Guide to User Engagement that Uplifts Your $$$
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Step by step guide to user engagement that uplifts your $$$

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You can’t win the game with downloads only. Period. That ship has sailed long ago. It’s the number of engaged users that will determine your level of success. Most app developers are not paying enough attention to user engagement, if at all. Those who do, are usually rewarded. Big time!   Here’s how you crack the world of user engagement. 

Right, there are millions of apps are out there. No need to say that again… On average, smartphone users have 65 apps installed on their phone, but they are only using up to 15 of them a week (Flurry.com). You may know this already but Localytics claim that 26% of apps are never used more than once. If you ask Apptentive, only 40% of customers continue to use an app they downloaded a month ago. Six months later that number will drop to 10%, and after a year, only 4% of customers will still be using this app. It’s too painful to continue. I think the point is clear!

Even if you have employed the most sophisticated tools out there to bring in new users, you are still far from success. Forget about Jamaica beaches at this stage.  Heavily relying on user acquisition campaigns over time is not scalable and it’s crazy expensive. And don’t think that if your users cross the door, they are bound to stay. The key lies in them having fun, getting value, and keep coming back for more. It’s your Job to make that happen.

HOW? We are here to help you crack the world of user engagement: Get them hooked, addicted and loyal. Turn them into your app ambassadors!

In our let’s get sticky piece, we discussed the basics of user engagement. If this whole topic is new to you, you might want to start there. Also, I will be using some terms explained in there.  BTW here is a benchmark table of what’s considered a good engagement level by category, just to give you a ballpark idea.

Defining your engagement strategy

As always, before you act, you need to sit down and plan, set some goals, so later on you can make sure you are in the right direction. Planning will allow you to maximize impact of your efforts and methodically go through a trial and error period. So first, you might want to start with some initial thinking:

  1. What do you consider an engagement in your specific app? If there are certain activities that a user completes in order to be considered an engaged user, prioritize them (the events that are more likely to hook the user, get them addicted and therefore increase LTV – bring in revenues). Here are some examples of what’s considered engagement in different categories:

    Click to enlarge; Source: Localytics

    Click to enlarge; Source: Localytics

  2. What is your current base line level of engagement? You may identify different engagement levels for each type of event you had defined. That’s great because than you use specific tactics to increase engagement for selected events. Obviously, we would want to start with events that are high on the priority list.
  3. What is your current user life time value (LTV)? This will be helpful in order to look at the big picture and make sure that your total investment in generating install + engagement boost is less than your return. Yup – we are after positive ROI here.

Note that it will take you some time until you collect enough data to analyze and determine your baseline engagement levels (e.g., rate of active users, rate of loyal users, etc.). In other words, if you have just launched your app, make sure it runs for a few months, and that you have a big enough user base before you jump into any conclusions. Also, engagement levels are not necessarily constant over time, so you should keep the analysis going.

In order to make things a little easier, we have prepared a worksheet than you can use to make sure you don’t miss any important parameter you need to look at. You can find the worksheet here.

The importance of user lifetime value (LTV)

We all tend to look at the cost per acquired user and ROI of our ad campaigns. We also look at engagement/retention levels, and eventually, rates of conversion to monetization. But at the end, all these metrics boil down to a user’s lifetime value. Yes, of course you want to invest in getting your users to install the app, but you must also invest in engaging them with activities that are more likely to bring in loyalty and revenues. On the expenses side, you need to make sure that your total spend on acquisition and engagement is lower than your return. Meaning: LTV X # of users. This is a must, no matter what your business model is.

Your engagement strategy is highly related to your monetization strategy. Why? Because you need to have an idea of how your engagement efforts are going to influence your revenues. What’s the expected uplift? Also, in order to work in a smart way, when planning your spend on engagement activities, you need to take into consideration the expected ROI. I will demonstrate it in a minute, but first let’s make sure we understand the strong impact of increased usage on your revenues.

  • IAP (in-app purchases) / e-commerce – When this is your business model, you need to make it really easy and seamless for your users to spend money within the app. Here your ultimate, successful engagement result is placing an order or making an in-app purchase. Invest in users engaging with activities that lead to this result and your LTV will increase.
  • In-app advertising (see our ad revenue optimization training) – Your goal here should be keeping people in the app as long as possible (session duration, multiple logins, etc.). This way users will be exposed to many RELEVANT ads, increasing the chances of them engaging with the ads. Watching / clicking an ad is of course your ultimate result here.

 Calculating LTV

So again, your user lifetime value MUST increase as a result of a successful engagement investment. Therefore, you need to know what your current LTV is, estimate the expected uplift from your engagement activities and once you start, measure and analyze your success, results, if you met your targets, whatever you call it.

Let’ see how to calculate LTV.

LTV means how much on average a user will be worth until he/she is gone. Practically, it’s the overall revenues achieved in a given period (ads, in app purchases, commerce, you name it) divided by the overall number of active users in that period.

But, when just launching an app, there is no way that you can know for sure your user LTV – you can look at benchmarks, try to find out what’s going on with the competition, but only over time will you see how much users actually spend with you on average, how long they stick around, etc.

Only then will you be able to analyze your acquisition and engagement results and costs and optimize.

Rest assured, when you are just starting with your engagement activities, you will most likely take a loss at each acquired and then engaged user, and that’s OK! (Everyone are dealing with this). Still, it serves as a trial period and a learning curve, so you can improve down the road. Moreover, this stage is a must so be prepared!

By the way, to make things even more complicated, you should calculate LTV by segments (to see which segment is the most profitable for you, and invest there..)

Example use case

 Initial facts:

  • A social, geo-location app for dog owners who want to schedule time for their dogs to socialize with other dogs in their area.
  • The business model is in-app advertising ONLY
  • Current install base stands on 400K users; 25% of them are active every month
  • The average user keeps the app for one year – so that’s the user lifetime
  • The preferred engagement event is using the inapp chat to set up dog meetings
  • An active user logs in to the app twice a week (8 times a month) and the total ad impressions generated are 266, 000 impressions /day

Now, let’s look at the numbers:

  • Acquisition only cost per active user = $4 (no engagement costs at this stage, but stay with me)
    • Average user acquisition cost is $1 but since only 25% become active, the “real” cost per active user is $4.
  • The current user lifetime value = $9.6. How is it calculated?
    • We have 26K logins a day (100K active users, login in 8 times a month. 800K logins divided by 30 days)
    • 26k logins a day generate 266k impressions (10 per login). The eCPM stands on $10/ mille impressions.
    • An active user who is generating 8 logins a month is therefore generating 80 impressions a month. That means an active user is generating $0.8 / month and $9.6 in its whole life.

Theoretically, the app is in great shape. We paid $4 to get each active user, and eventually each active user will generate $9.6 in average.

Want to go through the same exercise with your app? I have prepared an Excel template based on this example, where you can plug in your numbers and the parameters will be automatically calculated for you. You can find the template here.

But if we wish to keep users engaged and increase those levels, we should keep reminding our users to use the app, encourage social sharing, build a community and so forth. All these engagement activities cost money. In theory, we just need to make sure that our “engagement costs” per active user are less than $9.6-$4=$5.6, and we are good to go. Or that we can assume that our engagement activities will manage to increase our LTV, let’s say by 20%, so the $9.6 will increase to $11.52.

Most developers, sadly, are not challenging their existing LTV values. Therefore they are not maximizing their app’s potential. Their reluctance to invest in engagement activities causes their metrics to drop over time, while all along they could have stabilized and even grow their metrics, using a proper engagement strategy.

Convinced already?

So how do you derive specific engagement activities when you’ve completed your strategy, and you know what you want to achieve?

In our upcoming engagement training, we are going to deep dive into the activities, tools and techniques that can help you push up your user engagement.

 

 

Tsipi Joseph
Tsipi is one of AppGo2Market.com Co-Founders, a mobile expert and a mentor. Over 10 years of experience in the mobile and marketing industry: Director of Marketing at Telmap, Comverse and marketing professional development director at the American Association of National Advertisers.
Tsipi Joseph
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