Category posts
Unit economics

LTV (Lifetime Value) is an important metric for decision-making in both marketing and product management. But measuring LTV is a bit tricky and you can easily make mistakes when calculating it. Moreover, even articles that have found their way to the first first page of Google search results contain mistakes when it comes to calculating LTV.

In this essay, I will discuss how to (not) calculate LTV, and how to avoid these common mistakes:

• Calculating LTV based on revenue instead of gross profit.
• Calculating LTV by using users’ Lifetime which is calculated as 1/churn or in any other way.
• Calculating LTV based on the average number of user purchases.

→ Test your product management and data skills with this free Growth Skills Assessment Test.

→ Learn data-driven product management in Simulator by GoPractice.

→ Learn growth and realize the maximum potential of your product in Product Growth Simulator.

→ Join our discussion on LinkedIn. New topics to talk about every week.

Unit economics is a powerful tool that can help you better understand your product and business. In particular, it helps you answer one of the key questions when you want to scale your product: are you making or losing money on a particular user?

Calculating unit economics might look like a complex task that requires knowledge of various formulas and terms. However, in reality, unit economics is simple and intuitive.

I will explain it to you in less than 50 words. Read and count.

→ Test your product management and data skills with this free Growth Skills Assessment Test.

→ Learn data-driven product management in Simulator by GoPractice.

→ Learn growth and realize the maximum potential of your product in Product Growth Simulator.

→ Join our discussion on LinkedIn. New topics to talk about every week.

ARPU and LTV are often used interchangeably. But in reality, they are two fundamentally different metrics. They are calculated in different ways. They answer different questions.

This article will discuss the following:

• How to calculate ARPU
• How ARPU differs from LTV
• How increasing ARPU can harm your business
• How decreasing ARPU can benefit your business
• Why you need to be careful about using ARPU to make product decisions

→ Test your product management and data skills with this free Growth Skills Assessment Test.

→ Learn data-driven product management in Simulator by GoPractice.

→ Learn growth and realize the maximum potential of your product in Product Growth Simulator.

→ Join our discussion on LinkedIn. New topics to talk about every week.