Explaining Customer Acquisition Costs: How To Win App Store Optimization Race
Investing in marketing, sales, and customer acquisition are critical parts of getting your brand new app off the ground. But as time goes on, are you sinking costs upfront without seeing a return?
If you’re looking to understand how much it costs to acquire a customer for your app, you need to know what that number is currently. If you can apply the right strategy, and do some planning and metrics tracking, you’ll be able to make informed decisions that will allow you to minimize your Customer Acquisition Cost (CAC) while maximizing revenue.
Avenues of app promotion can be quite expensive, and often not very effective. CAC (Customer Acquisition Cost) is a key metric that can allow you to make well-informed decisions when it comes to marketing, sales, customer acquisition, and everything in between.
Here are the important terms you need to know about Customer Acquisition Costs.
1- CTR (Click-Through-Rate)
CTR is a ratio showing how often people who see your ad or free product listing end up clicking it. This ratio can be used to gauge how well your keywords and ads, and free listings, are performing.* Click-through rate is the number of clicks your ad receives divided by the number of times it is shown or placed. For example, if you had 20 clicks and 100 impressions, then your CTR would be 20%.
Click-through rates are a factor in customer acquisition, particularly through paid advertising. You must consider click-through rates when running campaigns on an advertising network because the bids you set for your ads are based on cost per click. In addition, most ad networks display quality scores for each campaign and its corresponding ads, which are partially based on click-through rates.
2- Conversion Rate
Conversion Rate is the average number of conversions per ad interaction, shown as a percentage.* This rate is calculated by dividing the number of conversions by the number of total ad interactions that can be tracked during a given period.
For example, if you had 30 conversions from 1,000 interactions, your conversion rate would be 3%, since 30 ÷ 1,000 = 3%.
The cost of acquisition is calculated based on the number of new customers acquired and their lifetime value. Improving your conversion rate means every dollar spent brings in more than one new customer, giving you greater value for your money. This reduces the cost of acquisition.
3- Install To Subscription
A user’s journey to your app has a stage, named “Installs to subscriptions” which implies convincing your customers to subscribe to your app. This stage has three elements, and they are paywall, subscription packages, and understanding of the characteristics of your app.
Paywalls are a form of content restriction that requires people to pay a fee in order to read or view the full content. They offer a few different models, each one can be beneficial for different types of apps. There are paywall models such as Hard, Soft, Freemium, and Dynamic. Each one appears at different times and offers a different payment method.
The next screen after the paywall (or during, if you use a dynamic paywall) your users will see is the subscription packages screen. This type of screen shows the subscription offers. Users can select one of them if they like to subscribe to your app. The packages can change the elements of your app, such as the loyalty level of your app, what kind of a service your app offers, can your services be used for a long period or short period of time, and the pricing of your packages.
Another important factor for converting installs to subscriptions is understanding the characteristics of your app. What are your users’ demographics, gender, income, country, and age? What kind of solution do you provide with your app? What are the usage habits of your users? The best way to be certain and work with solid facts is by conducting tests. Results of the tests will give you the information you need for the localization, design, and pricing stages for your app.
Understanding your app and its users will help you create the most relevant content, pricing and visual elements for your app and these actions will make it much easier to lower your customer acquisition cost. By creating an app that’s organically reachable and catches the attention of users, you will spend much less money acquiring new customers.
The Correlation Between Installs-To-Subs (ItS) And CAC
Based on the information we’ve shared above, you can see that the Install-to-subscription metric has a correlation with Customer Acquisition Cost. Knowing your ItS metric can give you the outcome of how much it costs to acquire a new customer. For example,
If you manage to have a CPI(Cost per Install) of $2.00 and your Install-To-Subscription is %2, your Customer Acquisition Cost will be $100. Because for every 100 installs you’ll have 2 subscribers, so for 1 subscriber you’ll need 50 installs. Since you know that one install costs $2.00, multiplying that amount by 50 will yield the cost of one subscriber, which is $100.00 in this example.
There are also other elements you need to know that will evangelize your strategy and help you understand the mobile app marketing world in the best way.
The Power Of Creatives
Nowadays, the algorithm of platforms is becoming more inaccessible to outside interference, which is a very compelling fact for marketers. The best action that can be taken is optimizing visuals in today’s marketing world, creating the most compelling visuals is becoming more important than ever.
The best way marketers, entrepreneurs, and developers can make the most of their campaigns are by creating the most captivating and converting visuals. In the competitive world of marketing, the visual language of your campaigns will be the most significant element of your campaigns. Even the algorithm of digital platforms is always changing and is hard to control therefore working with professionals will help you get a long way during this stage.
Test & Re-Test
Each app is unique, and so are its users. Considering that in the marketing world there is no one-size-fits-all strategy, the best thing to do is to find the way that will work for your app. And on your way to finding one, testing is what you should do often.
Which platform is working best for your app? Which countries do your ads have a higher rate in? The strategy should be to always optimize your campaigns and acquire more users while spending less. App creators should always watch the interactions of their campaigns closely. And the action of testing should continue until you reach the ideal outcome you wanted.
Testing may not be the most budget-friendly marketing element, you should have enough budget to conduct them often. And if you’re just getting started and don’t have a high budget, you can work with Cherry without spending a dime and a professional team can conduct marketing tests for you.
Break The Rules
The norms and the best practices can vary, and always following the rules may not be the best strategy to take. Discovering the differences between markets, users, and countries lie in breaking the rules. Marketing is feeling the moment and turning them into metrics. And the trends, beliefs, actions, and ideas are always changing. If you break the rules, you can discover new techniques and find the most beneficial strategy for your mobile app. We highly recommend not always following the best practices or following a certain path too rigidly.
Marketers, or anyone who will start marketing, should know that true and false can always change. For example, by conducting a new test, you can discover that your app is very popular in the working-class population in Japan. Or millennial moms in Europe might love your app and subscribe to your app. If you believe that your app can only be successful in the USA, this might prove to be a wrong belief. The only way to find the best outcome is by testing, and breaking the rules with the best visual and content strategy.
If you hesitate on applying these methods to your marketing strategy, the professional team Cherry can help you with it. Discover the world of Cherry and how you can market your app with our partnership model, without spending a dime.