Mobile apps are expensive to develop and maintain, but they can drive a huge return on investment for your business. Mobile-first companies, such as Uber and Facebook, generate billions annually off the strength of their apps alone.
So why isn’t your app making more money?
The problem is that a lot of folks simply develop a mobile app and expect it to fly. 67% of marketers don’t even measure their mobile ROI. Ignoring this metric defeats the point of a mobile app—to generate a return and meet business objectives.
To do that, you need to constantly optimize and experiment with your app. By testing, you figure out ways to cost-effectively promote and refine your app experience. The more frequently you experiment, the more you learn and the more you can improve your app’s user experience for greater returns.
The Mobile User Journey
To increase your app’s ROI, you have to consider costs and revenue as a part of the user experience, rather than just numbers on a spreadsheet. If your analysis is too short-sighted, it’s easy to miss when you’re pouring your money into a leaky funnel that isn’t actually driving user retention.
Say, for example, you budget $100,000 for a Facebook ad campaign to drive app installs. Your campaign seems successful with 50,000 installs generated. You only spend $2 per mobile app install.
At first glance, this calculation seems pretty good compared to a 2016 benchmark of $2.74. But this $5 figure is a misleading indicator of success.
Based on the short-term metric of app installs, the $5 calculation ignores the bigger, long-term goal of user retention. You check your analytics 90 days later to discover that just 5% of those 20,000 installs are still using the app—only 1,000 users. With only 1,000 users, you realize you’re now paying $100 per retained user.
What went wrong? The only way to know is to experiment at every stage of the user journey:
- Acquisition: People become aware of your app and download it.
- Activation: Users grasp the value of your app and become hooked on it.
- Retention: Users continue engaging with your app.
At each of these stages, you need to experiment to see which changes lower user costs and increase user revenue for a better ROI. Setting up this testing is simple once you know how ROI is impacted at each stage of the user journey and what you should test and measure for to increase your mobile ROI.
Stage 1: Acquisition
Your app can’t succeed without acquisition, the stage of getting new users to download and install your app. Getting users to that point of installation takes time—and money. You have to pay for marketing campaigns to advertise your app and encourage people to download it. The more you can decrease these acquisition costs, the more you can increase your mobile ROI.
The costs of acquisition
Two factors at this acquisition stage can increase your cost per install—your ad spend and your number of installs.
The greater your ad spend and the lower your number of installs, the greater your cost per install. If you can lower your CPI, your overall return is greater, providing you with extra resources to acquire even more users.
So what are the keys to lowering your cost per install to increase your ROI?
- Find cheaper ways of advertising your app to lower your ad spend.
- Acquire users at a quicker rate to increase your number of installs.
By experimenting, you can identify advertising methods that are cost-effective, yet still lead to a high number of installs.
Testing your app promotion
There are a few experiments you can use to find ways to lower your cost per install. Here are a few ideas:
- Experiment with multiple ad audiences. By testing different audiences for your ads, you can identify which target groups have the highest ROI. For example, AdEspresso experimented with 3 Facebook ad Lookalike audience sizes to see which group had the best campaign results.
- Experiment with ad design. Test different versions of ads that play around with design elements, such as the image to text ratio and the CTA placement. Even small design changes can resonate more with users and lead to greater installs.
- Experiment with referral. Encouraging users to share your app with their friends lowers the cost of acquisition for you—instead of increasing your ad spend, users handle promotion for you. Check out these innovative ideas for mobile referral programs. If increasing the shareability of your app drives installs, you can lower your ad spend to reduce your cost per install and increase your mobile ROI.
With these tests, you can identify what changes you need to make to lower your CPI and increase your ROI.
Stage 2: Activation
Your work isn’t over once the user has installed your app. You need to “activate” users—or get them to the core value of your app—as quickly as possible. Unactivated users who don’t understand your app’s worth won’t stick around, dragging down your bottom line. The key to increasing your mobile ROI is activating as many users as possible.
Maximizing revenue through greater activation
For the average app, only 2.7% of app users are still around by day 30. You have a short amount of time to “activate” users and get them hooked on your app before they disappear. The more users you can activate and show the core value of your app, the higher your long-term retention and ROI.
For a user to continue using your app after downloading it, they have to understand why it’s a valuable tool, or reach the point of activation. This is different for every product. Facebook, for example, defines their activation point as a user gaining 7 friends in 10 days. The greater your activation rate, the greater your retention and revenue.
Onboarding is the time to activate users. You explain how your app works and why it’s worth using so people want to continue engaging with it.
Testing different versions of your onboarding allows you to find the most powerful, efficient ways to convey your app’s value so users quickly reach the activation point and become long-term users.
Testing Your Onboarding
To find the best way to increase retention and communicate your app’s usefulness, consider experimenting with your onboarding in the following ways:
- Experiment with flexible notification settings. New users are often turned off by apps that force allowing notifications. They’ve just started using the app, so they haven’t formed enough trust in the app to permit these reminders. With this hesitancy, test versions of your app that allow users to engage with the app without requiring notifications. If notifications are a critical aspect of using your app, make it easy for users to switch their notification settings from the app.
- Experiment with flexible sign-up settings. Users often don’t want to immediately sign up for an app after downloading it—they’d rather explore the app first to see whether they like it. Forcing them to sign up may lead to the user closing the app and deleting it. Test a version of your app that doesn’t force sign-ups to see if the change increases retention. Letting users explore the app may create a foundation for regular usage, as opposed to blindly signing up.
Testing different versions of your onboarding will highlight what you need to change to quickly and effectively communicate the value of your app. With this improved introduction, new users will feel motivated to stick around, your revenue doesn’t drop, and your mobile ROI stays strong.
Stage 3: Retention
Retention is the foundation for your app’s growth. Users have to continually engage with your app in order for your product to stay afloat. Any churn at this stage sinks your revenue, so you have to focus on keeping the customers you have to maintain a positive, strong ROI.
Maximizing revenue at retention
If users get bored with your app, they’re bound to leave your product and find a new one. Tracking whether your users are staying engaged with your app and improving retention is one of the most important ways you can impact your revenue.
If you let your churn levels get too high, your revenue reduces and lowers your ROI significantly.
The key is to rewire your users’ minds to make your app seem less ordinary. You present your app in new ways so users are more likely to notice it, remember its value, and re-engage. Churn is avoided, and your mobile ROI isn’t reduced.
Testing ways to refresh your app experience
Experimentation allows you to vary the app experience for users at the retention stage and see if the changes increase their engagement. Here are a few tests to try out:
- Experiment with adding new features. Introducing changes to your app refreshes your user’s perspective. With these alterations, you’re showing users a new way your app adds value to their lives. When you add a new feature, always notify users in the app so they don’t miss it and understand how the change works.
- Experiment with notifying users about rarely-used features. Users might not be using a feature simply because they aren’t aware of it. Remind them of cool features in your app with in-app alerts, notifications, or even by email. Be sure you send these reminders to a segmented group of users who aren’t using the feature—that way your users who already know about the feature don’t feel spammed.
With these tests, you find the best ways to refresh your app experience and keep your users engaged.
Get a hold of your mobile ROI by testing
Experimentation takes the guesswork out of your mobile ROI. Instead of blindly changing your app, you make deliberate alterations that you think will lower your cost of users and increase the revenue from users. By tracking each test, you can choose the version with the best results.
The more frequently you test your mobile app, the more quickly you can improve your ROI. You constantly have insights about how to improve your mobile app, so you can swiftly make adjustments to keep your app performance and ROI healthy.
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