Mobile App Monetization: A/B Test for In-App Purchases

As we previously discussed, In-App Purchase is becoming the primary source of app income. Aside from following implementation best practices, it is important to assess the performance of different in-app items. Assessment can come in the form of monetization KPI tracking or better yet,  an A/B test.

 

The tracking of user behavior isn’t of much use unless you know how to act on each behavior. A/B testing allows us, marketers, to explore and experiment different monetization strategies with minimal risk to revenue loss.

 

IAP A/B Testing Best Practices

 

When is the right time to start an IAP A/B test?

It is advisable to start monetizing with the use of in-app purchases after the app has significant traffic and loyal user base. You can start an A/B test anytime you feel the need especially when you are still tweaking with the IAP monetization strategies. There are times where an A/B test is vital, though. This includes times when you conversion rates seem to be slow or skewed, if revenue is low, and if you add or change any in-app item.

 

Which IAP elements should you test?

It is important to consider first and foremost which stage of the monetization funnel directly affects the result you want to test for. Is the low revenue because of the IAP’s placement, price, or its very nature? Test or add IAPs at each level or part of the app where you feel the users are inclined to spend money on. The test would show if user preference over one item before or after an action.

 

You don’t need to specifically test every in-app item. There are in-app elements/aspects that you can tweak and A/B test for performance:

  • Price
  • Placement (or frequency of appearance)
  • Design (color, layout, etc.)
  • Headlines Wording
  • Nature of the offer (bundles, boosters, extensions, etc.)

 

What types of test should you try?

You can try price point tests, placement tests, conversion funnel performance, and market segment test.

 

There are times when tests generate negative or no conclusive reports. This just means that you need to create and try new hypothesis or combinations.

 

How can you track the results?

App analytics tools are the first option. Google Analytics has a built-in A/B testing tool called Google Analytics Experiments. There are also other A/B testing tools that help in simplifying the testing process and offer special features that can help given an insight into what users want and need.

 

How long should the test last?

It is advisable to continue running the test until a statistically significant result is reached. That is if the aggregated data can be used for objective comparison. The longer the test runs, the more accurate the results will be.

 

But how would you know if an in-app purchase really won over the other? You can use A/B test duration calculators to calculate the amount of time necessary for the test. You can also try the traditional way wherein you just estimate the sample size you would need and then divide it by the daily traffic. The result would determine what sample size you should stop the test.

In-App Purchase Implementation Best Practices

Only about 5% of app users make any in-app purchase (IAP), but the average amount these users spend is about 20 times greater than the average spend of all paying users. In-app purchase is projected to be the primary source of app revenue, amounting to $37 billion by 2017. With these facts in mind, the optimization of in-app purchase design and implementation is vital in order to make the most of the huge revenue potential.

In-App Purchase Best Practices

Don’t Focus too much on In-App Purchases

IAPs should not take the attention away from the main function of the app. First and foremost, design an enjoyable and engaging app, and then design in-app items around it.

 

Keep In-App Purchases Simple and Practical

Don’t flood users with every thinkable item for purchase. Users should be able to use in-app items as commodities that can either aid in the gameplay or optimize the overall app experience. Apps with in-app purchases often alienate users as they see it as a “pay to win” scheme. Make in-app items a must-have but not necessarily the only means to proceed.

 

Be Upfront

Trust is something app users are wary of giving, especially to apps with game mechanics that are geared towards maximum monetization. As much as possible, be transparent especially if there are locked levels or in-app currency that can only be accessed through a purchase.

 

Pricing Strategies

  • Decoy Effect. There is a pricing strategy that looks quite irrational, but it is actually grounded in behavioral economics. One key concept is the perception of value in the context of other options. For example, users would most likely select an item that costs $4.50 over an item that costs $10.25. But if you add a third item costing $13 with an additional booster included, they would jump on the offer thinking that it’s a better deal. The second, more expensive offer was just used as a decoy to emphasize the value of the third offer and convince users to spend more than they would normally do.
  • Dynamic Pricing. This strategy basically entails that you offer flexible price points depending on your users’ spending propensity. There are three basic pricing points based on the main categories of app spenders: minnows, dolphins, and whales. Whales are the big spenders, accounting for 70% of revenue derived from in-app purchases but they only comprise 10% of paying users. Dolphins are considered as mid-level spenders while minnows are low-level spenders. Whales make on average 7.4 in-app purchases per month and opt for special and exclusive offers regardless of price. Dolphins and minnows, on the other hand, make only about 1.75 in-app purchases per month. These purchases also come in smaller amounts so you should offer them items with lower price points or currency bundles to extend the value of their purchase.

 

Create a Sense of Urgency

Free, sale and discount are powerful words in marketing especially if you add words like ‘limited time only’. You can use this to welcome new users and use as an incentive for engaged users. Offers like this can also increase app sessions since some users don’t want to miss out on offers that may suddenly appear.

 

Customize Common In-App Items.

You can get ideas for IAPs from your app users and even from your competitor’s users. App reviews, feature requests, and even social media comments can give you an idea on what users want but don’t fall into the mistake of just copying another app’s in-app purchases. Coins and gems are staples in games but make your offer in context to the app’s theme.

 

Give Purchase Suggestions during Key Moments

So, you’ve been upfront to your users and they know too well that there are virtual goods they can purchase. That means that you can’t just bug them at every move about making a purchase. The same approach when asking for reviews should be used. Prompts should appear during key moments in the user’s progress within the app. This can be during success/failure in passing a level or finishing a task.

 

Don’t Forget to Measure Monetization KPIs

Monitor and measure key KPIs for monetization. Use analytics to track user spending behavior and demographics. You can use data from these KPIs to then run A/B and price point tests.

 

Types of In-App Purchases to Consider

Aside from the regular power-ups, lives/turns, and gems/coins, there are also other popular in-app items that need some exploration. Some of these may not work for your app but can still give you some insightful ideas.

 

Remove Ads

This is considered as the most-utilized in-app offer. This can also be considered as a lifetime purchase so implementation is important. Visibility is the key. The ad removal offer should appear on every session, level, and after ads are shown. It needs to be as unobtrusive as possible, though, and seamlessly integrated into the app’s UI.

 

Bundled Items

As mentioned on the pricing strategies above, you can bundle in-app items together to create an enticing offer that’s difficult to refuse. One way to execute this is to offer bundled features for upgrades, mini-games, boosters, and in-app currency.

 

Lifetime Purchase

Single use or consumable items produce the most number of purchases but lifetime purchases are the money makers. You can offer subscriptions or upgrades and supplement it with secondary purchases like additional features throughout the app’s use.

One strategy that is commonly used in games is to include doublers. Doublers can be used for any booster or any other vital in-app item. The idea is that it will provide a lifetime value for your users.

 

Unlockable Features

This may include levels, mini-games, sequels, and character/item reveal. A common implementation of include users being able to bypass a locked advanced features of the game. This is perfect especially if users are required to wait for a certain amount of time to access said advanced features/levels.

 

Character Customization

A lot of users may not see the sense in collecting virtual goods that can’t aid in the gameplay. That’s where character customization comes in. You can provide accessories for in-app avatars or even entirely new characters they can use and collect. Most often, these collectible characters enable users to explore a new theme (seasonal or not), also somehow enabling them to customize their app experience.

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Mobile App Key Performance Indicators

List of KPIs for Mobile Apps

 

Measuring the success of an app is at the top of almost all developers’ priority. But are you sure that you’re properly measuring and analyzing the right metrics? There had always been warnings about vanity metrics, metrics that are good to look at but doesn’t really contribute to the business side of things. Actionable metrics, on the other hand, are the best performance indicators. They measure metrics that ultimately lead to revenue and scaling success of a mobile app.

 

In this article, we would discuss key performance indicators for mobile app acquisition, engagement, and revenue.

Cost per Acquisition (CPA)

CPA is measured by dividing the cost of user acquisition by the number of acquired users. User acquisition models can vary but the most common metrics are install rate, cost per install (CPI), and cost per action (CPA).

 

Retention Rate

Retention rate is an important performance indicator, more so than downloads. It can determine the success of your app over a certain period of time and determine user lifetime (LT). LT  is one factor in determining the lifetime value (LTV) of an app user.

 

Retention is mainly based on the frequency of app sessions. The retention rate of an app is determined by dividing the number of daily users by the total number or users at a given time. Common time frames for the measurement of retention rate are 1 day, 7 days, and 30 days after download. The formula for retention rate is Day X users/Day 0 users.

 

Churn Rate

The churn rate metric is the opposite of retention rate. With the use of this performance indicator, you’ll find out the percentage of users that uninstall or abandon your app. The formula is 1 – retention rate. For example, if your retention rate is 20%, you’ll have 1 – .20 = 80% churn rate.

 

Daily Active Users (DAU)/Monthly Active Users (MAU)

The DAU and MAU metrics are very important for apps that use advertising as the main revenue model. The data these metrics provide will help you analyze user trends and also to calculate app stickiness.

 

Session Length

Session length is the measurement of the length of time users spend on the app from its opening to closing. Long session lengths are a positive sign of engaged users. This performance indicator also lets you assess the efficiency of your app flows.

 

Session Interval

Session interval, on the other hand, is the time period between a user’s first and second app session. This performance metric can signal if the user deems the app to have immediate value as to run the app the second time. Analyzing session intervals can help you optimize user experience and consider contextual app notifications and prompts.

 

Lifetime Value (LTV)

Lifetime value is the measurement of potential revenue throughout the length of a user’s usage of the app. LTV is commonly the main revenue metric, showing not only the lifetime value of each app users but also the financial value of the app. There are many ways to calculate LTV, mostly depending on how you define user value.

 

Average Revenue per User (ARPU)/Average Revenue per Paying User (ARPPU)

The ARPU performance metric determines the average revenue users generate. In order to determine the ARPU, divide the lifetime revenue of the app by the number of lifetime users of the app. Tracking this metric can determine if you are acquiring (or will acquire) users with the highest LTV at the lowest CPA.

 

 

How to Get a Slice of the Holiday App Bonanza

Modern holidays are becoming more like marketing ploys to make people spend money. According to a 2014 data, people spend the most on these holidays:

  1. Winter Holidays (Thanksgiving, Christmas, Hanukkah and New Year) – $616.9 billion
  2. Valentine’s Day – $17.3 billion
  3. Easter – $15.9 billion
  4. Mother’s Day – $20.7 billion
  5. Father’s Day – $12.5 billion
  6. Halloween – $7.4 billion
  7. Patrick’s Day – $4.8 billion

 

These numbers are bound to fluctuate but not by much. This is surprising especially that this data is only for the US. It is estimated that online shopping will increase up to 45% this year. As a result, e-commerce revenue is estimated to reach $327 billion.

 

Christmas day app downloads can increase up to 91% and Apple reported New Year’s Day 2015 as having the highest sales in its short history. Surveys also show  that online spending in other countries increased in the past years.

 

So how can you have a slice of the holiday app bonanza?

 

Skin the app according to the festivities. 

Or better yet, submit a holiday app. There’s a study  that shows how the right type of holiday music and atmosphere influence the behavior of customers in malls and retail shops. This same principle is applicable to apps. A lot of people chose holiday-themed apps just to get into the “holiday vibe”. The use of holiday themes is also an effective strategy to increase your app’s exposure, engagement and click-through rate especially if the app is newly published.

 

Offer holiday-themed promos.

Decorations are good, but adding seasonal  features and in-app goodies can make your audience feel the holiday spirit more. It could either be collectible items or sales that mimic real-world promos. After all, 70% of online shoppers are in holiday shopping mood all because of the promos.

 

Adjust your ad campaigns.

Make sure that your targeted demographics and ad campaigns coincide.  This is very important since app stores are very competitive during these peak seasons as the quality of users increase.

 

Try your hand on app retargeting.

Some advertising networks offer an app retargeting service where you can send ads to users that installed your app but haven’t used it for a while. This way, you can re-engage them to the app, increasing both engagement and retention rates. This advertising strategy can become a boon during the holidays. Users are more forgiving of advertisements and more ready to spend on in-app purchases.

 

Take advantage of in-app messages and push notifications.

These messages can increase user interest in your app. Users are more likely to open your app if they are given a prompt using timely, relevant and persuasive , messages.

 

Prepare for high CPI costs.

CPI costs usually increase during the holiday season due to high demand. It is important to have a balance between user acquisition costs and estimated installs.

 

Submit the app early.

Almost every developer wants to take advantage of the high-spending trend of the holiday season so it is best to submit a holiday app early for review. The length of the approval process can double starting the third or fourth week of November.

 

Make sure that all’s set with your app.

Last year, the ‘App Store Freeze’ was implemented on December 22-29. The freeze would mean that manual changes on the app version updates, descriptions and prices won’t be allowed. This is also important since for the duration of the ‘App Store Freeze’, app ranking would remain mostly static so it is important to rank higher and give a good impression to possible users.

 

Aim for the holiday charts.

The ‘App Store Freeze’ is beneficial especially for apps that rank high in their categories. But another way to gain high exposure is through holiday app charts that feature the best holiday-themed apps. Visitors of the App Store is immediately drawn to this listing.

 

Plan ahead for eventualities post App Store Freeze.

A few days after New Year, things would go back to normal.  After the holiday fever subsides, your holiday app may experience high churn rate. Another update may be necessary to shed off the holiday app skin and return to regular marketing strategies.

 

How to Boost Organic App Downloads

Incentivized app downloads can go a long way but only organic downloads can sustain the growth of your app. Here are eight ways to boost organic app downloads:

 

  1. Good ratings and reviews.

    Ratings are often used as a basis for an app download. Most users won’t even give apps with below 3.5 rating benefit of the doubt. Often, poor ratings are coupled with isolated review/complaint about a technical problem. You can avoid these type of reviews/ratings from surfacing by providing in-app feedback and great support for your app. Not only does poor reviews/ratings affect organic downloads, it can also be a sign of user dissatisfaction.

  2. App previews.

    Apps get to have their own trailers too! Introduced in September 2014 by Apple, App Previews gave an opportunity for app publishers to showcase and market their apps in a new dynamic approach. Show how your apps work and the screen flows. Users are more likely to download apps that they know works according to their expectations. In the end, it’s all about impression. The app with the best impression gets downloaded most.

  3. Regular app updates.

    Regular app updates help in keeping your app visible in the app store. It also assures users that there is an active technical support for the app. Bugs and other technical issues are often the subjects of negative reviews so it ties up with other factors that boost app downloads. Regular app updates do not only increase the app’s user base, it also increases retention and contributes to app ranking.

  4. Viral loop through social media and other channels.

    A viral loop is a marketing strategy in which users become the product’s own marketers through the power of social sharing. It starts with a call for attention that then encourages users to share information about your app. It soon becomes a cycle, something that keeps on giving. About 77% of app users downloaded apps recommended to them by friends or family.

  5. App localization.

    We’ve discussed app localization before. App localization is a driving force in increasing app downloads. It enables an app to extend its reach to a previously untargeted market. With localization, there’s much room for scaling.

  6. ASO for every iOS update.

    For almost every iOS update, there’s also changes in the App Store algorithm. This is especially true with iOS 9’s deep linking and search capabilities, ASO practices need to also upgrade in order to adapt. Optimizing content and not only the app’s copy is now the forefront of ASO. It’s not only about visibility in the App Store anymore.

  7. App indexing.

    In iOS 9, ASO emphasis falls on in-app content indexing. An app content index may include events, screens, and even user-generated content. App-related search triggers are now more common. Therefore, app content is would a common sight in mobile SERPs.  A high ranking  in mobile SERPs is also believed to produce the same conversion rate that web pages enjoyed in the heyday of SEO.

  8. App Website.

    A website for your app is important, not only for support and promotional purposes but also for ranking in mobile SERPs. Google also crawls content from an app’s website. As a result, more app website content rank in SERPs. It is important to design your app website so that it is mobile-friendly. Provide a description, screenshots, previews and download links to further convince the site’s visitors that your app is fit for download.