Not all players hold the same value to a business. Some customers will use their welcome bonus and never return, while other customers will spend large amounts on a regular basis and become loyal customers. But how do online sites separate the wheat from the chaff? We’ll cover all the tactics online casinos use to calculate the value of their customers in this article.
Lifetime Value Analysis
Once a business truly understands a player’s lifetime value it means they can tailor advertising to the individuals wants and needs.
Understanding the lifetime value of customers is an important tactic for online businesses. It enables them to assess where their profits are coming from and make strategic decisions about what games and offers they should invest in and predict how they will make the best returns. Understanding which customer segments are most profitable and engaged is key to successful marketing and revenue growth.
To improve their lifetime value rate, you need to increase both the likelihood of a new customer returning to your business and the average revenue.
Calculating lifetime value can be done in a number of ways. More simplistic methods use calculations, such as total revenue divided by the number of total customers. However, more complex models can determine more accurate figures. These can require months of data about user activity and so take a while to establish results.
Factors That Must Be Considered
There are a variety of factors that online businesses must investigate when trying to determine lifetime value and how it can be improved, these include:
- wagering requirements
- welcome bonuses
- free spins
- first-time deposit options having an impact.
These can be categorized into three key areas:
One way an online casino can anticipate what a new player’s lifetime value will be is by analysing their behaviour during and around the time of game play. A player who signs up for the newsletter featuring new games and game tactics is likely to be someone who takes their casino gaming seriously. For example, a player who searches esteemed sites like 888 Casino, looking for expert advice will find blogs like this one, written by gaming expert John Grochowski, offering winning slot tips to help improve their play.
They are more likely to wager higher amounts or play more frequently than a player who just wants to take advantage of a sign-up promotion. As Pareto’s law suggests, 80% of a business’s profits come from just 20% of its customers.
A customer’s lifetime value can be impacted by the wagering requirements set by the online platform. Those with lower wagering requirements may find that players spend more after using their first-time deposit or welcome bonus, whereas those with higher requirements are more likely to attract customers with more dedication to the game, or those happier to take risks.
It is also likely that customers who sign up and claim a welcome bonus but then leave their account inactive for a few days are not going to have much lifetime value for the . Casinos do not want to be offering free games or free spins on slot machine games to players who are not going to re-visit the site and spend money.
Targeting players who are most likely to spend more means casinos can be sure to get more business out of their most loyal customers.
By identifying customers that are serious about their services, the company can use targeted advertising and promotions in order to establish customer loyalty and increase overall satisfaction. The goal behind this is to achieve a lower churn rate, which is the amount of customers that discontinue playing on the site after a set period of time.
They can identify the customers who’re more likely to engage with loyalty schemes and even give them exclusive access to newly released games or player guides. It is usually the players with the highest lifetime value that rewarded with loyalty bonuses.
Analyzing lifetime value proves that blindly targeting their offerings at all customer segments is not an effective way of achieving a good return on marketing investment. In order to achieve the best return on investment, companies must establish and nurture the relationships that bring them the most profits.
Using Cohort Analysis
Cohort analysis gives online businesses the means to determine each customer’s lifetime value.
One effective method for determining lifetime value is cohort analysis. Cohorts are subsets of players that play on the online website. The cohort could simply be the active users on a set day, or it could be a cohort based on a certain advertising campaign, promotion, geographical location or device type.
When using cohort analysis, it can help to factor in the cost of customer acquisition, for example a social media campaign may have bought in lots of new players, but how much did it cost to run? After gathering data from different cohorts, businesses can compare the lifetime value of customers acquired through different platforms. This can help identify the most cost-effective channels for future marketing campaigns.
This method can also be effective for geographic location, if the company finds that players in one country have a better lifetime value than another, it makes sense to put effort into product development for players in that market. Similarly, if they find that lifetime value is much higher on mobile devices rather than desktop they may decide to expand into the app market.
In general, businesses find that somewhere between 20% to 40% of customers are not profitable, meaning that they have invested more in acquiring the customer than the customer has spent with the company. When comparing lifetime value to customer acquisition cost, the generally accepted ratio is 3:1 (meaning lifetime value is three times greater than the acquisition cost), however a ratio of 2:1 still suggests a healthy return on investment.
Investing in marketing strategies that retain customers is a no-brainer for online businesses. However, in order to maintain and grow revenue it is important that players are spending more on you than you are on them. By analysing and measuring lifetime value data, online businesses can identify their most profitable customer segments and design marketing strategies and tactics that will be most effective in improving value rates.