June 22, 2015 by Dennis Mink

How to Measure and Drive ROI in App Marketing Campaigns

With app marketing, the best way to go forward is to start by working backwards.

Today’s app market is incredibly crowded. There are an overwhelming amount of options in every category, and building a great product is no longer enough to attract and retain users. At the same time, the stakes (and opportunities) have never been higher.

One in five people in the world own smartphones. According to Flurry, app usage dominates 88 percent of the time that the average U.S. consumer spends on their smartphone, with 224 million monthly active app users in the U.S. These trends give no sign of slowing down. Localytics found that the amount of time people spend using apps has increased by 21 percent since last year. The appetite for apps is fierce.

Apps are increasingly dominating the online ecosystem and marketers have taken notice. eMarketer predicts that the global mobile advertising market will hit two significant milestones in 2016: it will surpass $100 billion in spending and account for more than 50 percent of all digital ad expenditure for the first time. With over 1.5 million apps in the app stores, the challenge that app publishers face is to break through all the noise. Apple’s iTunes App Store and the Google Play store contain 1.4 million and 1.5 million apps, respectively.

In an effort to rise to the top of the mobile food chain, app publishers have traditionally focused on acquiring as many installs as possible at the lowest cost per install, then relying on push notifications and app updates to try to convert these installs into active users. This is a poor way to market an app and establish an active user base. Most apps lose 85 percent of the people they acquire within the first 30 days after the install. And nearly 70 percent of apps will generate fewer than 5,000 downloads, according to VentureBeat Insight.

Rather than wasting time obsessing over installs and the cost per install, marketing resources are better spent focusing on users who will not only install the app, but actively use it to shop, share, create profiles, make reservations or do whatever it is your app does. This is where you can start generating meaningful value and revenue from the mobile app experience. Today’s mobile app ecosystem demands measuring and optimizing the cost-per-action.

Work Backwards

The best way to make this shift is to start with your end goal. Ask, “What is the key event inside my app that provides the most value for the company?” Let’s say your goal is to generate hotel bookings. Now work backwards to identify the key steps a user must take in order to book a hotel room. In order to book a room, they need to create an account. Before that, they need to search for and find the hotel they want to stay in. Before that, they need to install the app.

Having a clear outline of this funnel will enable you to not only gain a better understanding of your users, but also to figure out what you can do to ensure people move smoothly through it, and how much you are willing to spend.

The next step is to create a marketing campaign that will attract the kind of users you want. App-install campaigns, retargeting, blogging/content marketing, partnerships, videos, emails, paid search, press, etc.–the user acquisition toolbox is large and well-known. As we’ve discussed above, the hard part actually comes next.

Once you have people installing and using your app, measurement becomes key. Every app should have good mobile analytics tracking integrated with event tags, so you can identify each step of the funnel and watch as people go through.

Track what percentage of people are installing and browsing, what percentage of people who are browsing are registering and what percentage of people who are registering go on to make a purchase. Mobile analytics makes it easy to identify where you should focus on widening your pipeline.

The most important return on investment calculation to make is the cost-per-action, or the cost to acquire a user who engages in your most valuable post-install event. This metric takes into account the amount spent on a campaign, the number of users who install and convert and the average cost to those conversions. This metric can then be analyzed by marketing activity or channel to gain insight into which activities are driving the most engagement. For example, how does each ad network, ad creative, or ad type (display, video, native, etc.) impact engagement with your app, and at what cost?

Another key metric is what we call the “install-to-action” rate (ITA). This is the percentage of installs that successfully complete a post-install event, such as making a purchase. The ITA is a handy metric to evaluate the performance of your app in driving conversions and comparing the performance of one app to another.

Mobile analytics are also helpful in identifying key characteristics about your users that, when combined with CPAs and ITAs, paint a clear picture of your best performing cohorts. For example, do you see a higher percentage of women or men making reservations? Are there differences by location? Do iOS users book more hotel rooms than Android users? This treasure trove of data will help you be even more targeted and data-driven, and thus more impactful, about your marketing.

When it comes to measurement that matters, cost-per-action and install-to-action will help you maximize the value of every marketing dollar you spend.

(This article was originally published as a guest blog post on Adweek.com.)

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