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App Analytics – The Importance of Measurement When Growing a Mobile App

HomeTechnologyApp Analytics - The Importance of Measurement When Growing a Mobile App

“You can’t manage what you don’t measure” -Peter Drucker

Let us start this article with an easy question; do you want to be successful in life? For most of the readers, I can conveniently assume that the answer will be a “Yes”. Now let us move onto another question; how do you define a successful life? Now, this is a very difficult question.

The answer to the above question is very subjective. However, every person has to attach some objectivity to his answer in the form of measurement. For example, if your answer is “I will consider myself successful, when I will be rich”, the next question would be “How rich? $1000 rich? or $1000000 rich? Or maybe even more?” If your answer would be, “I will be called as successful when I will get a beautiful house” then the next question would be “What will be the size of the house? How many rooms?”

Measurements are important in life. Not only to know where you are right now but also to know where you want to be. If your business is dependent on a mobile app, then you should better know the importance of measurement when you want to grow your business. Although a mobile app development agency may do a very good job of giving your business idea a shape, even they cannot guarantee you any success in the absence of correct measurement systems. You will not even be able to get great performance out of your employees if you do not have specific and measurable goals for them.

Now that we have realized how important the role of measurement is, in the growth of your mobile app, it is equally critical to understand how this growth can be measured. You cannot buy rice in “litres”, and you can never use a weighing scale to check the temperature of an object. There are scales, S.I Units, and metrics defined to measure different physical properties of any substance on this planet. Similarly, the growth of any mobile app is also measured using particular metrics and standards. Let us take a look at a few of them to understand the art of measuring and achieving the growth of an app:

The Digital Advertising Metrics

The dictionary meaning of the word “Metric” is “a system or standard of measurement”. There are various parameters, which have to be accounted for when you try to analyze the success of a mobile app, and different metrics provide this analysis a framework to get a fair idea of growth.

1. CPI:

It stands for Cost per Install. It is used as a pricing model by digital marketers, in which the app owner pays every time a user installs their app. It is a very simple model and most closely related to the desired outcome that the app should be installed by the user. The formula for CPI is

(Expenditure on Ads/Total Installs)= Cost per install

This model puts the responsibility of increasing the downloads of the app on the marketing company to publish the ads in places with high conversion rates. However, at the same time, CPI can charge you significantly higher than the other models as it is more result-driven and convenient for you.

2. CPM:

It is another model similar to CPI. CPM here stands for Cost per Mille. In Latin, “Mille” is used for 1000. Therefore, CPM means Cost per 1000 ad impressions. This metric is important for developers as well as the advertisers as it determines the cost of ad space. The success of a CPM campaign is easy to find out by looking at click-through rates. CPM is ideal in situations when the business is more inclined towards increasing awareness and exposure of the brand rather than looking for high user action-based goals like installing an app or clicking on a particular link. CPM is more economical as compared to CPI as it is based on a just number of eyeballs an ad caught.

3. CPC:

As you must have guessed it by now, CPC is “Cost per Click”. Another simple yet effective model for digital advertisers to build their pricing model. The goal is to get maximum clicks from the target audience on an ad. This is again a user action-based goal for the advertisers and hence can be a little expensive option for the business. Nevertheless, the CPC model gives you a clear idea that how effective was the ad as compared to CPM where you are not completely sure whether the user will visit the app/website after watching the ad.

Apart from these metrics the digital marketing pricing models also run on CPCV (cost per completed view), where you pay if the user watches a complete ad video and CPE (cost per engagement) where engagement can be anything from swiping on an ad to submitting contact details.

Financial Metrics

1. ARPU:

The full form of ARPU is “Average Revenue per User”. It is the ratio of total revenue and number of users. It is a very important metric for you and your investors as the potential of an app can be judged by this metric. If an app has a very high ARPU, it means that it is receiving a good amount of money from each customer. Therefore, even if you are playing in a very niche segment with your app, a healthy ARPU can boost your start.

2. AOV:

Average Order Value is the ratio of total revenue and the number of orders. It is important to calculate the returns on operational expenses. Taking the example of an e-Commerce application, there are some costs associated with the processing of each order right from the order confirmation to final delivery. In such a case, it is important to calculate the amount of cash inflow with each order. Therefore, AOV is necessary to be calculated.

Another similar metric to AOV is AOVPPU, which is Average Order Value per paying user. Some apps may provide some free services to users. However, revenue increases only when revenue from these paying users increases. This can be done by providing extra services to these paying users. Hence, AOVPPU can help you in formulating strategies to increase willingness to pay in users.

3. CPA:

It is nothing but Cost per Acquisition. It is the average cost incurred to the business in acquiring one subscriber or paying user of the app. The formula for this is as follows:

Cost per acquisition = Total cost of campaign / Number of Acquisitions 

Some of you may think this metric should come under the previous category and not in the category of financial metrics. Let me make this thing clear that CPA is a cost that includes all the moolah spent by the company in acquiring one customer. It may include marketing as well as developmental expenses. To make profits, you have to keep the prices of your paid app features higher than the CPA.

The most basic metric, which is used to monitor the health of any business, remains ROI. Return on Investment is the percentage of total costs incurred that was converted into profits.

ROI = [(Revenue-Total Investment)/Total Investment] x 100

Engagement Metrics

Your app’s success is not limited to mere installation. Installation is the fruit of good marketing of the app but the customer engagement is the real deal that has to be cracked. For active usage, everything matters in your app right from the content to the service. Therefore maintaining active users is very important for the growth of the business. The engagement metrics are very simple yet important to understand.

DAU/WAU/MAU: Number of Daily Active Users, Weekly Active Users, and Monthly Active Users. These are important to keep a track of active users as well as to formulate plans to call them back to the app.

Session Length: This is the average time spent by a user in a single session. It is the total time between the opening and closing of the app. The longer duration will mean that the users are more engaged.

Retention Rate: Percentage of customers who came back to your app in the last X no. of days (Generally X=30). It measures the utility of the app. The customers must be motivated to use your app at last once in those X number of days. This will keep your app in their phones for a longer period.

Churn Rate:This is equal to (100-Retention Rate) %, that number of customers who did not come back in the last X days. A high churn rate requires an intervention from your side to call the customers back to the app.

LTV: It stands for Life Time Value. LTV measures the average total profits made per user during his/her entire life on the app before he/she stops using the app. Higher retention will keep the users hooked on to your app for a longer period of time and hence LTV will be higher. If your LTV is low, then you must work on other parameters like increasing ARPU, increasing retention rate and reducing CPA.

Improving Metrics via SMART Goal Setting

Until now, we have seen the important metrics to track to measure the growth of the business. In the upcoming paragraphs, we will see a very simple technique to be followed to set the goals to improve the performance of the app on all these metrics. The name of this goal-setting technique is SMART.

The full form of SMART is self-explanatory. The metrics make your lives easy in setting up SMART goals for your business. Here’s how:

Specific: What is more specific than numbers and mathematics? Therefore, metrics can help you set to-the-point goals for your business. Your team will also be more motivated in achieving those specific numbers.

Measurable: The sole purpose of metrics is to measure. Therefore, continuous tracking of the performance of the app will lead to a high-performance culture in your organization. This can also give a touch of gamification to your employees when they will be rewarded after reaching a certain “metric” milestone.

Achievable: Metrics prevent you from over-estimations and make you more patient. Hence, the goals set should be achievable and not impossible. It is very important to set difficult but achievable goals to reach success and metrics can help you do that.

Realistic: Impractical goals will help nobody. Do not set very high targets for yourself and the team. This will result in a strong resent as well as the stressed environment.

Time-bound: Metrics like a number of downloads per month, LTV and retention rate have one thing in common. They are all dependent on time. The time-bound goals are necessary to present the projected growth in front of the investors. Your aim should be to set goals for a specific time and not for eternity.

Improving Metrics via Tracking Goals

Now you have understood what SMART goals are what your approach should be towards goal setting for the growth of the app. The next step, which appears, is setting up the goals in a goal tracking system. To keep things simple, we will go ahead with Google Analytics as a goal tracking system. Google Analytics will not be able to tell you how your business is doing without your help. You have to tell Google Analytics the critical parameters to be tracked.

You can track your goals on Google Analytics through URL Destination, Visit Duration, Page/Visit and Events. The following guide may explain this briefly.

1. To find Goals in Google Analytics

Step 1: Go to Google Analytics Standard Reports

Step 2: Go to “Admin” section by clicking on the button in the top right

Step 3: Click on “Goals”

Step 4: Choose one of the Goal Sets

Step 5: Click on “+Goal” to add a new goal in the goal setting

2. Name the Goal:

The name should be clear in terms of communicating the metric, which is going to be tracked. The name is important because this name will pop up all over Google Analytics.

3. Active/Inactive State of Goal:

Once a new goal is created, it cannot be deleted. It can only be activated and deactivated. This is because the compilation of data for the reports is done by Google Analytics. Hence, a goal created cannot be removed.

Now let us understand different ways to track the goals one by one in Google Analytics:

URL Destination: These goals are triggered each time the user visits a specific URL. This is most effective when you have confirmation or thank you pages, or some links for downloads.

Visit Duration: As the name suggests, the goals will be dependent on time in this. This type of defining goals can be used to measure retention on the platform. You can measure how many people stayed on the platform for a certain amount of time.

Pages/Visit: This tracks the number of pages a user view in each of his/her visits. It is also similar to duration based goals and the below screenshot will give a clearer image.

Event: These goals are slightly more complex than others. You can track almost anything in Google Analytics using these types of goals. You just need to have some basic knowledge of JavaScript.

This Guide will take you through a complete journey of setting goals on the basis of events. You can track external links, downloads, completed view of videos, widget usage, and social media interactions, etc. Hence, you can track almost all the metrics using Events.

Improving Metrics via Split Testing

Setting performance goals is an extrinsic way to grow your app or it may be called the first step. However, to achieve these goals, you might have to take the help of the mobility service provider which pro dirty. It means that you have to come up with new ways and innovative methods to improve your metrics.

However, would you be able to go full throttle with every new experiment you think of? Of course not. In such a situation, the split testing comes to your rescue.

What is Split Testing? As the name suggests, it is a testing of a new intervention. It is a method of conducting experiments in a controlled environment to improve the metrics. Here the traffic, which comes to your app, will be divided into two groups Original (Group A) and Variation (Group B). The users in Group B will have no idea that they are undergoing an experiment or a new intervention. The data is recorded of both the groups to check if there is any significant change in the behavior of Group B as compared to Group A after implementation of the intervention.

This technique can be used to test the impact of any change made in the app like registration pages or calls to action or sometimes a process improvement. Subjective choices towards web design can be measured objectively using this technique. Therefore, it is a great way to check any hypothesis related to any intervention and hence, ultimately demonstrating the ROI of the intervention.

Summary and Conclusion

This article focused on the importance of metrics and measurement in the growth of an app or business as a whole. It talked about the critical metrics and pricing models followed by the various developers and advertisers related to enterprise mobility solutions. We also talked about the significance of metrics in a smart goal setting for the growth of an app. We then moved onto the discussion of Google Analytics and setting up of Tracking Goals. In the last, we saw how split testing and its analysis can be used to measure the impact of various experiments done on the application to enhance its growth.

In conclusion, it can be said that the measurement is the key to growth. An app requires your continuous attention to be a success. And when you can measure success in numbers, it gives clear directions, objective decision making, and specific goals as a result.

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