Many App developers struggle with defining what key performace indicators (KPIs) they should pay attention to. Solving this question is important to measure the success of your app, understand if your strategy works, and to rethink the concept where necessary.
If you hope for a magic formula you will be disappointed. Apps differ so drastically that what signals a huge success for your solution may indicate a disaster for another one.
“We often have clients ask us for the ‘secret’ to having successful apps, but the truth is, much of a mobile apps success is defined before it even launches. Have metrics that actually matter.”
What you should internalize immediately is the following: the number of downloads is only the first step to position your app, unless you have launched one of the 7% of paid apps. That said, you still have to make sure to have a good seeding strategy, and keep your fingers crossed that your product get’s enough traction, and then climbes up the ranks of the App Store or on Google Play. If your goal is to hit the top ten of the App Store you need 80,000 downloads, mostly within the previous 24 hours. That’s the moment, when the “app discovery” effect will help your product to propel. To land at this magical zone comes at a price of $1.20 per download for non-game apps and $0.70 for games, so you should plan for a major investment.
Afterwards, you want to make sure that people are not only downloading your product, but that they start to actively use it, which sounds easier than it is:
Accordingly, the engagement and retention rates should be among your main concerns, regardless if you monetize through in-app purchases, in-app ads, subscriptions or referrals. Each of these strategies will only be successful if people are becoming engaged users.
Let’s have a closer look at the KPIs that matter, once people have downloaded your app onto their phone.
To successfully position your app, you have to understand the basics. Stick with the 5 Ws to address some key strategic challenges that will decide about the rise and fall of your solution. You don’t want “to get relegated to the ‘app icon graveyard,’” as Brant DeBow, EVP of technology at BiTE Interactive, describes it.
Who is using your app? Get clarity about your audience, their demographics, behavior, etc. The better you know about the person who is using your app, the better you can target them, and make sure that they will also promote it to new users.
What Device? Whether users open your app on a smartphone or tablet makes a huge difference. But the true magic comes when you look on a more granular level. Knowing the device and its specs can help you to think about special features, which make use of the gestures that people use, or to respond to a certain hardware feature.
What operating system does your app run on? 79% of the smartphones that had been shipped last year were running on Android. Users of this operating system are characterized as being more experimental. In other words, they may accept a product that is slighlty more complicated if they receive a feature rich experience in return. By contrary, iOS users expect a straightforward, intuitive solution, and will be unforgiving if your product is too complex.
Where and when do they use it? This question is key to the success of your app. A recent Google study shows that 84% of smartphone shoppers use their phones while in a physical store, which implies that there is a request for quick results. In other words, if your app is offering a solution for this particular moment it has to provide a quick call to action.
Engagement / Active users
Jason Baptiste, CMO at OnSwipe, describes one of the biggest challenges for mobile apps:
“Users only have so many apps and sites they will visit on a given day and are going to be loyal to those with the best mobile first user experience.”
The engagement can only be prompted by delivering an outstanding user journey and through high quality content.
The opening rate and the length of engagement will give you a first answer on whether or not your app delivers the right experience. Both KPIs indicate where you lose users, or how you can win new ones.
Once you start to see that users become engaged, there are two groups that you should consider in particular: monthly active users (MAU) and daily active users (DAU). They provide insights about what they love about your app and what you should rather get rid of. Don’t hesitate to reach out and interview them. They can help you to pivot and improve the user experience as well as the engagement.
If you want to lose users, a slow loading product will get your there in no time. Users expect a seamless experience, and that starts with launching your app.
Just consider why Facebook recently started an A/B test to determine in which scenario users would attribute slow loading speed to Facebook vs. their iOS. It’s a great example of how important a quick launch is for the success of your product.
The same is true for the overall app flow. Users expect that they can access all functions seamlessly. Accordingly, you should consider the speed a crucial factor. Even moren so if there are similar solutions with which customers could replace your product.
The session length is closely connected to your monetization strategy. If your concept focuses on in-app purchases or in-app ads you want to keep users engaged as long as possible. For e-commerce apps the case is a little different. If you intend to drive sales you want to see a short session length, combined with a high convertion rate.
As the example of Punch Quest showed, it is great if your app receives 600,000 downloads in a very short time, even more if they are highly engaged. However, if the downloads don’t lead to conversions you risk to fail with your monetization strategy.
Your big goal is to turn users into paying customers, whether it is through in-app purchases, by making them click on in-game ads, or getting them signed up for a premium version. Triggering those conversions can be otpimized by understanding the user journey, and tipycal behavior patterns. It helps you to identify natural breaks or actions within the app, for example where you can place your ads.
You should aim at improving this rate, in combination with the session length.
Average Revenue Per User (ARPU)
Getting an understanding of how much revenue you make per user is a first step towards improving your product and marketing strategy. Once you have segmented the user base into high-value and low value groups, you can take specific actions. The first one is to improve the user experience in order to increase the number of people spending money on your app. Secondly, the segmentation should provide the right insights so that you can shift your marketing budget to channels that attract high value users.
Lifetime Value (LTV)
The Lifetime Value is probably the best KPI to understand the relative health of a mobile app. It analyzes how much revenue is coming from individual customers, whether it is through in-app purchases, in-app ads, or referrals. In other words the LTV is closely related to your monetization strategy.
For a news app, the value will most likely be based on ad impressions, or, increasingly, sponsored content. Meanwhile, if you develop a game such as Candy Crush Saga you should focus to understand the LTV based on in-app purchases.
In both cases the LTV should help you to segment your audience, identify the most valuable users, and understand where they come from. This insight then informs your marketing strategy. In a nutshell: understanding the LTV is the most effective way in which you can plan your marketing budgets to drive user acquisition.
Costs per Acquisition (CPA)
Your marketing strategy will define measures to drive acquisitions through owned, earned and paid media channels. Hence, you have to analyze precisely how each of those channels contributes to your user growth, and look closely at the different CPAs.
Once you know them, you have to look at the payback, which essentially compares the CPA to the LTV. If this KPI isn’t positive, you have to adjust your strategy, unless you want to end up losing a lot of money.
Maud Pasturaud, who directs mobile marketing at Gilt Groupe points to the opportunity: “Thanks to advanced app tracking tools like HasOffers, app developers can track the return of their ad spend efficiently.
The best practices in customer acquisition that were long used on desktop are now coming to mobile.”
The rentetion rate is what app developers fear like the morning after a great night out. On the one hand, what can be better than whitnessing your app to become the talk of the Internet and to be mentioned on Mashable and Techcrunch? On the other hand, the party will be over at some point, and that’s when you realize how compelling your product really is.
“The commonly accepted wisdom for mobile retention is that 40/20/10% retention at day 1/7/30 represents a hit, but the reality is more subtle,”
“In the end like all good growth models, there’s no magic number — like any growth model the key is understanding how the variables affect each other,” concludes Siqi. In other words, if you understand those correlations and how they affect your retention rate, you can apply the insigths to evolve your app and increase its success by updating the right features.
You may recognize this principle from science experiments, where cohorts are applied to compare different groups of people who share a common characteristic.
In order to evaluate the success of your app this concept makes a lot of sense. The most popular way to apply the cohort is to look at the time when they first launch your app. You immediately receive a bunch of different data points, for example money spent, engagement, or session length. Subsequently, you track the behavior of each new cohort, and compare the data sets. This will help you to understand the effect of any changes that you apply, whether it is the an updated user experience, a different ad spending, or an easier check-out process.
Once you have collected some experience the cohort analysis gives you the opportunity of a targeted, incremental improvement of your app, that ultimately ensures that your product becomes profitable.
Tailor your KPIs to your app
All those different KPIs give you a sense on how your app performs, and where you have to improve. Yet, the real challenge is to move beyond the siloed data points and to understand how they relate to each other. Have you been able to increase engagement while your conversion rate hits a new low? Maybe your call to action is not clear enough. Is the increasing number of downloads negatively affecting your ARPU? Analyze if you attract too many low-value customers.
Finding the right KPIs for your specific app is paramount to its success. Hence, you should start to think about how your dashboard has to look like before you even launch your product, instead of doing it months later. Consider yourself a sailor: you may not know where the wind will carry you, but knowing the coordinate system helps you to define the direction.
And there is one more thing: it is crucial to understand your audience and their behavior very closely. Get in touch with those people and let them tell you what you have to work on.
**This article was updated to include CPA and Cohort Analysis.