To learn how business work, it is crucial that you understand the set of terms related to business. However, the one term which is widely used is Return on Investment (ROI). It is defined as a method of determining the efficiency of an investment. The calculation of ROI helps you in knowing what is working for you and what is going against your business. Hence, you can introspect and invest in all those areas where you can generate more revenue.
ROI can be achieved in different ways in application development. Some companies sell user information to third parties in order to generate revenue, while others analyze user behavior and patterns within a given industry. This trend caught the attention of organizations who are realizing the significance of mobilizing apps.
It’s true that as long as the mobile app provides a service that is useful to the customer, the app is capable of obtaining a good ROI.
Create an Action Plan
Before developing the mobile app, determine how you’ll measure the mobile app ROI. For instance, if it’s an e-commerce app, you may want to use the number of checkouts as the gauge of success. In case of internal business apps, you may want to measure how many people use it. You should spend a good deal of time on this factor.
Calculate App Development Cost
Under this step, you should take into consideration the development cost. This generally include implementation cost, hardware cost, support and integration. Additionally, the amount which is required to maintain the app and how much you need to spend in marketing should also be considered. This is a crucial step because you may need to ensure that you stay within the determined budget.
Identify Not All Users are the same
You should keep in mind that not all users will be equally important to your business. It is believed that numerous businesses have found that existing customers who download their apps are more valuable in comparison to people who are not yet your customers. This is because existing users have already confirmed they’ll be loyal to your business because they are completely satisfied with the app.
Compute the Lifetime Value of a Customer
The customer lifetime value, which in short known as CLV shows what you should expect to earn from each user until they stop using the app. It considers a customer’s revenue value and compares the number to the company’s anticipated customer lifespan. In order to calculate customer lifetime value, you need to calculate average purchase frequency rate to find out customer value.
Define Actionable Metrics
When it comes to choosing the metrics you will use to measure ROI, make sure that you take actions based on them so that you can improve the app performance. For example, success metric of a retail app can be the number of people who compete the checkout process. This can be easily measured and improved. You can even test different checkout designs to know which leads to the most completed checkout.
In conclusion, many businesses have come to the forefront to invest in mobile app development. Carefully calculating the ROI of your app enables your business to move in the right direction.