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Mobile App ROI estimation

Mobile App ROI estimation

Mobile apps have changed the global business landscape and have become one of the most integral parts of a business’s marketing strategy. ROI estimation for the mobile app is becoming a major issue, especially when presenting your app to potential investors or your boss, if you aim to engage your existing customers in your product or services through a mobile device. See: Statistics To Convince Your Boss to Invest In Mobile

 

How to calculate ROI for your mobile app?

First of all, you need to take into account the investment/cost side of the mobile app, that is development plus marketing and estimate your annual earnings from the mobile app. Estimations can be based on several factors including market size, competitor revenues, typical customer spend for your app category and more. Based on these estimations, you will be able to calculate ROI for your app. If you do find competitors in your market, you’ll need to identify a gap. Use this Competitive Analysis Guide to identify weak spots and opportunities.

 
A basic formula is to take your earnings from the app, subtract out the money spent on app development plus marketing and then divide on the figure of investment cost in development and marketing. You will get a percentage which will be qualified as your ROI indicator. For more details in ROI estimation you will find here.

 
Ideally you should expect to receive a return on your investment in the end of the first year, you have to be realistic. The first year of launching an app is like the first year of starting a brand new business – in fact, it is starting a new business. When you actually start making money, you can use this formula to track your ROI projections month to month and adjust your estimations based on percentage changes.

 
In order to make better estimations of your ROI, you will need to know your customer LTV.
LTV is one of the most important metrics that drives profit for your business. Essentially, the longer a customer stays with you, the more they’re likely to spend. First, it measures the profitability of users, which will help you identify more lucrative customer segments. Second, it takes future profits into account.

 

How to calculate your LTV?

A basic formula is simple. Take the revenue you earn from a customer (i.e. their average spend in the app), and subtract out the money spent to acquire the customer. Then, based on average lifetime sessions, calculate how much money they will spend in your app. Once you have begun collecting data from your app, you can start to make more accurate projections of your LTV and ROI. But for now, just set an LTV projection for each year and multiply it by the number of customers/users you intend to attain.

 
Oles Dzyub,
Branded Content Manager at ComboApp