6 Factors That Help Determine Your Mobile App’s ROI
Investment always two sides: it can either gain you great profits or drown you to big losses. What if your project doesn't work and you end up losing a huge part of your resources? Hence, ROI (Return On Investment) should be your fundamental metric to coordinate the entire strategy.
Even you know that building a mobile app isn't cheap. You should have data-backed estimations and researched projections to take your "app idea" seriously. Therefore, it is vital to analyze and calculate an evaluated ROI before implementing it.
How To Estimate ROI For Your Mobile App?
1. Understand what the goal is
Certain parameters need to be set to measure the ROI. These usually include:
- The number of downloads
- The rate of lead conversion
- The number of customers who have made purchases
2. Define how to measure
Businesses need to come out with a foolproof plan to measure the rate of return. Use separate and dedicated trackers to check the progress for a period.
For example, if it is an e-commerce app, then ROI can be measured based on the number of products sold. This means that the percentage of people who check out and purchase will be the primary criterion for measurement.
3. Compute expected profit
One of the best ways to do this is by taking into account how much a customer will purchase over a time period - be it app or website. This is often referred to as Customer Lifetime Value (CLV).
CLV is calculated by taking into account the total number of purchases made by a buyer or even the total sales figure that has been achieved so far.
4. Know the operating and other costs
The rate of return depends hugely on the amount that has been invested in the business. These factors should be taken into consideration:
- The cost to design and develop the app
- The cost to test the app
- The cost required to maintain the app
- Other operational expenses
The factors mentioned above will help create a better and well sought out ROI measurement plan for the business.
5. Actionable metrics
Once there are definite metrics that have been put in place, an actionable plan can be created without much confusion. It is also essential to analyze the metrics and create an actionable plan that will help the business to measure the parameters.
Organize these metrics in an excel or any other application you are comfortable with so that it becomes clear how ROI will be calculated for your organization.
6. Cash flow method
This is a method of ROI calculation that takes into account the total earnings and the initial investment made. The percentage is arrived by using a formula, which is:
ROI = Earnings – Initial Investment ÷ Initial Investment
Earnings may be classified based on the flow of cash. This is a very simple and straightforward method to compute the ROI percentage. The percentage of error is comparatively lesser in this method.
Though multiple factors drive the ROI for business, it depends mostly on:
- The amount of time a customer uses an app for
- The income earned from each customer
- The number of active users on a specific mobile platform or website
As a business, it is essential to take all measures to compute ROI accurately and also maintain the same.