Tracking user acquisition metrics is critical for any performance marketer. Discover the KPIs you need to monitor to achieve your marketing goals. Performance marketing can seem complex, but it can yield remarkable results. Success demands understanding user engagement and analytical thinking to drive growth and reduce costs. Grasping key user acquisition metrics aids wiser ad budgeting, enhances campaign results, and maximizes ad spend returns.
Learn how to measure cost per acquisition, customer lifetime value, retention rate, and more. We’ll divide this into three segments across the upcoming posts.
Cost Per Install
Cost per install measures how much ad spend it takes to get one user to download and install your app. It’s often abbreviated to, and has long been one of the most crucial customer acquisition metrics marketers should know. Its importance has come under scrutiny as more comprehensive metrics vie for the north-star position. Metrics like return on ad spend and stickiness have gained popularity as marketers take greater accountability, and shift focus towards maximizing lifetime value. Still, it’s crucial to understand your CPI rates as a constituent part of overall performance.
How to calculate CPI: Cost per install is calculated by dividing the total number of installs by the total advertising spend.
Cost Per Install = Total Ad Campaign Spend / Total App Installs During Campaign
Cost Per Acquisition
CPA (Cost per aquisition) measures how much money it takes to gain a new customer, whether that’s a new user for your mobile game, a purchase on your website, or a signup for a monthly subscription plan. It is one of the most fundamental user acquisition metrics performance marketers use and is the foundation for minimizing advertising costs while maximizing your potential revenue. Plus, CPA can help you get a better sense of your users’ overall lifetime value.
How to calculate CPA: Like CPI, cost per acquisition can be calculated by dividing your total advertising spend by the total number of tracked acquisitions:
Cost Per Acquisition = Total Advertising Spend / Total Number of Acquisitions
Connected television (CTV) platforms can unlock new channels for user acquisition, combining the high-quality ad creative typically found on linear TV with powerful performance marketing tools.
Customer Lifetime Value
This KPI measures the total revenue a single customer or user generates throughout their relationship with your company or product. This value can represent the revenue generated over time from a combination of product purchases, monthly subscriptions, ad revenue, and other sources of profit. It’s commonly known as CLTV, but can be shortened to just LTV.
Marketers need to ensure that the lifetime value your customers provide is greater than the cost of acquiring and maintaining that relationship before their time in the product life cycle is complete. Figuring out the lifetime value of your customer base will help you inform your overall marketing efforts and the amount you spend on them, as well as identify whether your retention strategies need to be adjusted to maximize revenue.
How to calculate CLTV: Figuring out customer lifetime value requires a few preparatory steps.
First, you need to determine your customer value. This is represented by the following formula:
Customer Value = (Average Purchase Value x Average Number of Purchases)
To get the average purchase value, you divide your total revenue over a designated time period by the total number of purchases:
Average Purchase Value = Total Revenue / Number of Purchases
To get the average number of purchases, divide the total purchases by the total number of customers.
Average Number of Purchases = Total Purchases / Total Number of Customers
You’ll need one more value before we can determine the average LTV of your customers. Multiply the sum of all customer lifespans by the number of customers to get your average customer lifespan.
Average Customer Lifespan = Sum of Customer Lifespans / Number of Customers
Now, we can calculate the lifetime value by multiplying your customer value by the average customer lifespan.
Lifetime Value = Customer Value x Average Customer Lifespan
Alpha Media Can Help Your Business Grow
Television has been a crucial marketing channel for building brand awareness, but it hasn’t been a primary resource for user acquisition — until now. CTV offers the ability to reach your target audience when they’re most attentive and provides you with the tools to optimize your ad spend through incremental testing, retargeting capabilities, and multi-touch attribution, all with high-quality, brand-safe inventory. Want to discover how adding CTV to your media mix can boost your user acquisition efforts? Alpha Media can help. Contact us for a conversation with a Digital Consultant.
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