here’s an app for that.
And in fact, for many developers and business development teams alike, that’s exactly the problem. In a sea of millions of competing apps, how do you make sure yours stands out with users?
And that’s not even the hard part. Once developing something from scratch that people actually want, how do you measure success over time?
Anyone with two thumbs and a smartphone can tell you that mobile is a different game. So, which mobile app key-performance indicators (KPIs) are the tried-and-true predictors of long-term success, and why do they matter?
Let’s take a look at some of the most essential mobile app KPIs and engagement metrics, and what they can tell you.
Retention Rate and Churn Rate
Want to know for certain whether users are enjoying your app? Measure it the same way you measure if people are enjoying your birthday party: how many are leaving, and how many are staying?
Retention Rate – and its partner, Churn Rate – are simple mobile app KPIs that tell you how many users stay with your app by measuring the change in your user base over a relevant time period.
Those users who continue using your app are retained, and those who abandoned your app are lost to churn.
Of course, there are a couple different ways you can measure Retention and Churn, and the right way for you depends on how people use your app.
For example, measuring Retention/Churn simply by your month-over-month download base is wise if you’re more interested in gauging the effectiveness of your marketing and brand awareness efforts.
But if you’re interested in the UX, in-app design, or in-app messaging of your product, you’ll want a deeper measuring points, like logins per month of app interactions per month.
If you observe Retention falling too low, or Churn rising too high, you should take it as a warning to reevaluate either your operations or your overall product.
Total Active Users
The next essential KPI for any mobile app is total active users.
Like the name suggests, this is an easily calculated metric, but one that has enormous consequences for most revenue models.
Whether you calculate this figure by daily active users (DAU) or monthly active users (MAU), the math doesn’t change. Total Active Users is simply the number of unique users who opened and ran your app in a given timeframe.
Not only does this metric give you an idea of how important your app is to your users’ daily lives, but it has huge repercussions for your revenue streams. The size of your user base – and how often their eyes are on your app – will dramatically affect how much revenue your app brings in. That doesn’t change whether your revenue model is based upon ad sales or in-app transactions.
If your Total Active Users metric is too low, your app is probably not providing enough real-world value to users post-download, or the UI is too complex.
Total Sessions per Active User
Now we start to get down to the more granular understandings of your user base.
Total Session Per Active User measures how many times in a given timeframe each user uses your app. If we’re measuring Daily Sessions Per Daily Active User (DAU), for example, we simply divide the number of total sessions per day by the number of unique daily active users.
This information is extremely useful to help you understand how your customers are using your app. Banking and financial apps, for instance, might not expect their users to need the app more than once per day. But social media applications would want to see their users opening the app multiple times per day.
If you have ten million daily active users, you’ll have ten million daily active sessions. But if each of those users opens your app once per day, says, “Nope, still not useful,” and closes the app, this KPI will reveal that fact.
Cost Per Acquisition (CPA)
Ah, yes. We’re all familiar with this one. But even though it’s a classic, it’s still relevant today.
So far, all of the metrics and KPIs above have dealt with raw user volume. And that’s important! But eventually, when the CFO comes knocking, you’ll need to justify the business case for all those new users.
And that’s where CPA comes in.
First, calculating Cost Per Acquisition is easy enough. Simply divide the total cost of your associated awareness/marketing campaign by the number of acquisitions or conversions you’re interested in.
But why is CPA so important? Because there are a lot of hidden costs when it comes to acquiring app users. Especially when you consider the different thresholds for “active users” we discussed above.
According to a report by eMarketer, the current average CPA for a user to download an app is approximately $4.12. But, the average CPA for a user to create an account and login to that app jumps to $8.21. And if your metric for “acquisition” is an in-app purchase? Well, that’s going to cost you $64.96 per user on average.
Therefore, honesty is important when measuring CPA. If you really want to gain actionable insights that boost efficiency, you’ll need to include all your affiliated costs. That includes product development, marketing, sales, and customer support.
Lifetime Value and Average Revenue Per User
Lifetime Value is a metric closely linked to CPA, but with additional factors taken into account.
Essentially, Lifetime Value surfaces whether or not you’re paying too much for your current CPA. It does this by projecting the revenue your app is likely to generate over a given timeframe, and subtracts the total CPA over that same span.
There are a couple different ways to measure Lifetime Value. The first requires a granular understanding of your revenue models and your users’ habits. For example, you can calculate Lifetime Value by multiplying the average value of a conversion by the average number of conversions per year by the average customer lifetime.
So, let’s say your average conversion is worth $100, and your average user completes 10 conversions per year. If your average user keeps your app for two years, your Lifetime Value would equal $100 x 10 x 2, or $2,000.
The other way to measure Lifetime Value is by calculating Average Revenue Per User (ARPU). But this method measures Lifetime Value To Date, not a forward-looking projection.
ARPU is a simple calculation and doesn’t provide the granular insight that Lifetime Value does. However, it is a quick and easy way to gauge the overall financial health of your app since launch.
Simply divide the total lifetime revenue your app has generated by the number of total lifetime users of your app. So, if you’ve generated a total of $20 million to date, and you’ve had 10,000 total lifetime users, your Average Revenue Per User is $2,000.
Lifetime Value and Average Revenue Per User may measure slightly different KPIs. But you should use them in concert to identify opportunities for enhanced user experiences or process optimization.
Summary
When it comes to mobile app KPIs and engagement metrics, knowing what metrics to evaluate is just as important as having good numbers.
And as we’ve discussed at Zendrive before, data is power.
By understanding the KPIs above, why they matter, and how to use them, mobile application companies can understand how their app is performing. And how users are receiving it.
And, most importantly, how to keep their users coming back for more.
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