Improving the Lifetime Value of an App User

For an app developer to successfully measure the return on investment (ROI) of a growth or marketing campaign, they must understand the lifetime value (LTV) of their users. Also called customer lifetime value (CLTV), the LTV is exactly what it sounds like — the average value of a customer or user, over their lifecycle with your app.

However, the jury is still out on the best way to measure LTV. Most articles even acknowledge that there are multiples ways to measure LTV, and leave it to the developer to choose, depending on their type of app and the metrics available to them. Interestingly, a survey by Tapdaq found that developers unanimously agree that lifetime value is the most important app marketing metric, yet only 1 in 20 measure it.

Although the structure of the LTV equation is hotly debated, there is one thing that all developers seem to agree on — the variables that go into it. Improving any of these variables independently will improve the value of your users. As explained in a post by Apptamin, these variables are:

• Monetization — How much customers contribute to your mobile revenue (in the form of ad impressions, subscriptions, or in-app transactions).
• Retention — The level of customer engagement with your app, looking particularly at the length of the average customer lifecycle.
• Virality — The sum value of additional users a customer will refer to your app.

Now the obvious question is, how do I improve the variables that impact my app’s customer lifetime value? One option: deep links. Deep links are capable of improving all three drivers behind LTV. We’ll walk through some of the ways deep links can be used to improve monetization, retention, and app virality, and provide some insights into the lift metrics we’ve seen across our platform of thousands of apps.

Increasing Lifetime Value with Deep Links

Knowing the LTV of app users opens up a whole new world for experimentation and growth. Once you can calculate LTV, you can prioritize and measure the impact of building new features or testing different marketing campaigns. Since LTV is a function of three variables, as an app developer you have the choice to focus on the variable you think will impact your LTV the most. For instance, if you know monetization will come later once you reach scale, focus on virality and retention in the short term. If your users share a lot but have a short lifecycle, deep linking for retention is for you. Depending on what you need, jump to a section below and learn how deep links can help.

App Monetization

Deep links have obvious use cases when it comes to virality and retention, but at Branch, we’ve yet to spend much time talking about monetization. Why is that? Well, most apps will not make any money. Most developers enter the mobile app ecosystem knowing that their only chance at making money is by reaching a certain scale. For that reason, they first focus on growth. But acquiring users costs money. We’ll show you how deep links decrease the cost per install (CPI) and why new apps should focus on this before monetization.

We won’t skip over monetization. There are many instances where deep links can and will help, specifically because of their ability to move users further down the customer acquisition funnel.

Moving App Users Down the Funnel

You’ve all seen images of this funnel. The multistage, conical shape that goes from awareness at the large end to a customer at the other. (Don’t know what I’m referring to? Here you go.)

The purpose of the funnel is to demonstrate that the number of potential customers decreases with each step the user has to go through to become a customer. So it makes sense that it’s best to skip as many of these stages as possible. That’s where deep links come in.

In the video example, Close5, an eBay company, uses a deep linked smart banner to convert mobile web users to app users. But it doesn’t stop there. As you see in the video, the deep link stores the parameters of the incoming user, bringing them directly to the content in the app they were viewing on mobile web. Their first time using the app, users start just one step from making a purchase, on a piece of content we already know they’re interested in.

In another example, Hotel Tonight uses deep linked ads to take advantage of a searcher’s inclination to buy. When a user types in ‘hotel in Seattle,’ Hotel Tonight presents them with a deep linked ad that takes them directly to the Seattle city listing within the app. Once again, by minimizing the steps to purchase, these apps use deep links to optimize the monetization channels that they have established.

Decreasing the Cost of Customer Acquisition

As we discussed earlier, many apps do not have revenue and don’t plan on flipping on the monetary switch anytime soon. For these apps, decreasing the cost of customer acquisition (CAC) is just as important as optimizing monetization. Customer acquisition costs have risen 84% over the past year and were at a steep $4.14 per user as of September 2015. For one, paying less to acquire new customers allows them to scale to a point where they can monetize faster. If they don’t have plans to monetize, a decreased CAC may allow them to reach a point where this is another, non-monetary value in the network they’ve created. Whatever the reason may be, decreasing CAC is always on an app developer’s or marketer’s mind.

When we analyzed the results for Hotel Tonight, we found that deep linking ads to content decreased their cost-per-install by 16%. This was due to the 18% increase in their install-to-booking rate from the ads. This meant they could increase ad spend with confidence, ultimately driving a 94% increase in bookings, and 80% increase in installs, and a 99% increase in revenue, month over month. See how monetization and CAC are related?

Retaining and Re-Engaging Your App Users

The second variable of the lifetime value function is retention. Retention is important for LTV because it defines the active lifecycle of an app user. We’re going to look at not only how deep links improve retention, but also how they can re-engage app users you may have lost. In both cases, the lifetime of a customer increases.

Improving User Retention

Mobile users are fickle. This year, the percentage of mobile apps used just once was about 20%. And that’s an improvement from last year! So although 30 days doesn’t feel long, for mobile app users, it can be a lifetime. As such, mobile app retention is usually measured in 1-day, 7-day, and 30-day blocks.

Recently, we ran a study to look at the impact of deep linking on user retention. The results were pretty amazing. Users who arrived from a deep link had a 75% increase in 1-day, 89% increase in 1-week, and 103% increase in 1-month retention. This means that deep links can double your customer’s lifecycle.

Deep Linking for Re-engagement

No app is perfect. Even if you can improve retention, you’re still going to lose users. But they may not be gone forever. There are certain retention techniques that utilize deep links to boost re-engagement.

One benefit of Branch links is that they are compatible with every platform and search standard, including Spotlight Search. In a recent post, we demonstrate how you can use Spotlight Search to improve re-engagement. Although Spotlight Search does not yet allow you to list app content for users who don’t have your app, it does allow you to index content for users who have your app installed. By indexing your content on Spotlight, your disengaged users have a new channel to discover app content that may re-excite them about your app.

Check out our blog on using deep links for engagement and re-engagement for more ideas.

Building Virality Into Your App

The final factor of an increased user LTV is virality. Our CEO Alex Austin goes into detail about how to make your app viral by turning it into a mobile growth engine. He defines a mobile growth engine as a cyclical engine that results in your existing users inviting their friends. There are four important stages: awareness, download, activation, and sharing. As you can see, these correlate closely with the factors of customer LTV, and he walks you through examples of how deep linking plays a part in each of these stages.

Improving the Likelihood of App Sharing

Remember the Close5 example above when users were deep linked to in-app content they were interested in? Not only does this move them down the purchase funnel, it also increases how often they share. And it’s not a small jump. Users who arrived from a deep link shared 1.34 links on average, up from 0.17 links or 7.8 times more often than those who arrived from other channels. On average, each user who arrived from a Branch deep link shared with more than one other user, crossing the “viral boundary” that every app seeks. The diagrams below demonstrate the difference in user flow of a user clicking on a web banner- the first without a Branch link, and the second with.

Tracking and Rewarding Referrals

App developers and marketers know that existing users are key to virality and often try to reward or incentivize these users for inviting others. However, building out complex referral programs proves to be quite a difficult task. With Branch’s referral feature, all the logic, routing, and rewarding is handled automatically. Better yet, since Branch links can store user parameters, there is no need to use referral codes to receive rewards, further reducing one or more steps in the customer acquisition process.

The League uses this referral system to Branch’s drop-in referral solution to customize the post-install experience, remove the need for promo codes, and identify and reward influential users using the Branch dashboard. As a result, they’ve seen a 30% boost in installs through user referrals, 31% increase in conversion to sign up for referred users, and double the engagement for these same users.

Overall Impact of Deep Links on Customer Lifetime Value

Now that you’ve seen some proven examples of how deep links can improve app monetization, retention, and virality, it’s up to you to determine and prioritize which deep link features to try. The impact of Branch features on LTV will vary depending on several different factors. What vertical is your app in? Are users incentivized to share? How long is your average customers lifecycle? To start, look at your app’s current monetization, retention, and virality performance and see which aspect needs the most attention. You know your app and users best, so I’ll leave it to you to prioritize a list of features that you want to try.

At the end of the day, no matter which equation you use to measure LTV, deep links will help.

This was originally posted on the Branch blog.