mobile app marketing

Advantages of a Cost Per Action (CPA) Model in Mobile App Marketing

By Morgan Friberg | July 23, 2017

When it comes to marketing an application, the last thing you want to do is spend a lot of time and money attracting users who will install the app once and forget about it; perhaps even uninstalling it a few hours, days or weeks later. After all, your return on investment (ROI) depends on much more than the number of people who have your app on their mobile device. What’s truly important is how people engage with your app after installation. In other words, continued post-install engagement is the true goal—one your mobile app marketing strategy must reflect for sustained success beyond initial installations.

The Importance of Post-Install Events
These aptly named post-install events can be anything users do after downloading and opening the app, from making in-app purchases to signing up for a paid subscription. According to Retail Dive, the key here is for marketers to “determine which post-install events are the best indicators for future conversions and revenue.” Doing so allows you to assign values to each post-install event, turning them into measurable key performance indicators (KPI).

Post-install events will vary across industries and apps. For example, a dating app may be striving to acquire users likely to purchase a paid subscription, while a gaming app wants users who will continue beyond the free version to augment their gaming experience with in-app purchases.

Cost-Per-Install vs. Cost-Per-Action Pricing
There are several models for marketing an app, including cost-per-install (CPI) and cost-per-action (CPA). The primary difference is that CPI-based campaigns focus on garnering the highest number of app installs for the lowest cost, while CPA-based marketing campaigns focus on acquiring high-value users who go on to partake in post-install events.

Which one is more effective? A study from VentureBeat shows that despite the fact that over half (52 percent) of app marketers chose CPI first, “The problem is that most of the users you acquire via CPI are astonishingly low-value. Over two-thirds of the users you acquire via CPI have sub-$10 LTV, and almost one in six have profitability-dooming LTV of precisely zero.”

Using a CPA-optimized model, on the other hand, allows marketers to target users with a higher likelihood of going beyond installation to engage in actual, revenue-producing events—and pay on a sliding scale based on what actions users carry out. Though the acquisition cost may be initially higher than casting a wide, indiscriminate net with a CPI campaign, these users tend to have a higher lifetime value because they will engage with an app over time.

If you’re marketing an ecommerce app to users, you don’t earn worthwhile ROI for a user who downloads the app once and fails to engage again. Rather, your revenue depends on that user completing subsequent transactions through your app. Food apps want users to go beyond just browsing a few restaurants and exiting out, never to engage again—they want users to order deliveries and place takeout orders with their favorite restaurants through the app.

Long story short: When marketers can target high-value app users with a CPA-optimized model, they’re lessening the risk they’ll spend money on acquiring customers who will merely install their app.

Liftoff switches marketers from a CPI pricing model to a CPA pricing model after a short testing period so marketers can get the most out of their ad spend. Want to learn more about optimizing your mobile app marketing budget? Get started with Liftoff today!