3 Day-One App Marketing Mistakes That Will Doom Your ROI
Creating a successful app is extremely difficult – and if you are planning out a launch and app marketing strategy, you’re well on your way to success.
Not only does it require a lot of premeditation, development, and testing, but competition is quite fierce and you are up against millions of other applications. In fact, it is estimated that only one out of every 10,000 apps will actually turn a profit.
Why is this number so low? After all, there are certainly thousands of apps that are extremely successful. But why do so many apps fail?
Recently, I spoke to an app business owner with an amazing new health and fitness app. His goal was to create an app that positively impacted other people’s lives while improving their health. This man spent two years of his life and $500,000 on development in the hopes of having a successful launch – built on a strong app marketing strategy.
However, after 6 months of his app launching, he wasn’t reaching the numbers he had hoped for. His original goal was to hit 100,000 downloads in the first six months, but he had only 200. Obviously, he felt totally frustrated and discouraged. How could he help people improve their health if they didn’t know his app even existed?
Maybe you’re feeling a similar way. Maybe you just launched as well and aren’t getting the traction that you were hoping for.
I want to share three mistakes that many people make when launching an app and marketing it – of which might have led you and this other app business owner to fall short. If my friend had avoided making these mistakes, I have no doubt that his app would be generating millions of downloads and sales today.
I see these mistakes time and time again and I don’t want you to fall victim to them – which is why I will also share HOW to fix them.
Let’s jump on in and make your app marketing plan successful!
Mistake #1: Treating Your App Like A Hobby
The first and biggest mistake you can make with launching an app is not taking it seriously. Treat your app like a business, not a small side project.
A business makes sales and revenue. A hobby does not.
You cannot sit back and expect your app to suddenly create a profitable revenue model on its own – you need to figure it out and do all that you can to get things going properly. Setting up your business to successfully make money is the first step.
So, to start taking your business more seriously, you need to have a strong app revenue model prior to your launch.
This leads us to another major mistake that many people make when launching an app: they don’t have a strong revenue model and don’t understand how to calculate the customer lifetime value of their users.
1. What is Lifetime Value?
Lifetime Value, also known as LTV, is your primary revenue metric. This is the core revenue metric that top apps in the industry monitor.
The reason why it’s called “Lifetime Value” and why this is so important is because it represents the total financial value of a consumer. It is how much revenue each app user generates in his or her lifetime.
For you to understand how much to spend on marketing to acquire a user, you must first understand how much a new user is worth to you.
When you’re first starting off, this may just be an estimate because you won’t have any sales to base this on. And that’s okay. Like I said, all of the top apps in the industry use this model and it directly correlates with their success.
Let’s take a look at Uber for example.
When first starting off, Uber offered new users with $25 credit upfront to use on rides. Think about that for a second…Uber is giving away free money.
Why would they do that? Why would Uber be willing to lose $25 upfront from every new user?
The answer is because they understand their lifetime value per user is far greater than $25.
They know that for every $25 they give upfront, they get FAR more back in return over the lifetime of that user.
$25 is roughly two rides on average. But how many rides have most Uber users taken so far? I bet far more than two. In fact, the average American spends over $4,000 every year on Uber – which could equate to a lifetime value of $323,000. So, that $25 incentive is extremely minimal in the long run.
You might be thinking right now, “That’s great, but I’m not Uber and I don’t have billions of dollars to spend.”
That’s a fair point, but Uber actually offered this way before they were a billion-dollar app. They understood the value that their app was going to offer – and that after one or two rides, users would be hooked.
If you can implement a strong monetization strategy and know your lifetime value, you will be far ahead of the competition.
2. How Do You Determine the Lifetime Value?
Let’s go back to your user’s Lifetime Value. Once you know how much your users are worth (AKA your lifetime value) you can determine how much you can spend to acquire new ones.
But, how can you do this if you are a brand-new app and have no customer data to base it on? Well, this is a bit tricky – so you will have to estimate it at first until you start to generate sales.
One of the easiest ways to calculate an estimate is by dividing the Total Revenue for a chosen period of time by the Number of Customers for a chosen period of time.
Now, this number will most likely change (and hopefully increase) over time. But this is a great formula to use if you have a couple of sales so you can get a general idea of what to expect.
So, I encourage you to think: How can you position your App so that users are not only interested in paying you, but will do so two, three, or even ten times over the course of a year?
Just like Uber, you need to shift your mindset from one upfront sale to long-term sales.
Mistake #2: Seeing App Marketing As An Expense – Not An Investment
The second biggest mistake owners make is not spending enough on the right app marketing strategies, both paid and organic.
Unfortunately, most make the mistake of seeing marketing as an expense instead of an investment. Oftentimes, app owners will say, “I’ve allocated $50k or $100k total marketing budget for this app.”
Marketing is an investment – but only if it’s done right.
1. Why Should You Spend More On App Marketing?
If you gave me $1, and I gave you $5 back, would that be a good deal?
Of course, it is! That’s a pretty amazing return on investment. Wouldn’t you want to do that deal again? You would want to continue that growth and momentum as long as possible.
This seems like common sense – but when it comes to app marketing, most people just allocate a certain amount and miss out on the possible returns.
You need to start thinking differently about marketing and focus on the return on investment – instead of the initial expense.
I’m sure that you want to launch your app for the same reason many people do: you want to make a difference. However, the reality is that your app won’t be able to impact the number of people you set out for without substantial marketing.
Multi-million dollar app creators think about marketing as a return on investment; they see their marketing budget as a variable. It’s no wonder why mobile app marketing spending has increased year over year!
Furthermore, the CPA (cost per acquisition) is steadily increasing across digital platforms. The average CPA for an app on Apple is $1.76, but it can go up to over $7 depending on the category. Therefore, you must be willing to invest large portions of your budget to ad spend if you want to see good returns.
Like the example I shared earlier, you could spend $500,000 and 2 years creating an amazing app, but it could all feel like it goes to waste because you only get 200 downloads.
2. How Much Should I Spend on App Marketing?
We advise spending equal (if not double) the amount you spent on development towards marketing. If you spent $50,000 on development, then you should think about spending a minimum of $100,000 to reach your initial launch goals.
This is how the top-most successful app business owners think. Marketing is an investment because it’s the #1 driver to help you reach your app goals.
Mistake #3: Incorrectly Measuring Success
The third and final biggest mistake that app business owners make is incorrectly measuring and tracking success.
As an app creator, you most likely spend a significant amount of time each week on either development enhancements to your app or marketing. But what if you found out your development enhancements and marketing efforts were not actually bringing you any more downloads? You would probably change your efforts – right?
Unfortunately, many developers are intimidated by mobile app analytics or do not truly understand why they are so important. Further, a lot of people make the mistake of focusing their attention on the wrong things. To avoid this, we recommend sticking to the 80/20 marketing rule.
1. What Is The 80/20 Marketing Rule?
The best app marketing initiatives follow the 80/20 rule. That means that 20% of the marketing you do (such as specific ad campaigns or channels you utilize) accounts for 80% of the additional downloads you get.
If this is the case for your app business, it’s important to identify which 20% of your marketing efforts work. That way you can actually focus on what works rather than what doesn’t.
In order to do this, you need to track your key performance metrics on a continual basis so you know what you need to improve.
This might sound like common sense, but I assure you it’s not common practice. Time and time again, we see this as something most people miss out on – and I don’t want that to happen to you.
Without tracking key performance metrics, you won’t understand what’s driving downloads, where your engaged users come from, or what’s really driving your revenue. Plus, you could be wasting your ad spend on strategies that are not driving in real returns.
Your analytics are your roadmap to success.
And data-driven marketing is the most effective way to establish a successful strategy. The data behind your analytics will leave you breadcrumbs to follow.
Analytics allow you to understand what works and what doesn’t to obtain actionable insight that you can incorporate into your app right away. If you follow them, they will lead you to the promised land.
2. How Do I Find Marketing Analytical Data?
So, where does this information come from? Well, it can be from a variety of sources. According to the latest report from Adobe, most marketers rely on CRM, real-time data systems powered by AI, and cross-channel analytics to make marketing decisions.
3. How Do I Apply This Data To My Marketing?
Let’s go back to Uber as an example. The company reported when tracking Uber’s revenue and retention, they found the more that a rider uses their app, the less willing they are to wait for a car to arrive and pick them up. In other words, they found that users are less likely to wait, the more they use the app.
Their analytics showed that in 2013 for example, users were willing to wait up to 12 minutes for an Uber car to arrive before canceling the app.
One year later, the same users were only willing to wait 8 minutes before canceling the app.
As of 2018, the average wait for an Uber is just five minutes – clearly, Uber listened to its users and improved the experience in order to keep their customers coming back.
If they did not continually track and improve the time it took for a car to arrive, many people would simply switch to a competing ride-sharing app. Therefore, Uber needed to continually raise the bar to improve its users’ experience to stay competitive and retain users.
The key to this story is that you must correctly measure your key performance indicators. For Uber, if they had never tracked this specific key metric, it would have resulted in a loss of 10’s of millions of dollars per month.
Given this data, it’s safe to say the next billion-dollar app to compete with Uber will be competing on the user experience (that is the time it takes for a car to arrive and transport the user to their destination).
I encourage you to think about:
- What are the key performance metrics you are tracking?
- What do these numbers tell you about the user experience of your app?
- How can you improve these numbers?
- How do you measure the success of your app?
- What do you define as success?
Without tracking your growth or decline, you won’t fully understand how or what to improve. This tracking is so important that it’s always one of the first things we cover with our private clients.
Remember, you can’t improve what you don’t track.
- Treating an app like a hobby instead of a full-time job will only slow down your app’s growth.
- You must set reasonable goals by first determining the lifetime value of each user to create a revenue model.
- You can determine an estimated customer lifetime value even if you have minimal sales – just be sure to re-evaluate once you start generating more revenue.
- It is important to spend adequate time testing and evaluating various marketing strategies until you find the marketing mix that works for your app’s audience.
- View marketing as an investment rather than a cost – then finds the channels which generate the highest returns.
- Many app developers have no idea how to measure their app’s success and do not understand which metrics are important to track.
- You need to find the key performance indicators and use these metrics to improve the customer experience.
Your Next Steps
As always, I encourage you to live a bigger life and build a bigger app business as you continue to make your dream a reality. An app requires a business model with the right pricing, right messaging, and right delivery channel to the right target customers. The key is to sell what your users want and then deliver what they need.
This will not only keep your app alive but will cause it to continue to grow.
As you continue on this journey, I want to make sure that you’re always thinking about your app as an actual business and not a hobby.
You need to:
- Have a strong revenue model
- Consider marketing as an investment
- Correctly measure and track your success.
The reality is, there’s a HUGE opportunity right now in the app industry with new, million-dollar platforms created every single week. Avoid these 3 biggest mistakes and you’ll be on a path to being the next huge success.
Reach out to our team to learn more about effective app marketing strategies, how to find and evaluate mobile app analytics, and other growth hacking tips to take your app to the next level.
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