How do you measure a mobile application’s ROI?

March 25, 2021

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ROI is the financial ratio of money earned or lost to the money invested upfront.

Measuring it is therefore a ‘must’ for your mobile app projects. While today there are in fact many tools out there to gather data about smartphone use, most publishers don’t adequately use them to get accurate metrics.

And, yes!  You can calculate the ROI of a mobile application easier than for paid apps because the income generated by the purchase is a tangible and a quick, at hand indicator. The situation is more complex when it comes to free or freemium applications (free download but in-app purchases). In this case, it is not a matter of relying only on the number of downloads, installations or launches. The company must develop a comprehensive strategy taking into account a set of steps that are both distinct and complementary.

That’s why Forrester Research suggests a 5-point method (just that and nothing more) designed to outline these strategic steps; from the definition of the objectives to the coherent and quantified measurement of the return on investment.

  1. Identify the benefits associated with mobile

The first step is to ask why invest in a mobile application at all, what is the purpose(s)?
It may seem obvious but a mobile app’s ROI will depend in part on the goals set by the company based on its business and strategy.
E.g., Direct and indirect revenue generation, customer acquisition, CRM database
 development, improved brand image, increased average basket size, reduced order time, enhanced customer experience, cross-channel sales opportunities, POS traffic generation, cost reduction and the simplification of internal processes…

  1. Quantifying these benefits

Once the objectives have been defined they must be prioritized and quantified using consumer data, forecasts and figures from market research, which lets the company visualize precisely how to proceed in order to reach the target audience and encourage these consumers to act in the desired manner. The challenge is to estimate the relative gains of these objectives.

If the main objective of the application is to reduce costs, for example, the application could offer fully comprehensive services to avoid the user needing to contact a call centre. This saves time and reduces the company’s expenses.

  1.  Evaluate the total cost of the app

In order to get a true measure of the investment costs, it is necessary to include all the costs in launching the application. Beyond design and technical development, you have to take into account the involvement of the people in the project, the complete creation process, maintenance, deployment, integration, marketing, advertising, etc.

  1. Build a business model

After evaluating the total cost, the real benefits and costs are modelled and adjusted. To do this it is important to have an overarching vision that can define the business model and adapt it to the company and its objectives. Since many of these elements are a matter of estimation, the solution may be to demonstrate their feasibility by quickly setting up the idea to find out the actual profit or loss.

  1. Using analytics

An important final step in this process is data collection. Although this is quite a hot topic in the digital world of 2018, it does allow companies to develop their business model and adjust the app if necessary. Analytical tools are crucial in understanding how apps are used (number of downloads, interactions, time spent, etc.). But when used correctly, they let you see geographic and behavioural market segmentation, understand how users browse, see what the obstacles are and how to resolve them (graphic redesign, ergonomics, etc.).

Many companies don’t take the time to develop a clear strategy, nor are they able to use analytics essential to measuring the ROI of a mobile application to their full extent. 

Among the tools used the most often, MobileAppTracking lets you know the source of traffic and the users’ origin. Flurry, however, measures engagement, retention (customers retained over a monthly period), and the conversion or revenue generated. The tool also provides user files (name, gender, geographical location, etc.) enabling the company to know precisely who its customers are and to hone its market segmentation.

At Idéine, we’ve chosen Xamarin Visual Studio for its ability to integrate multiple analysis tools. It can therefore identify any errors that might have occurred during the process and specify the exact origin as well as the type of hardware used (device, OS version, etc.). This feedback allows errors to be corrected as they happen. Depending on the data collected by the tool (e.g. contact information), it is possible to contact users and notify them of any corrections that have occurred during their sessions. Xamarin Visual Studio also has its own way of reporting on audience and application usage – all in real time.

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  1. Case study of the ROI of a mobile application

Canadian company Present Consulting Group has conducted several studies demonstrating the interest of good ROI for mobile applications.

The most talked about study was the introduction of an app for a large Canadian pharmacy chain.

At this company, ordering and delivery of medication happens on a daily basis. This is done manually, mainly by laboratory technicians (1 hour per day). They made the calculations on the basis of the technician’s average salary ($60,000 per year, $30 per hour) multiplied by the number of stores, and then by the number of days in the year. The result exceeded $1.5M per year. A mobile app containing barcode scanners reduced the working time to 15 minutes per point of sale. Although the investment to set up this solution was in the region of $60,000, it resulted in a significant reduction of $1M per year in operating costs.

The bottom line

83% of apps published on the App Store were “zombie apps” at the start of 2017. They did not appear in the rankings or recommendations and had a grand total of less than 500 downloads over their lifetime. This figure currently represents just under one million of the 1.20 million apps on the Apple store.

It is quite clear that if you don’t want to publish your application in this climate of disinterest, the strategic development – particularly definition of your objectives – becomes crucial. Marketing will also play an important role in promoting the app as a fully-fledged product and make sure that it is attractively presented, well referenced for visibility and so widely used.

Finally, following these main steps will help you offer an app adapted to your goals and see it on its way to flourishing and finally getting a return on your investment. However, ROI is specific to each case and can be difficult to measure depending on the company and the type of application.

by Mathieu Laroussi

Filed under App Funding

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