Player lifetime value (LTV) is an important metric that online casinos use to measure their performance. Gauging LTV can help determine which marketing and customer relationship management strategies are the most effective and which player segments are the most valuable.

Calculating LTV

LTV measures a player’s estimated net value to an online casino from the date of customer acquisition to the end of the player’s relationship with the site. LTV considers the revenue earned from a customer and compares it to the predicted customer lifespan. The closer you look at the topic, the more formulas there are to break it down, but for this blog post, we’ll keep it simple.

Player LTV can be determined by multiplying the casino’s Average Revenue Per User (ARPU) by the average length of time players stay on the casino. ARPU is measured by dividing the amount of revenue earned by a casino in a certain period of time by the number of players on the casino in that period of time.

In short, player LTV is the total amount of money generated by a player over the entire length of their relationship with the casino.

Formula:

LTV = ARPU x average length of time players stay on the casino
ARPU = casino revenue in a certain period of time / number of active players in that period of time

Why LTV matters

An accurate estimation of how much a player is potentially worth will have a direct effect on customer retention strategies. Keeping a player on the site is self-evidently worthwhile, but not to the point where you’re spending more on them than they are on you.

Not all players are equally valuable. A customer who bets a few dollars on a football match once every few months is less valuable than one who bets hundreds of dollars a year on online slot machines, and your attention and marketing budget should be spent on them accordingly.

It’s important to balance player LTV against customer acquisition cost (CAC). One common rule of thumb is the 3:1 ratio - a customer’s lifetime value should be equal to three times the acquisition cost, though some experts allow for a smaller ratio of 2:1. The better the ratio, the better the return on investment.

A thorough understanding of LTV can help an online casino understand the value of different player segments and properly tailor their customer service.

Increasing LTV

It’s in a casino’s best interest to raise LTV as high as possible. This can be done by extending the player’s lifetime on the site, increasing the amount of revenue from each visit, or, hopefully, both.

Extending a player’s lifetime on the site can be managed with effective CRM software. Players will provide value to the casino as long as they feel it provides value to them. Using loyalty and VIP programs to make sure players know they’re important will result in increased bet sizes and an extended player lifetime.

Effective casino customer service will decrease churn rate and increase lifetime value. Of course, the most effective method of increasing player LTV is by offering a high-quality product. Keeping an online casino updated with the latest slots and live dealer games is the most important step towards building casino customer loyalty.