Understanding Math of the App Business - ARPU and LTV

Understanding Math of the App Business - ARPU and LTV

LTV Shoaib   00:08

In this post, we will discuss App revenue per user and Life time value as well as tips to help engaging and retaining current app users.  

Analyzing two more key metrics of an app business 

1. ARPU - Average Revenue Per User 

2. LTV Life Time Value of an App User, continued from previous topic . 

So Let’s get started!

TIP: Focusing on user retention gives a whole new set of opportunities for to drive user love.

4 – Average revenue per user (ARPU)

The average amount of money each customer contributes to the revenue from an app over a given period. ARPU is commonly calculated in monthly terms and by monthly active users. 

A simple math to measure your ARPU is as follows,

ARPU app metric formula:

In some cases it can also be done using total lifetime values, by dividing lifetime revenue of the app by total number of app users. 

For example: 

If your app has made $10,000 from in-app purchases since the launch / app has been used by 5000 people in total, 

ARPU = 10000/5000 = $2. [Total sales / Total number of app users.] 

Another version of this metric, ARPPU, can also be applied. 

It means average revenue per paying user, aimed at calculating the impact of paying users on the generated revenue. 

ARPPU = Revenue / Number of paying users.

5 – Lifetime value (LTV)

Lifetime value is considered by most to be the primary revenue metric. It represents the value of the app and how much each app user is worth during their lifetime. 

LTV revenue can be measured in a dollar amount, social sharing, articles read etc., and can be split by average monthly value or value per customer across all channels.

LTV formulas will help you assess the efficiency of your spendings to gain customers with the app. The main factor here is that LTV should be greater than 

CPA – cost per acquisition: 

Measuring lifetime value of a customer is aimed at figuring out how much profit you can expect from him (or a segment of customers) during the entire time.

Factors of the LTV equation include frequency of user transactions, the monetary value of those, and the time customers continue to interact. So a projected LTV might be equal to average value of a conversion multiplied by average number of conversions multiplied by average customer lifetime.

Example: 

The average in-app purchase is $5 x the average user makes 5 purchases a year x the average customer stays with your company for 10 years = $250 LTV per customer.

Next Topics to be covered:

 

*Last two metrics out of​ seven 

Key App Metrics of an App Business

1. What happens after you get customers to your app? 

2. How do you keep them engaged and turn them into loyal customers?

Hope you like and follow these useful tips. . .

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How to grow app or user retention?

How to grow app or user retention?

users Shoaib   17:02

How to grow app retention?

Would Increasing customer acquisition be truly the best objective for today’s mobile marketer? Perhaps not. 

Your app may get thousands of new downloads and installs every day, but how do these installs translate to your audience? 

How many of these will become active, engaged, and profitable customers of your app?

Downloads and installs say little about the true health of your app. According to our research, only 40% of customers continue to use an app they downloaded a month ago— and this number plummets to 4% over the course of the first year in the customer journey.

The challenge after getting a mobile app developed and launched is keeping the users interested in using the app after the first install.

Today we will learn that how can you keep those users interested in using the application. We will discover the ways of improving your retention rates to keep your user base steady and increasing.

What many mobile marketers don’t realize is customer churn can be largely managed with a few simple improvements to their app’s customer experience, and boosting retention doesn’t mean you have to completely reinvent the mobile app marketing wheel. 

Getting Started

Prior to improving the retention rate of your users, at first you need to make sure that you are keeping track of the retention rates.

Many analytics tools allow you to get a hint about user retention. Once you have gathered data to work with you are ready to begin. What would be a good time to track user retention well that depends on the type of app you have, certain apps need a lot of engagement of user like social network apps on the other hand an airline app won’t need that much engagement.

Steps before initiating

Before you start considering retention numbers are bad or good, you first need to understand that what would be the real use of your application and what would be its daily use percentage.

I usually go with different time frames to know about the retention rates, but it is totally up to you that how you decide to go with the analytics.

• 1-2 weeks after each major app update
• 1 month post download
• 1 week post download

It should be remember that comparison of retention rates with other products doesn’t help and there is no magic number at all that you should be going after, because a lot of things may affect the user retention which you might not be able to control. Just concentrate on your own analytics data and go with that, preventing following usage aspects, users have already disliked as sample stats shown below!

Conclusion

To be short just keep the analytics data of your application and initiate from there, then with the passage of time start experimenting with the retention rates by altering branding, product, marketing and by simply adding new features. 

We will continue talking about FIVE GREAT TIPS FOR Boosting Mobile App Retention in upcoming posts sooner so stay in touch

1. Launch a Voice of the Customer (VOC) Initiative, 
2. Use contextually relevant messaging and proactive engagement strategies,
3. Let users know you care, 
4. Give customers a reason to come back, 
5. Understand the math of the app business F.

For more Tips and Tricks regarding mobile app business and increasing your app revenues, Stay in Touch with us. . . 
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