In this third edition, we delve deeper into crucial measuring metrics required to achieve your marketing goals. Despite the complexity of performance marketing, it can yield remarkable results. Success requires understanding user engagement and using analytical thinking to drive growth and reduce costs. Mastery of these user acquisition metrics enhances fund allocation, boosts campaign performance, and optimizes ad expenditure returns.
Acquire an understanding of measuring metrics such as retention rate, incrementality, among others.
Retention is essentially the opposite of churn rate. Instead of calculating how many customers are leaving, you’re figuring out what percentage of customers are sticking around during a set time. Measuring business growth involves three crucial data points: the influx of new customers, the retention of current ones, and the attrition of previous customers. Satisfying existing customers, preventing departures, and consistently attracting new business lead to your business’s growth. This metric will help you determine how successful your retention efforts are and whether you can keep more customers than you lose.
How to calculate retention: Prior to calculating retention, establish your Day 0 value, which signifies the initial app users on the measurement’s first day.
Then, you need to choose which retention calculation you want to make. There are a few ways to measure retention, and each one comes with its own strengths and weaknesses.
First, there’s classic retention. It’s easy to calculate but is susceptible to day-to-day noise (such as holidays or unusual spikes in usage). Calculate classic retention with the following formula:
Classic Retention Rate = Number of Users Who Return to the App on a Day after Day 0 / Number of Users Who First Opened Your App on Day 0
For example, if 20 people open your app on Day 0, and eight of those users come back on Day 5, your Day 5 retention rate is 8/20, or 40%
Then there’s range retention, which is helpful for discovering how many users return within a specific time period. This aids trend detection and reduces calculation noise, but it’s less detailed than other measurements. You can calculate range retention with the following formula:
Range Retention Rate = Number of Users Who Return to the App During a Following Interval of the Same Range / Number of Users Who Open the App During an Initial Range of Time
To measure a 7-Day Range Retention Rate, first count app opens in the initial seven days — let’s assume 50. Then, you measure how many of those users return in the following seven days. With 35 users returning the next week, divide 35/50 for a 7-Day Range Retention Rate of 70%.
Last, you can measure rolling retention, which can tell you how many users are coming back after a set amount of time. Quick to measure and offering insight into app “stickiness,” its numbers can vary with timing. Calculate rolling retention using this formula:
Rolling Retention Rate = Number of Returning Users Who Open Your App On or After a Specific Day / Number of Users on Day 0
Incrementality is the measurement of how effective an ad campaign is at influencing conversion compared to organic traffic. In mobile user acquisition, it’s vital to grasp if paid ads drive conversions. Otherwise, you’re spending money on users who would have converted regardless of your efforts. This is where incrementality helps. Compare ad-exposed audiences to an ad-free control group to assess your campaign’s real impact on user acquisition.
How to calculate incrementality: To calculate incrementality, you need two groups: a test group that sees your ad and a control group that doesn’t. Once you’ve run your campaign, you can perform the following calculation:
Incrementality = (Test Group Results – Control Group Results) / Test Group Results
For instance, if the test group gets 125 installs and the control group has 100, the difference is 25. Divide that number by 125, and you’ll get 0.2, or a 20% incrementality rate.
Like rolling retention, stickiness can help you determine how many of the users that you’ve acquired continue to return to your app. Unlike rolling retention, stickiness ties to daily and monthly active users, providing a focused macro view of loyalty. Stickiness is becoming one of the most important metrics for maximizing the results of your user acquisition efforts. Knowing your app’s stickiness can tell you when to throttle your ad spend or by how much. And if you’re holding onto users longer, you can spend less on acquisition.
How to calculate stickiness: All you need to calculate stickiness is your daily active users (DAU) and monthly active users (MAU):
Stickiness = Daily Active Users / Monthly Active Users
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