a customer is collecting relevant data from various sources. Typically, operators collect data from their own systems such as: Customer Relationship Management (CRM) software, transactional databases, and other internal sources. Additionally, third-party data sources such as: affiliate tracking systems, social media, and web analytics can be used. Operators also need to ensure that they are compliant with data protection laws and regulations.
Data Warehousing
Once the data has been collected, it needs to be stored in a central location to be analyzed. Data warehousing allows operators to store and organize large amounts of data in a centralized database. This data can then be used to generate reports that help operators to make informed decisions about their business. Cellxpert houses all this data in the granular reporting we offer to our clients and affiliates alike to utilize to keep track of the profitability of campaigns on a granular level.
Data Analysis
After the data has been collected and warehoused, operators need to analyze the data to calculate the LTV of their customers. Data analysis involves various techniques such as predictive analytics, segmentation, and data visualization. Predictive analytics helps operators to understand customer behavior patterns and identify factors that influence their LTV. Segmentation helps operators to divide their customers into groups based on their LTV and other attributes such as demographics and location. Data visualization helps operators to understand data trends and patterns by creating visual representations of the data.
Reporting
Finally, operators need to generate reports that provide insights into their customer LTV. These reports should include various metrics such as customer acquisition cost, customer retention rate, and customer lifetime value. Additionally, operators need to ensure that these reports are accessible and easy to understand. This is especially important when sharing these reports with affiliate partners as they need to be able to make informed decisions based on the data provided.
Conclusion
In conclusion, calculating the LTV of a casino or sportsbook customer requires a robust technology stack that can collect, warehouse, analyze, and report on large amounts of data. This data should include both internal and third-party data sources. Operators need to ensure that they are compliant with data protection laws and regulations. The reports generated from this analysis should be easy-to-understand and accessible to all stakeholders, especially affiliate partners who need to make informed decisions based on this data. By utilizing a comprehensive technology stack, operators can optimize their marketing spend and establish best commercial rates with their affiliate partners.
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