Last updated on December 7th, 2016 at 07:46 am
Now that you know how to measure and assess the volume, sources, and effectiveness of your app acquisition efforts, it’s time to look closely at the quality of the customers you’ve acquired. After all, what’s the point in all that acquisition effort if the ones you acquire don’t use your app or generate revenue for your company?
Step 1: Identify Data Sources
To understand the quality of your customers, start by reviewing all engagement and monetization data available. There are a ton of tools that do this (Firebase Analytics, Amplitude, and Mixpanel are just a few) and even iTunes Connect offers helpful data. No matter what tool you use, I’m going to focus on the data itself rather than offer tool-specific tips.
Step 2: Clarify Goals
Every app will have different goals, and these need to be clearly defined before you can measure customer engagement. So… what are the goals of your app? If you’re stumped, think about it this way: what can customers do in your app that generate revenue and value for your business?
The goals for your app could include:
- Make a purchase
- View in-app advertising
- Visit specific screens
- Make an in-store appointment
- Use a specific feature or function
Example: NRG Sandwich Shop
NRG Sandwich Shop is a small regional chain that makes delicious sandwiches. They have a mobile app that enables customers to view the menu, get discounts, and place orders for pick-up or delivery. The purpose of the app is to increase orders and customer loyalty.
Their primary goals are:
- Place orders within app
- View menu items
- Redeem offers and discounts
Step 3: Engaged vs Active Users
Most dashboards offer an Active User metric, which is the number of people who opened your app within a given timeframe. Great — you’ve got your engagement metric, right? Nope. You need to dig a bit deeper to find the customers who took meaningful action toward your goals.
Identify Disengaged Users
In web analytics, the percentage of users who leave a site after viewing only one page is called the Bounce Rate. There isn’t a similar concept in mobile apps (though there should be!), but there are ways to approximate this data. To understand how many of your app users were actually engaged users, as opposed to those who just opened it and left, you need to look for specific behaviors and events in your data.
To identify your app’s disengaged users, look for things like:
- Sessions with only one screen view
- Sessions with no events (e.g., tapping on links, sections, and screens)
- Session with short durations
While the examples above can help you isolate disengaged users, there are also ways to identify engaged users. The goals you specified provide a way to measure user actions that are truly valuable. Counting users who take actions toward your goals enables you to find three important numbers:
# Total Active Users (those who have opened the app)
# Engaged Users (those who have take an action toward a business goal)
# Disengaged Users (those who opened the app and then left)
The team at NRG Sandwich Shop define Engaged Users as those who complete or take an action toward any of their goals which includes:
Goal: Place order within app
- Add item to cart
- Customize menu item
Goal: View menu items
- View menu screen
- View item detail screen
- View menu category screen
- New “new” items screen
Goal: Redeem offers and discounts
- View offers screen
- View individual offers
- Apply offer to cart/order
In order to measure Engaged Users, the team has created custom segments that track all of their goals and target actions. They apply these segments to their Active User report to count how many users began or completed the process toward the company’s goals.
Last week, the NRG Sandwich Shop app had 20,000 Active Users. Using custom segments and goal tracking in Google Analytics, the team sees that 15,000 unique users looked at menu items, started orders, or viewed the latest offers. Since this is all valuable activity that supports their goals, we can say that last week NRG Sandwich Shop had:
- 20,000 Active Users (everyone who opened the app)
- 15,000 Engaged Users (everyone who took a valuable action); 75% of all Users
- 5,000 Disengaged Users (everyone who did nothing in the app); 25% of all Users
Step 4: Measure Monetization
Now that you know how many Active Users and Engaged Users you have, let’s look at which are generating revenue for you. On the surface, this is pretty easy if you just look at Average Revenue Per User (ARPU).
ARPU = Total Revenue / Active Users
This metric can guide things like the average Cost Per Acquisition (CPA) you spend to get new users. However, like most averages, it can misrepresent the data.
Focus on Paying Users
I prefer to look at Average Revenue Per Paying User (ARPPU), Average Transactions Per Paying User (ATPPU), and Average Transaction Value (ATV). To calculate them, you need to know how many unique customers made a purchase, how many unique transactions were completed, and how much revenue you earned overall.
ARPPU = Total Revenue / Paying Users
ATPPU = Total Transactions / Paying Users
ATV = Total Revenue / Total Transactions
These data points are incredibly important in identifying how well you’re converting app users to revenue-generating activities. You can use this information in a number of ways to optimize your acquisition and engagement efforts:
- Identify customers who fall above or below these averages, and segment your customer base by how much revenue they generate
- Develop targeted offers or messaging for below-average customers
- Track ARPPU and ATPPU throughout the year to understand the seasonal rhythms of your business
- Adjust Cost Per Acquisition (CPA) goals of your campaigns, and pay more for new monetized customers
- Identify similarities among high-revenue customers and run look-alike campaigns to acquire more people like them
- Identify similarities among low-revenue or no-revenue customers and exclude similar prospects from future campaigns.
- Assess your acquisition sources and tactics based on ARPPU and ATPPU they generate, and adjust your campaigns and spend accordingly
Optimize Acquisition Campaigns
The last point is worth repeating: use your monetization data to adjust current and future campaigns. It can be tempting to look at a campaign’s total numbers and scale up or down based solely on download volumes and CPA. By applying monetization data to your campaign reporting, you can see which campaigns attracted paying users and how much revenue you got from them. You may find things that surprise you, such as a campaign or source that has an above-average CPA but over-delivers good-quality customers with above-average ARPPU.
The team at NRG Sandwich Shop have been closely watching the results of their most recent acquisition campaign. The campaign ran for a month, in three cities, across Facebook, search, and mobile display banners. The team also worked with two regional food influencers to post app content on their blogs.
The results were:
Influencer #1 and Search acquired users at the lowest cost, both influencers delivered high click-to-conversion rates, and mobile display was the top source of download volume. If the team received more acquisition budget to spend, where should they put it?
This is where paying users and ARPPU come into play. Since the campaign used tracked links, the team is able to segment their users by acquisition source. The average NRG Sandwich Shop customer purchases a couple times a month, so the team decided to look at the monetization activity within the first month of app acquisition.
Note: There is usually a gap between download and Active User numbers because a download isn’t the same as an install, and not every installation will convert to engagement. For the sake of ease, I’ve ignored this gap. Just go with it.
With this fuller picture, the team can now compare:
- Monetized Users vs Active Users vs Downloads
- Monetized / Paying Users acquired by source
- ARPU vs CPA by source
- ARPPU vs ARPU by source
Looking at new users’ first month of activity, they see:
- Search and Influencer #1 delivered ARPU greater than the CPA
- Facebook had the highest overall ARPPU
- Mobile Display cost more than the revenue it generated in the first month
Based on this information, NRG Sandwich Shop should spend their increased acquisition budget in Search and Facebook, with some tweaks to the Facebook targeting to try to lower CPA.
Step 5: Think About Retention and Onboarding
People download and abandon apps a lot (20%+ use an app only once, according to recent data). If you look at your retention reporting, you’ll likely see a lot of activity within the first couple days of installation, and steep dropoffs thereafter. This can be cause for great concern if it leads to customers lapsing in usage or uninstalling your app. The challenge is discerning natural rhythms of inactivity from signs of churn.
Rhythm of Usage and Growth Metrics
Your customer needs, app functionality, and use cases should provide guidelines to usage patterns. If your app is one that depends on regular engagement and content (Facebook or Twitter with their ever-changing content come to mind), gaps in usage of more than a couple days may be a sign of lapse. However, apps with functionality that is used irregularly (like ones used primarily for booking travel) may see lengthy gaps between usage with no negative impact long-term.
The key to forecasting post-install retention often comes down to how many of your new users fulfill specific actions such as completing their customer profile, opt-in for push notifications, or making a purchase. If you’re not sure which actions are indicators of continued usage, have a look at your loyal users — are there certain common actions they took when they first began using your app? If so, track those actions among your new users and validate if they are really indicators of retention. If they are, you’ve found your key growth metrics (Facebook’s is a new user gaining 7 friends in the first 10 days), which will come in handy in future. Here’s a handy 5-step guide to finding yours.
Engagement Hack: Onboarding Content
A way to keep customers engaged in the first few days and weeks after install is through a thoughtful onboarding process. Many apps launch overlay “welcome” carousels that show new users the key functions of the app and help to guide them around. In turn, many new users swipe through or close that content. If that is the extent of your onboarding experience, your customers will miss useful information and you’ll lose an opportunity to keep them engaged.
When planning customer onboarding, focus on the information that will be most helpful to new customers and the actions they should take to get the most value out of your app. What are the key things they need to know? From there, consider the timing and volume of this content. Your retention reporting will show which days post-install customers are using your app, which can be used to guide timing. I’ve had success doing the opposite — looking at the days customers are not returning to my apps and then deploying content on those days as a way to bring them back into the app.