When launching an iOS-app, it is important for a marketer to foresee all the details: from methods of interaction with different segments of the target audience to the cost of actions within the service. Sometimes it seems that everything is calculated and works well, but subscribers still leave. We figured out what mistakes marketers could make. Some details are very easy to overlook.
Problems With the Sales Funnel
You can face the first problems while building a sales funnel for a mobile application or when tracking conversions. The funnel for an iOS subscription service consists of the following stages: click on the ads, installation, trial period, first purchase, second purchase, etc. At first sight, nothing is complicated, but you need to understand what indicators are worth monitoring at each stage. Let’s analyze them one by one.
So, you created your app, then uploaded it to the App Store and started attracting users. Maybe you even carried out an App Store Optimization (ASO). It is the SEO-optimization analog for mobile services and gives your application a higher position in the list of apps in the store. You also launched ads on social networks and, probably, involved influencers. At this stage, you can already track the main sources of installations and the Activation Rate. The last one shows how successful your campaign was and how many users are engaging with your app. For example, your ads were shown to 1000 people and 100 of them installed your service. So, your Activation Rate would be 10%.
As the number of installations can not be less than the number of users who actively use the app, track involvement at the stage when the user goes through a trial period. One of the main engagement metrics is DAU or the number of daily active users. A similar MAU indicator reflects the number of people who use the app within 30 days. Look at the ratio DAU:MAU in your case. If the indicator is small, e.g. only 20%, then this is a reason to think about the funnel optimization.
The non-price metric can help you with it. This metric is a conversion from installation to trial. Its calculation formula is:
Number of conversions / Total installs * 100%
To increase the conversion rate start optimizing the funnel. You can do it by testing different ad formats: change the description of the offerings for a user or partially adjust the design. You can also try different interface variables and analyze user interactions with the application.
The customer retention rate will help to understand how much the user is involved in the app during a certain period of time. Retention rate can be calculated this way:
Number of users who opened the app on the N day / Number of users who opened the app on the day 0
And you can identify possible reasons for unsubscribing users with cohort analysis. Its idea is in dividing users into groups (cohorts) according to certain criteria and tracking key metrics for these groups at different time periods. By following the behavior of the cohorts you can find out why users don’t pass to the next stage of the funnel.
After the trial period, according to the funnel, the app is monetized. The user pays for subscription and makes purchases within the service. To understand how effective the application promoting campaigns were, the marketer can calculate the return on investment (ROI) in the campaign, taking the gross profit from the paid subscriptions as a basis. The ROI from app advertising on a certain channel for the control group of users can be calculated the following way:
(Revenue from subscribers — Cost of acquisition) / (Cost of acquisition)
So, you checked these indicators, but something still goes wrong? Well, there are some more metrics needed to evaluate the monetization of the app. To increase the conversion from trial to a paid subscription, you as a marketer should be patient and figure how deeply you’ve plunged into the unit economics.
Miscalculations in Unit Economics
In fact, the unit economics answers a simple question: how much money does a company get from a single user? But here you could also miss some details.
First of all, it is important to separate the concepts of ARPU (Average revenue per user) and ARPPU (Average revenue per paying user), although both of them are indicators of the monetization effectiveness of the app. ARPU applies to all users in general for the period under review, while ARPPU refers only to those users who made a purchase. The ARPU calculating formula is:
Total revenue for the time period / Number of users for the time period
ARPPU is calculated the same way, but taking into account only a number of paying users.
To evaluate your earnings on the attracted users, look at the customer lifetime value (LTV) and customer acquisition cost (CAC). The first one can be calculated like this for subscription business:
ARPU * Lifetime
The lifetime here means the average period users are interacting with your service. If users of your app subscribe for half a year on the average, so six months would be the lifetime and the period for ARPU calculating.
You can understand how sustainable your subscription business model is for any period of time, taking into account LTV and the customer acquisition cost (CAC). The last one is calculated like this:
The total cost of customers acquisition / Number of new customers for the period
The total cost of customer acquisition usually equals to ad budget.
To estimate the effectiveness of your subscription business, look at the ratio:
LTV / CAC
it’s easy to make a mistake at this step, although it seems to be simple. First of all, CAC depends on what the acquisition is: it can be e.g. install or the first purchase. Secondly, the results of LTV and CAC comparison at the first purchase stage may not be entirely correct. Several stages of the funnel, like the second purchase, the third one, etc., show when the user churn ends (and whether it ends). So it would be more relevant to calculate LTV taking into account the regular users.
Try to avoid the equality of LTV to CAC. In case your LTV is the same as CAC, your marketing brings no income and it’s time to revise your strategy. Accordingly, if LTV is less than CAC, marketing operates at a loss. If LTV is twice higher than CAC, you have profit, but it’s not usually big enough. The optimal ratio LTV:CAC is 3:1 and more.
These metrics would also help to analyze the traffic. When working to increase these indicators, in the marketing strategy there should be paid special attention to where users come from.
Mistakes In Traffic Attraction
Some mistakes can be done because of an inappropriate traffic source. The kinds of traffic involved in the iOS app can be divided into targeted, organic and motivated. The first one refers to users interested in the content and services that your application offers. Organic traffic is the kind of traffic you don’t pay for, e.g. search engine users. Motivated traffic is a stream of users who are attracted by a bonus for installing your service. Now try to figure out which one is worth emphasizing with your app.
One of the sources of targeted traffic is social networks, e.g. Twitter, Facebook, and Instagram, which offer various targeting tools. An example of targeted traffic could be also clicks on ads placed through the Google Ads platform it displays contextual advertising as well as advertising in a search engine.
The type of quality traffic for iOS service is organic traffic. It refers to all the users who weren’t attracted by marketing campaigns and includes those who were redirected to your app page by a search engine. To increase organic traffic, it’s worth spending marketing efforts on App Store Optimization, which we mentioned earlier. You can optimize the application page by writing key queries in the name, adding a catchy graphic icon, screenshots that most fully reflect the functionality of the service and making a comprehensive description. And it’s just a part of ASO.
Bringing the application to the top positions of the App Store allows the application to get into the catalogs of App Store through special collections of applications that are most often viewed by visitors — it’s called to be “featured”. The hit indicators are affected by the number of downloads and positive feedback. The “featured” effect can be prolonged by regular App Store Optimization.
The application position in the App Store can be increased by motivated traffic. It works so that users begin to download your app for additional motivation like bonuses in a game or affiliated service. Among the new “users” of your app could be people who are not even interested in it at all. Nevertheless, the mistake of the marketing specialist of the subscription service is to lay the main emphasis on such traffic because of its cheapness and speed. So, if you are not ready for a sharp outflow of users and a decrease in the conversion from trial to subscription, it is better to focus on attracting targeted traffic.
The examples of motivated traffic sources are advertising platforms specializing in the promotion of mobile applications, such as Unity Ads and AdColony. Developers can get targeted users by placing banners, video and other types of ads into mobile apps. The services like Unity Ads also help companies to create the ad gallery in their services and to monetize them.
The universal optimal option for high-quality traffic to the application is social networks. There you can attract potential customers who did not plan to install a new application. At the same time, contextual advertising can “catch up” with users, even when they no longer need the product. The same applies to banners in games.
In order not to miscalculate the purchase of traffic, you should analyze the effectiveness of each channel focusing on the specifics of your app. For example, if you have a game application, it’s better to place banners in other mobile games to attract traffic. In case you created a dating service, social networks are the best place to promote it.
Also, to determine the quality of customers or traffic through different channels, it is worth analyzing the ARPU and ARPPU indicators for users who came from each channel (organic search, contextual advertising, social networks). So you can choose the priority one and revise the strategy in future promotions. And the price metrics would help not to miscalculate the cost of marketing.
Skipping Key Price Metrics
When you purchase traffic for your application, evaluate the effectiveness of your ad via different metrics, such as CPI (Cost per install), CPA (Cost per action) and CPC (Cost per click) promotion. They will help you to understand if you’ve paid too much for minimal effect.
The first thing you should start with is the CPI, which is calculated like this:
Cost of ad spend / Number of new installs from ad
If an advertiser chooses to pay for installs, he pays only for real conversions — and this is an advantage. The disadvantages are the high cost and the probability to receive fraud installations with subsequent unsubscriptions. Also, the App Store doesn’t technically report on install until the app is opened by the user. So the number of installations can be not always correct.
In the case of a subscription app, the more relevant metric is CPA, in which the action is commonly the activation of the trial subscription. Its value is calculated as:
The total cost of advertising / Number of actions
Here an advertiser pays not for impressions and clicks, but in fact for each user who has expressed interest in the app.
And the last metric is CPC. This is the amount that an advertiser pays to the platforms and search engines for redirecting the user to the App Store. It is calculated as:
The total cost of advertising / Number of clicks
The CPC allows to track how much the product is interesting for users. However, in the case of subscription apps, the action, such as trial activation, is more critical.
It’s not enough to calculate each of these costs. When choosing a traffic source, a marketer needs to rely on average market indicators. For example, the average CPI for an iOS app in the United States at the end of 2018 is $2,07 (according to Business of Apps). With plans to launch a campaign on Google Ads, you can block from about $1 to $2 per click if your ad doesn’t contain “expensive” keywords (e.g. “law” or “insurance”). Taking into account these points, it would be clear how viable and effective your marketing is and whether it works at a loss.
“Where could I be wrong?” In fact, on any step, from creating your sales funnel and calculating in unit economics to launching a campaign and summarizing it.
You can carefully monitor the behavior of the audience at each stage of the funnel, and optimize conversions. But users churn without having made their first purchase or even not activating the trial. Just because you’ve chosen the wrong traffic source for the service. Or, on the contrary, you calculated the cost of campaigns, purchased the most suitable traffic, but the CLTV is less than CAC.
It’s easy to make a mistake, even if you are a pro. However, to avoid miscalculations and analyze why a subscriber becomes a churned subscriber, high-quality mobile analytics tools are needed. For example, systems such as Adapty quickly show how and at what point in time the audience has changed. With the help of visual data, you can quickly adjust marketing strategy and run new effective ad campaigns to win back churned users.