Don’t Waste Your Money on the Wrong KPI: User Acquisition in the Mobile App Space

User Acquisition in the Mobile App Space

The year is 2016. App marketing for both brands and developers has become increasingly important in a world dominated by mobile. Mobile apps are an ideal conduit through which to reach consumers, drive engagement and in some cases monetization- however, what many advertisers fail to realize are the challenges they will face in order to successfully drive ROI.

What does it take to successfully market an app? What can you do to drive performance and ROI? Which tactics maximize marketing results? These are all important questions to ask before embarking on an app marketing campaign.

What are the challenges that App Marketers are facing today?

The competitive landscape of the Apple App and Google Play stores makes it difficult to acquire quality users and, more importantly, retain those users to drive ROI against the cost of acquiring them. The mobile app market has incurred a total of 147 billion downloads to date since the inception of the IPhone and Android operating systems; this number is forecasted to be double that in the next four years to 284 billion by 2020. [1]

Greater obstacles arise when it comes to retaining users. The average retention rate of users three months’ post-install sits at a low 25%- while churn rates sit at a high 75%.[2] These numbers reflect the decision to prioritize mass installs over sustaining usage and increasing LTV. Paying for installs that never perform within your application is an easy way to lose out on ROI.

The average user retention and churn statistics- 1, 2 and 3 months’ post-install of an application.

New Installs vs. Lifetime Value

Apps need audiences to survive- that’s obvious. The natural inclination at launch is to focus 100% on app installs. How many installs can we get? And what’s the lowest CPA we can achieve this at? are two typical questions that marketers and brands may ask. However, scaling users is only part of the success equation- lifetime value is a term that’s rarely ever mentioned, but should figure into your overall strategy to successfully drive ROI.

What is lifetime value (LTV)? Simply put, it’s a way of measuring what a user does with your app during the period that your app is installed on their device. Your overall key performance indicator, or KPI, measures how much value a user has within your app. For example: if you’re a ride-sharing app, then your KPI for users is based on the number of rides they take. You can get a bit more granular and then look at how many rides per day, week, or month, they take in order to assess the value that they have for your application.

How to measure Lifetime Value

An SDK, or Software Developers Kit, is a line of code that is installed into an app and used to attribute installs, analyze in-app events and group users into cohorts based off of their shared activity. Essentially, SDKs provide marketers with insight into how users are interacting within their app- allowing them to determining a user’s LTV.  Once marketers and developers have transparency into their audience’s movement and interests, it becomes easier for them to employ successful re-engagement strategies that will drive ROI.

An example of cohorts that have been grouped by search categories for the purpose of a re-engagement strategy.

Increasing Usage & ROI

It is paramount for advertisers to consider which users are performing and how they are engaging within an app in order to successfully to re-engage them. When a user has a high LTV in an app, it is likely that they will provide a greater return on your marketing investment once you successfully re-engage them. Moreover, if a user has a low LTV in your app, you may be a) providing them with ineffective messaging or b) wasting ad-dollars on a user that is uninterested in your product/service. Once you successfully analyze and re-engage users that are performing with your main KPI, you successfullyavoid churn, drive usage and increase monetization/ROI.

There are two main app marketing strategies for re-engagement: push notifications and re-targeting via paid media. Both of these tactics are are important to have in order to drive usage; it is considerably less expensive to re-engage users then to find new ones- so re-engagement strategies should be priority when it comes to driving ROI.

As is true with all re-engagement strategies, messaging that lacks context could cause user annoyance and do more harm than good for your application’s long term success. It is imperative for marketers to understand how users are interacting within their apps/their lifetime value in order to properly re-engage them via contextual offers and information.

Marketers and developers must have access to a comprehensive data tools in order to run a successful app campaign in 2016. By employing an SDK that tracks and re-engages users based off of their in-app activity- marketers are given an all-access pass to the data and tools that increase the LTV of their audience. As is the basis for most marketing strategies- understanding your user base will allow you make the most informative decisions for engagement, and, in turn, for an increase in ROI and overall campaign success.

[1] Localitics, 2015

[2] Ibid, 2015