by Robin Campbell, Marketing at Tapstream
As competition rises, one of the biggest questions plaguing the minds of app makers today is “How do I get more users?”
The other day, Tapstream’s CEO, Slaven Radic, was chatting to an app company about exactly this, only to discover the app maker had no idea what his customer lifetime value was – that’s to say, how much he will earn from an average customer throughout their relationship. This is alarming considering he was ready to dive head-first into user acquisition.
The sexy veneer of taking action and roping-in new users is tempting, but there are some important numbers you need to know first.
Knowing your cost of customer acquisition (CoCA) and lifetime value (LTV)
Learning how much it costs to acquire a customer (CoCA) for a given channel and how much that user is worth to you (LTV) is the only way you can determine which sources of users are worth going after.
CoCA is calculated by taking your total cost of sales and marketing for a given campaign and dividing it by the number of users gained from that campaign.
For example: you spend $1,000 on a week long ad campaign, and you use a unique tracking link to discover that at the end of the week you’ve gained 100 new sign-ups. You’re cost per user in this case is $10.
Once you know your CoCA for each marketing channel you’re using, you’re halfway there. LTV is CoCA’s better half!
LTV in simple terms is the total revenue gained from a customer throughout your relationship.
After serving your customers for some time, you’ll begin to see how long your relationships last and get a feel for your LTV – the key to tackling your user acquisition strategy.
Once you have a solid understanding of your LTV you can test different marketing channels to see which are the most valuable sources of users.
Note: Keeping CoCA below LTV is important, but the degree to which you do so is up to you. If you want to be aggressive, you can allow CoCA to rise rather high, as long as you have enough cash to hold you off until you see revenues from your customers.
Discover where your most valuable app users come from.
Once you’ve begun acquiring more users, the question will arise: “are these users actually valuable?” The golden ticket here, is tracking in-app user behaviour.
Sure, maybe a user was cheap to acquire, but is he coming back to your app? Is he buying? Measuring in-app events allows you to connect user behaviour back to the channel that scooped the user up.
For example: you conduct some competitive analysis for in-app Android ads and decide to run a campaign. You use a tracking link and discover that 25% of the users acquired through this channel make in-app purchases. This is highly desirable, so you would keep it on your list of future marketing activities.
4 in-app events you should measure to learn their effects on LTV:
To learn how many users each campaign is bringing in, you’ll need to set up an ‘activation’ event for your app. An activation represents the first time a person runs your app.
Once a user has activated your app, you can start measuring the behaviours that would define your ideal user.
1) Re-engagement – are your users coming back? Each time they come back, they become more invested, increasing your opportunities to convert them into customers. If they’re dropping out at a certain point, fix the leaky bucket.
2) In-app purchases – this is the ultimate goal for most apps. Discovering the spending habits of your users and and learning which channels brought in your biggest spenders is powerful information.
3) Social sharing – when a user shares an app experience to a social network it can really improve user growth. Find out which app experiences your users enjoy sharing so you can encourage this behaviour.
4) Ad engagement – if you’re monetizing your app through ads, understanding which ads your users are responding to with clicks or video views will help you refine your strategy moving forward.
Tying in-app user behaviour to your media buys allows you to locate your best sources of users. Combine this with some WhatRunsWhere competitive ad intelligence and a knowledge of your CoCA and LTV and you’ll have an incredibly powerful engine for scaling your user acquisition.
If you don’t already know what your average LTV is, start measuring it. Once you know your LTV, keep track of your CoCA for each channel that’s in your marketing plan. If CoCA creeps up to high, or surpasses, your LTV, your current strategy is probably unsustainable and you’re going to have some cash problems.
As long as you keep a finger on the pulse of these key metrics and the in-app events that define your highest value users, you’ll be able to continue refining your acquisition strategy and bringing in the right users at an affordable price.
About the Author: Robin Campbell leads marketing for Tapstream, a marketing attribution service for apps that tells you where your most valuable users come from, so you can get more. He loves chatting business, travel and adventures. Catch him on Twitter.