Running a business is a huge responsibility. There are different aspects of a business and all need attention. Spending the available budget on the right things is a major concern for businesses. It is the aim of every company to spend money on things that can offer a good return on the investment. Collecting metrics are critical for the success of the business as they let you know if your efforts and strategies are effective or not.
The ROI (return in investment) measures the efficiency of your business operations and the efficiency of using resources. It is a key metric because no matter what the size of an organization is it is important to tell which strategies are working and which ones are a waste of money and time.
When you develop an app you need to keep a close eye on the development process to make sure that the result is what you want. It is important to have a system for measuring the ROI so that the resources are used in the best way.
Measuring ROI metrics is not always an easy task but thankfully there are tools that can help with the task. Here are a few tips to stay on top of the ROI for your app development.
Creating a measurement plan
The first step to measuring the ROI is to come up with a measurement plan. The plan is a framework of analysis and instrumentation that is derived from mobile strategies. When you are developing an app you have a clear picture of what you want to achieve and you will have tactics in place to ensure that your objectives are achieved.
To measure the success of the tactics you deploy to achieve your objects you should use the following steps.
- Document objectives of the business
- Identifying tactics and strategies to support your objectives
- Choosing metrics that are KPIs
- Deciding a way to segment the data
- Determining targets for the KPIs
It is important to make sure that some of the KPIs are measured in dollars even if the e-commerce transitions or subscripts payments are not done in dollars. If the app you are developing has no source of revenue then you should think about customer touchpoints that are giving you the revenue. Measuring KPIs is important as it can help in making the right decisions.
Calculating the customer lifetime value
Another tip to measure ROI for your App development is the customer lifetime value, it shows what earnings to expect from the users when they are using the app. There are different ways to calculate customer lifetime value. Before choosing the method you need to consider the business model and level of precision you want. CLV is a function that lets you know how much you can earn for a customer and the period you can retain them.
CLV is an excellent metric to track because it can be used to forecast long term business performance. It allows you to focus on the efficiency of the business and get more value from every user.
Be aware of the cost
After you have a system to track your revenue it is time to calculate the amount you spent and how much you will continue to spend to earn the desired revenue. The things you count depend on the business needs can vary from business to business. Some common things you need to track include:
- App development
- Retention (customer service)
- Maintenance (analytical insight)
You can decide the percentage of the amount you want to allocate to the app. Sometimes the development process is considered a sunk cost. The money spent on marketing and retaining the customers is considered as the cost of ROI.
Find out: App development cost India
Understanding the customers
It is important to understand that the cost of attracting and retaining every customer is different. It is not easy to calculate the cost of different users as it can be pretty complicated. A customer that comes to your app because of word-of-mouth is going to cost less. Attracting customers with an expensive marketing campaign costs more than the latter.
Attracting new customers is not free and to efficiently track how much it is costing you, make sure that you take the differences into account. Some customers have better CLCV than the others. For precision, you should segment the acquisition channels and consider the cost per install for all the channels. Make sure you include cross-platform and cross-channel sources.
When you have developed a sophisticated system of analyzing the revenue and costs, it is time to calculate the ROI of the app. The ROI of the app is the compass of the strategy you are using to achieve your objectives. Trends and customer needs change with time and having a framework is helpful in making the right improvements.
Clear measurement of the ROI makes it possible to take a deeper look at the KPIs and find ways to improve the app and get better results.