Artists big and small refuse to invest in growing their fanbase - here’s why that’s a very bad idea
Discover more from The Baker Says
Artists big and small refuse to invest in growing their fanbase - here’s why that’s a very bad idea
Unlocking the Power of LTV: What Musicians Need to Know About Growing Their Fan Base
As an artist, you know that having a loyal fan base is essential for success.
But how do you go about building and scaling your artist business?
And importantly, how do you know how much time, capital and resources you should invest into acquiring new fans?
Most artists have no idea about the power of Lifetime Value (LTV) and are therefore misinformed about the benefits of investing into building their fanbase.
In this article, I’ll talk to you about how as an artist you can measure LTV, how to use this data to inform your strategies, and which actionable steps you should take toward maximizing your profits:
1. What is fan Lifetime Value (LTV) and why is it important for your Artist Business
2. LTV in Action: The 1000 True Fans Concept and LTV
3. How to Measure LTV
4. Actionable Steps for Maximizing Profits with LTV
What is fan Lifetime Value (LTV) and why is it important for Artist Businesses?
What is fan Lifetime Value (LTV)?:
Fan lifetime value (LTV) is a powerful tool to help you understand the true value of each fan so you can make data-driven decisions when it comes to marketing and expanding your fanbase. By understanding how much each fan spends on their music, merchandise, concert tickets, etc., an artist can develop targeted strategies to increase their fan base and drive more revenue.
Benefits of Leveraging LTV for Artist Businesses:
Understanding the lifetime value of a fan is an essential tool for any artist in today's market. By understanding LTV, artists can make more informed decisions about how to acquire and retain new fans, as well as what kind of promotional strategies they should deploy to maximize their profits.
For example, if an artist has a low LTV they may want to invest more heavily in marketing and promotional efforts to make sure their new fans are engaging with their music, connecting more deeply on social media and working towards generating more income from each fan: thus increasing the LTV.
On the other hand, if an artist has a high LTV, they can focus their investments on acquiring more of these valuable fans.
LTV in Action: The 1000 True Fans Concept
The 1000 True Fans concept was introduced by Kevin Kelly in 2008 and it states that an artist only needs 1000 fans who are willing and able to spend money on their music and merchandise to make a living.
This idea is powerful, especially when combined with LTV.
If for example, an artist needs to generate $100,000 per year in income, then they will need to achieve an average LTV of $100 per fan, per year.
By understanding their LTV, and how much value each fan brings to their business, artists can develop strategies to acquire and retain these 1000 true fans.
Further, if an artist has an LTV of $1000 per year, they only require 100 fans to generate the same amount of income.
When you understand the LTV of your fans, it allows you to project the impact of both acquiring more fans like the ones you already have and what happens when you’re able to get them to purchase more from you towards increasing the LTV.
How to Measure LTV
1. Calculate Revenue Generated From Each Fan
The first step in calculating a fan's lifetime value is to understand the revenue generated from each fan. This requires looking at all of the sales data for that particular fan, including any additional income from streaming, merch sales, ticket sales, and other direct-to-consumer revenue sources such as membership income or donations.
2. Analyze Your Fan Behavior
Once you have a better understanding of each fan's revenue, it's time to analyze their behavior. This includes looking at how often they purchase your music or attend shows, how active they are on social media, and whether or not they share your content with their network. By understanding the behavior of each fan, you can identify what types of fans are more likely to stick around and bring in long-term revenue.
Actionable Steps for Maximizing Profits with LTV
1. Leverage LTV to Target New Fans
Targeting new fans requires investment, so it's important to focus your efforts on the fans who are likely to bring in the most value. By understanding a fan's lifetime value, you can use this data to target potential fans who have similar characteristics and demographic profiles as your existing fan base.
For example, if an artist has a high LTV from fans in their 20s who listen to hip hop and regularly purchase physical merchandise, they can target other fans of similar age and genre who are likely to have similar purchasing behaviors.
2. Create Specific Promotions for High-LTV Fans
Once you have identified your most valuable fans, it's important to create specific promotions and incentives designed to keep them engaged. By understanding the lifetime value of a fan, you can design strategies that help increase their loyalty and engagement over time.
For example, an artist may offer early access or discounts on upcoming releases or products to incentivize loyal fans who have already proven they are willing to invest in the artist's music. In addition, offering exclusive content such as unreleased songs or behind-the-scenes footage is another way for artists to reward their best fans without sacrificing profit margins.
Further, creating premium products that have a higher price point as well as an increased margin, is a great way to incentivize high-LTV fans to purchase more. Products such as exclusive and limited edition vinyl and deluxe box sets are a great way to give fans an incentive to spend more, while still allowing the artist to generate additional revenue.
3. Utilize Data To Make Proactive Decisions
Finally, artists need to leverage their data regularly in order to make better strategic decisions and ensure they are investing their resources in the right areas. By understanding the lifetime value of a fan, artists can make more informed decisions about where and how to spend their marketing budget.
For an artist to be able to maximize and fully utilize the opportunity data presents, they must be able to obtain as much information on their fans as possible:
Artists should invest in data-driven marketing strategies and use a combination of analytics tools and fan feedback surveys to ensure they have an accurate understanding of their fan behavior.
It's important that the financial transactions themselves within an artist's business, are in systems where the data is accessible so that both marketing activities and the fan LTV can be calculated with completeness.
Conclusion:
Unlocking the power of fan lifetime value is an essential tool for any musical artist looking to grow their fan base. By measuring and analyzing each fan’s LTV, artists can create targeted strategies that maximize profits and keep fans engaged over time.
Artists should invest in data-driven marketing tools, use incentives like exclusive content or discounts to reward loyal fans, and leverage analytics tools to make informed decisions about where to spend resources.
Alongside offering a contrarian perspective about the music business and discussing things that others are afraid to write about, I’ll be dropping frequent value driven posts like this one.
If you got value from this article, please consider subscribing to get notified when new posts are published here on my Substack.
Kind Regards
Carl AKA ‘The Baker’
Missed my first and most important article? here’s the link to it:
