Return on investment (ROI) is a key metric used to evaluate the success of a mobile app. ROI measures the amount of return an app generates versus the total cost to develop and market the app.
Calculating the ROI of a mobile app can help developers and marketers understand if their app strategy is paying off.
How to Calculate the Mobile App ROI
Let’s discuss the detailed steps for calculating the ROI for a mobile app:
Step 1 – Define Your Objectives
First, clarify the specific goals and targets you want to achieve with your app. This could be number of downloads, user registrations, in-app purchases, ad revenue generated, etc. Defining objectives is crucial for measuring ROI accurately.
Step 2 – Calculate the Gross Cost Incurred
Add up all the costs invested in making the app. This includes app development costs, maintenance, marketing expenses, app store fees, and any other associated costs. Make sure to only include costs directly related to the app.
Step 3 – Estimate the Returns
Now calculate the returns or revenue earned from the app through all monetization models like ads, in-app purchases, subscriptions, etc. Projected revenues should be based on realistic assumptions.
Step 4 – Calculate the Net Profit
Subtract the total costs from the total returns to get the net profit.
Here’s the formula: “Net Profit = Total Returns – Total Costs”
Step 5 – Determine the ROI
Finally, divide the net profit by total costs and multiply by 100 to arrive at the ROI percentage.
ROI % = (Net Profit / Total Costs) x 100
A positive ROI means your app has returned more than the investment, while a negative ROI means the costs were greater than the returns.
What Are the Top Ways to Improve Mobile App ROI?
Here are some proven tips to boost the ROI of your mobile app:
1. Ensure Your App’s Performance – A fast, bug-free app with intuitive UI delivers higher user engagement and conversion rates. Invest in QA testing and fixing performance issues.
2. Make Easy Onboarding for Users – Simplify the signup and onboarding process to minimize hurdles for new users. Offer incentives for registration to boost conversions.
3. Better Communication with Users – Enable push notifications and in-app messaging to continually engage users. Personalized communication improves retention.
4. Loyalty Rewards to Retain Users – Offer rewards, discounts or VIP privileges to loyal app customers. This incentivizes them to keep using the app.
5. Enable Social Sharing – Integrate social media sharing to encourage users to share content from your app. This amplifies organic marketing.
Mobile App ROI: Key Metrics to Consider
There are many key metrics involved in App ROI. However, these four metrics are very crucial:
1. Customer lifetime value (CLV): The total revenue a business can expect from a customer over their entire relationship. It calculates how valuable each customer is.
2. Customer acquisition costs (CAC): The total costs involved in acquiring new customers, such as advertising and promotions. It measures how much it costs to gain customers.
3. Churn rate: The percentage of customers that stop using or purchasing from a company over a period of time. It helps in tracking how many customers are lost.
4. Customer retention costs: The costs associated with initiatives to retain existing customers, such as loyalty programs and customer service. This metric quantifies how much is spent to keep customers.
Tracking these metrics over time will give deeper insight into the profitability of your mobile app. Focus on improving the metrics that most impact your bottom line.
F.A.Q
Q1: What is ROI in apps?
Ans: ROI in apps is a metric that measures the amount of return an app generates compared to the total costs of developing and marketing the app.
Q2: What is a good ratio for ROI?
Ans: A good ROI ratio is at least 100%, meaning the returns are equal to or exceed the costs invested.
Q3: What is a 30% ROI?
Ans: A 30% ROI means that for every $1 invested, the app returns $0.30 in profit.
Q4: Is 80% ROI good?
Ans:Yes, an 80% ROI is very good, indicating the app generates $0.80 profit for each $1 spent.
Q5: Is 15% a good ROI?
Ans: A 15% ROI is decent but there is room for improvement by optimizing app monetization and marketing costs.
