How User-Level ROI Can Boost Your Remarketing Return
This is the first post in a series of articles about Return on Investment (ROI) in mobile marketing. Each post in Singular’s Mobile ROI Series will dive into a different level of mobile ROI data — from User-Level to Keyword-Level to Publisher-Level ROI — and show how mobile marketers are using different facets of their ROI data to increase performance.
These days, many mobile marketers are investing in app remarketing — the practice of creating high-performing user segments and customizing marketing campaigns to these users in order to drive incremental app engagement and revenue. Remarketing is increasingly viewed as a critical source of mobile ROI. For our clients who use the attribution toolset, remarketing’s share of paid events has increased more than 18X in the past two years.
When segmenting users for the purpose of remarketing, tracking how much you pay for each user and the touchpoints that drive them into your app is as important as tracking how much users spend in your app. Yet all too often, marketers rely solely on user revenue and post-install events when deciding on user groups to remarket to and how much to spend on driving their future actions.
Here we’ll show why targeting existing users based solely on the revenue or events they complete in your app may actually be hurting your remarketing efforts, and how you can leverage User-Level ROI data to drive more profitable remarketing campaigns.
Mobile ROI for High-Revenue User Audiences
For remarketing, mobile marketers often create user segments based on the revenue, events and device-level information recorded in their app. One segment might include users who completed a sign-up; another might include users who browsed a certain type of product page. These segments are used to customize remarketing messaging and media programs, including push notifications, email and retargeting on ad networks.
One of the most common pieces of information used for remarketing is revenue — the total amount of money a user has spent, or is expected to spend, in your app. Marketers will often segment users who have spent above a certain amount and shift budget to remarket to their most “valuable” users.
However, doing so without factoring in the cost of acquiring and re-engaging users can actually yield negative ROI. Marketers must factor in the cost of each user touchpoint — otherwise they risk remarketing to users who cost more than they generate in revenue.
As the table below shows, just because a mobile app user generates comparatively high revenue doesn’t mean they deliver positive mobile marketing ROI.
In this example, User 1 spends more in the app, but costs 6 times as much to attract. Based on these figures, User 2 is actually more profitable — a fact that would go unnoticed by marketers who aren’t tracking user-level cost.
We work with a client in Asia who witnessed such results. When they optimized their mobile app marketing programs to users that drove the most revenue, they actually overlooked many of their best customers from a profitability perspective.
Instead of user revenue, mobile marketers should focus on user-level mobile ROI (user revenue divided by user cost) when segmenting users for remarketing. Where ROI is greater than 100%, spending on the user yields incremental profit.
With this approach, you might observe that users who cost a lot to acquire will often also cost a lot to re-engage. Remove these users from remarketing campaigns in favor of remarketing to users who may spend less initially but who will be cheaper to re-engage and, as a result, more profitable in the long run.
The Problem with Optimizing on Cost
Remember that the reverse can also be true, that users who cost more to acquire can actually turn out to be your most profitable mobile app users. Consider two different mobile app users whose costs and revenue are outlined below:
This is a fairly common mobile marketing circumstance. For example, users of mobile apps that are attracted by low-cost incentivized media are often less lucrative from an ROI perspective. Remarketing to such individuals can spike your app installs but produce less profit.
If you focus your remarketing efforts solely on users that cost little to acquire, you may optimize to programs that actually hurt your rate of return. Again, considering both cost and revenue will yield better results for your business.
By accounting for the cost to acquire and re-engage users through mobile advertising and other tactics, marketers can segment users who drive the most revenue at the lowest cost. In turn, mobile marketers won’t get stuck blindly remarketing to app users who actually cost a boatload and are less profitable to re-engage. Marketers would do well to remember this important insight for their campaigns.