I have written several times about Moneyball and many times about customer lifetime value (LTV), so I wanted to bring the two together. Moneyball was the Michael Lewis book turned into a successful film about Billy Beane and how he made the Oakland A’s competitive by relying on analytics over intuition (for more detail, please see Lessons from Moneyball for the Social Game Industry and Moneyball Strikes Again). The same principles that help the Oakland A’s compete effectively could help social game companies compete, even against better financed firms. The same phenomenon holds with LTV, in which many of the metrics people focus on do not have maximum impact on long-term success.
Runs = LTV
LTV serves the same role in your business as runs do in baseball. Beane and his analysts realized that the success of a baseball team comes down to scoring more runs than your opponent. They thus reverse-engineered the game and its players into what contributed to scoring runs and what contributed to preventing runs. They then used their resources that maximized the delta between runs scored by the A’s and runs that they allowed. Continue reading “Lifetime Value Part 5: Moneyball and LTV”