Every article published on our blog highlights important aspects of retention and in what way it is more important than user acquisition. But for app owners, it isn’t always that easy to understand the terms involved in marketing discussions. They have an app and they want it to be successful. What are LTV, CPI, ARPU … and ROI? And why marketers use so many acronyms? Why is it so hard to say the entire word? Don’t worry; we will share here some useful information which will allow you to talk like an expert every time you enter the meeting room with your marketing team.
What Is ROI?
ROI, also known as Return On Investment expresses your gain after a certain campaign. You can think of it as the mirror where you can see the results of your efforts. Unfortunately, we are not talking about a clear mirror because of the many factors involved in the process of managing an app. If you want to detect something through a cloudy mirror you are going to need data for making it less foggy. Luckily, nowadays there are a lot of solutions even for a business with a low budget.
Why Is Mobile ROI Important?
It is crucial to calculate an estimated ROI for your idea before implementing it. What if your project won’t work and you will end up losing a big part of (if not all) your resources? At the end of the day, Return On Investment must be the fundamental metric which coordinates your entire strategy.
How To Calculate Mobile ROI?
So far so good, but it isn’t that easy to find the right method for determining the return on your investment.
The ROI Formula
There are many formulas attributed to this metric but a simplified mechanism is to compare the sum you pay for your program with the amount you are going to lose. Use the following equation adapted to your business:
ROI = (Gain From Investment – Cost Of Investment) / Cost Of Investment
Important ROI Metrics
For a good estimation of the return on your investment, you will need some helpers which make your work a lot easier.
CPI (Cost Per Install)
Cost Per Install (CPI) is a digital advertising method focused on mobile apps. It describes the system where you pay for a user if he clicked on an ad and he downloaded the app after that. In other words:
CPI = Ad Spend / Number Of New Installs Which Come From A Campaign
It is tricky to build a sustainable growth plan for your app with a CPI model because it depends on the country, platform, and app category. But as we said before, the tools offered by App Samurai are specially created for eliminating your concerns.
LTV (Lifetime Value)
LTV or Lifetime Value if you want, is the revenue metric which describes the financial value of your app based on the value of each user during his lifetime inside the app. Measuring LTV is crucial because you are making a huge mistake if you concentrate your strategy only on installs. It depends on retention, monetization and virality. An easy way to obtain this value is by taking into account the coefficient of virality (K) which can be 1 in case each user brings a new customer.
LTV = (1 + K) X ARPU
ARPU (Average Revenue Per User)
The ARPU or Current LTV is the average revenue per user which means that you can split the total revenue to the number of installs. As you can imagine, a simple formula would be:
ARPU = Total Revenue / Number Of Users
Road Map Of ROI Calculation
Let’s go step by step for gathering all the necessary elements in order to obtain an accurate ROI.
Determine Your End Goal
Start by deciding the most important action you are looking for while customers use your app. What do you want to achieve?
Separate Your App Funnel Into Steps
Next, determine what users need to do before reaching that point. Each step is very important for the customer journey.
Create The Campaign
After that, you need to build your campaign for reaching that purpose. Browse through our blog because you will find a lot of strategies for this stage.
Use Tracking Tools For Measuring Each Step
A smart campaign requires a lot of attention because you can’t launch it and forget about it. Calculate every event and optimize it according to the results received.
Determine The Percentages
Now, the most important is to observe how many users completed each point. This measurement will help you to decide where to focus more.
3 Basic Ways To Improve Mobile ROI
After we covered the most important elements which you need to determine when you have to calculate mobile ROI, it is time to understand the best techniques for optimizing ROI.
Enhance The App Funnel
Start by analyzing your app funnel and improving the way users pass from a stage to the next one. If you observe that they struggle in some point you need to step in and to optimize the process. Testing different solutions are necessary for a better understanding of your customers’ activity.
Improve App Spending
It is essential to keep your eye on ROI but you also need to focus your energy on convincing users to spend more inside your app. The way you monetize your app dictates the end result. Make efforts to improve the conversions and we are talking here about in-app purchases and in-app ads.
Hearten Social Sharing
Social media is the keyword for almost all types of apps. Encourage users to share your app by implementing social sharing features and at the same time be active on social networks for connecting with potential users who will become loyal customers.
Calculating ROI for your mobile business shouldn’t be a tedious process. Instead, you should consider it as a great guide that will tell you if you are in the right place and where to go next. Discovering the right data will help you to optimize your efforts and to take the best decisions. After all, it is not that hard, is it?