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Founder's Journal
The Dangers of LTV
Mar 13, 2024
Exploring the dangers of relying solely on Lifetime Value (LTV) in startup marketing, highlighting potential pitfalls such as misleading data and harmful business outcomes. Discussion on the challenges of heavy marketing spend and the importance of balancing customer acquisition costs for sustainable growth. Warning against the seductive nature of the LTV formula and emphasizing the need for a holistic approach to business strategies.
26:53
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Quick takeaways
- LTV measures marketing efficacy but can mislead if solely relied upon.
- Misuse of LTV can lead to overspending and neglect of organic growth strategies.
Deep dives
Understanding Lifetime Value (LTV)
Lifetime Value (LTV) is crucial for startups to assess the profitability of their marketing channels. LTV represents the net profit over a customer's relationship, factoring in customer value over time and lifespan before churn. Silicon Valley investors often focus on LTV to evaluate the cost of acquiring customers and benchmark it against customer value. While LTV aids in marketing prioritization and understanding customer economics, relying solely on LTV can be misleading or detrimental to a business.
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