There’s no doubt about it, mobile is hot right now. I’m certainly not going to argue against a belief that mobile represents a transformational technology when it comes to the brand / consumer relationship. Even if I wanted to, every statistic out there and the reality of the lives we live every day would be against me.
But there’s just one issue when specific technologies become fashionable. Decisions get made without reference to the bottom line. If mobile is the height of fashion, is it really necessary to run the numbers before committing to re-modelling the business with an innovative mobile strategy at the center?
For many organizations, the answer is usually ‘no’. It may be an unfashionable opinion, but I’ve been around long enough to know that if sufficient numbers of people in the right places WANT to do something, chances are it’s going to happen no matter what the numbers say. In fact, chances are nobody’s going to ask for the numbers in the first place - the truth is that “ROI” is more usually used to kill projects than give them the green light.
And that isn’t necessarily a problem. But at some point, someone somewhere is going to ask the “Mobile ROI” question - and if you don’t have a good answer then you risk losing a lot of good work or at best losing the support of the business (and budget with it). What follows is an attempt to help you avoid that situation - a simple guide to calculating Mobile ROI that should ensure you get the credit for your good work, rather than shut down because you can’t demonstrate the value you’re delivering!
Calculating Mobile ROI - The 5 Simple Steps
It’s always a good idea to look at mobile ROI from the get go. Aside from anything else, even if you know your mobile strategy is a sure-fire winner, being able to show the same in numbers will only help when it comes to budget and getting the rest of the business behind you. So here are my 5 short and simple steps to calculating Mobile ROI. This isn’t comprehensive, but it should get you thinking in the right way.
1. Be Clear About Your Goals
This might sound obvious, but as always you’d be surprised how many organizations fall at the first hurdle. Before beginning any mobile ROI calculation, be absolutely clear what success is going to look like on mobile. To give one example, there is a distinction between mobile apps optimized for engagement (media, games, entertainment) and those optimized for transactions (retail, travel, transport etc). Depending on which side of this line your business falls, you will have a completely different set of priorities, and a completely different set of metrics you wish to optimize for (and include in a mobile ROI calculation).
2. Understand The Link Between Metrics And Revenue
Having the right goals means you’ll have the right metrics, or at least it should do. The next step is to quantify exactly what a change in these metrics means to you in terms of revenue. That can be easy. If you only sell one product or service and get a set fee every time it is bought or used, happy days. Unfortunately that isn’t always the case and you’ll have to be methodical when it comes to getting to a mobile ROI calculation.
It’s useful to remember that ultimately the numbers that matter are revenue per user and total active users. You’ll need to break these down into the metrics that collectively roll up to them: retention, acquisition, engagement, average number and value of purchases or interactions, etc etc. That can be tough, but we have an online Mobile ROI calculator that can help!
3. Consider All Factors
If it was as simple as figuring out how much money was being made from mobile and netting off costs, calculating mobile ROI would be relatively straightforward (although understanding it would be more complex - as above). But again, that isn’t always the case. Many apps exist to improve customer loyalty by delivering brand awareness on the phone or supporting the user during interactions with the business. Think airline apps helping users during journeys.
In that situation, you have some additional work to do, namely some form of analysis to establish whether there are any clear loyalty or brand awareness benefits that can be attributed to app users over non app users. In this instance, you may need to look at more traditional research methods in order to arrive at a fair ‘value’ for app users that isn’t directly monetized in the app itself.
4. Be Honest About Costs
Any mobile ROI equation has two sides. On that basis, you’ll need to be fair and realistic when it comes to assigning costs to the project. Some costs are obvious (advertising spend on acquisition), some are reasonably obvious (fully loaded human resources cost of anyone involved in mobile) and some aren’t very obvious at all (revenue cannibalised from other channels). It’s easy to overlook costs or potential costs when calculating ROI, particularly when there’s a organizational desire for a project to succeed. That’s precisely why anyone responsible for a mobile ROI number should be as honest as possible with themselves.
5. Factor In Other Channels
We hinted at this above, but the point is worth expanding on. Mobile does not exist in isolation. But just as revenue can be taken from elsewhere, integrated campaigns across multiple channels can deliver a multiplier effect that you’ll need to account for. Take, for example, the rise of OTT and digital media streaming platforms, and specifically the direct relationship the content producer now has with the consumer. Yes, a lot of that relationship exists within the mobile app, but it also takes place on TV apps and desktop. Smart campaigns and investment will be across all these channels, and mobile brings more to the party than the raw numbers might suggest. Multi-channel businesses must be careful to tease out the value of these co-dependencies.
Conclusion: Making Mobile ROI Central
Hopefully those five steps make some sense - even if they won’t necessarily get you all of the way there. What is most important, perhaps, is to consider mobile ROI from the very start of any mobile strategy (difficult at this stage, to be fair, as most organizations are already mobile-friendly or mobile-first).
By ‘owning’ ROI you’ll be in position to spread the word about success and, if needs be, be the first to identify issues and resolve them. Your mobile strategy deserves nothing less.