Virality is one of three components that you use to determine lifetime value of a customer (LTV) and is the one where small changes can have the greatest impact. Last week I wrote about the central importance of LTV to the success of your game and your company. This week I want to discuss one of the key elements of LTV, its importance and how you can improve it.
How to define virality
Virality can be defined as the number of new players an existing player recruits (for free), and is often referred to as a “K-score” or “K-coefficient.” The viral coefficient K is usually calculated as K=i*conv% (conversion percentage), where “i” is the number of invites sent out by each new customer and “conv%” is the percentage of invites that convert into costumers.
Although calculating the K-score seems pretty straightforward, there are many different measures you can use in your LTV calculation. In a future post, I will detail how lifetime value is calculated, but I can only provide a framework, as companies calculate it differently based on their priorities and needs. There is no perfect formula and you will always be adjusting your formula to get a more accurate picture of your player’s lifetime value.
The K-score is a time- and cohort-dependent variable. Thus, based on the earlier equation, you may measure i*conv% over the life of the game, over a month, over a week or simply in one day. You may also want to use a combination of these metrics, for example both 1-week K-score and lifetime K-score. A related measure to track that could be incorporated into your LTV is Viral Cycle Time, that is how long it takes for a user to bring in another player (and another and another); the shorter the cycle time, the quicker your growth. Continue reading “Lifetime Value Part 2: Virality’s role in LTV and how to impact it”