Mobile app growth is stunning (and changing your business)

As I shared in a prior post about inbound marketing for mobile, the growth of the app ecosystem is simply extraordinary. A few weeks ago we learned that total app store downloads have eclipsed 100 billion with no signs of slowing down. The tremendous growth in this ecosystem is a testament to something that every marketer needs to understand:

Your customers are all moving to mobile.

Whether it's the mobile web or mobile apps (the chart below tells us it's all mobile apps these days), the evidence that consumers are flocking to their mobile devices is overwhelming. As a marketer, our first task is to find where our audience is and where it's going.

Today, the answer to both questions is increasingly: mobile.

Mobile's unique properties present us with a new set of marketing opportunities — new ways to learn about and connect with our potential customers. To name a few:

• Because your mobile customers are treating their phones like extensions of themselves (check out this recent Pew Internet study), they have invited us into a more personal and immersive aspect of their lives.
• This new dynamic means that we, as marketers, can develop truly deep connections with our customers through digital channels.
• The kinds of relationships we have been able to foster in person are now possible through software.

This very personal device has a downside

There are some meaningful challenges to the mobile app channel, however. The market for apps is already extremely crowded. The quality bar continues to rise rapidly and the era of the "get rich quick" apps has long since passed.

Because consumers download so many apps on a regular basis, they're very used to abandoning your software and maybe even deleting it. As a result, the largest problem in the mobile app ecosystem is really app retention. Within 3 months, over 3/4 of your customer base is gone, never to be seen again.

With average pay-per-install prices costing over $1.50, the shape of this retention curve is really disheartening to app marketers. It means that a lot of installs are going wasted and customers aren't really happy (one huge reason why mobile app tracking rules).

In thinking through this problem and working with thousands of app publishers, we've come to realize that there's a simple equation behind each and every business in the mobile app space. We find that it's a helpful way of understanding how to grow and build your business. Understanding the math of the app business helps marketers, product managers and mobile business owners prioritize their investments in order to grow their business.

In today's mobile environment, many marketers are myopically focused on the installation number. While that input is important and a very strong reason to invest in a proper App Store SEO strategy, our equation clarifies that it is but one of three crucial components. App marketers need to be more focused on:

• Increasing their mobile app retention in order to maximize LTV
• Analyzing and improving their Average Revenue Per User (ARPU)

So, how do you grow your app's retention?

As the CEO of a mobile app feedback and engagement company, I get to talk to a lot of mobile teams about the problems they face on the retention and monetization side of the business. There are several key ways in which innovators are increasing mobile retention and driving meaningful business results.

Analytics and iteration

Many app publishers are working with analytics packages from Google, Flurry, Kontagent, or New Relic in order to better understand their customers' behavior inside the app. By creating various events to track specific actions taken and watching the breadcrumbs of data left behind from consumer interactions, app publishers are able to get a much better sense of what happens once they've launched their app. Using that data helps identify places of popularity and places of exit. Using analytics to drive iteration on the product is a helpful piece of growing your retention numbers.

Consumer Engagement

Consumer engagement is a phrase that's used often these days but that requires more specificity in order to truly be helpful to app marketers. Engaging with your customers helps you make a product that will drive better retention, higher customer satisfaction and inform your product roadmap. In the mobile app world, there are 3 important ways in which you can connect with your customers:

1. Feedback: Listening to your customers and making it incredibly easy for them to give you feedback is a must-have for every app. There are people who are willing to look for a way to talk with you and tell you what they like, what they'd like improved and what is causing confusion already. These are your most engaged customers. Embracing and empowering them drives their investment in your app and company even higher.
2. Customer research: Every company with an app has a built-in audience of customers to conduct research with and learn from. Tapping into that audience for specific research (i.e. Did this product feature land as we expected it to? What are the demographics of our audience?) is an important engagement mechanism that often informs the product, marketing, and executive teams at the same time as involving customers in the betterment of the product. These involved customers tend to stick around a lot longer.
3. Targeted and personalized communications: Because mobile is such a personal experience, the old methods of communicating with customers (email blasts to your list, direct mail to everyone, advertising spend to find your audience) are not nearly as useful. More importantly, in the face of the tactics others are using, they make your brand look a bit clueless. Instead, it's possible to communicate with your mobile customers based upon the actions they take, the groups that they fall into and the questions they ask of you. Using intelligent in-app communications to generate conversations and follow-up in a personalized manner allow your brand to deliver a 1:1 experience for every consumer, which brings them back to your app on a regular basis.

Interested in more specific resources about driving retention?

We've scratched the surface about the retention problem and how to address it, but there's a lot more in the way of resources out there for mobile marketers. Here are a few that are helpful and specific:

• Urban Airship's white paper on "good push" can help you understand push notifications and the difference between a well-targeted campaign and spam
• OMI's piece on using analytics to boost retention is a helpful overview of setting up studies and using data wisely
• The Apptentive guide to increasing mobile app retention was compiled after 100s of customer interviews and walkthroughs of tactics and specific outcomes

Retention's downstream impacts:

In addition to driving up the retention aspect of the app business equation, increased retention actually fuels two significant long-term benefits, illustrating how interconnected each of these components are:

Boosting downloads

When apps increase their retention, their overall audience grows. As a result of the growth in their audience they end up with better app store performance because their larger, happier customer base is more likely to talk about them and share great ratings and reviews in the app store. In addition, the larger, more engaged audience is more likely to spread the word with their friends about the app. A more engaged, larger audience proves to be a significant engine for organic download growth.

Understanding your customers better

In order to drive higher retention, marketers need to understand their customers better and develop better relationships with them. The side effect of the work required in order to get to know customers better is that you understand the language that customers use and the things that customers care about most. Using that understanding to shape your further marketing efforts can yield significant increases in efficacy because you're using customers' language instead of your own. Very few things are as powerful as speaking to someone in their own words.

The deeper goal: meaningful customer relationships

Ultimately, mobile marketers should be focused on developing long-term value for their clients and brands. Through the mobile channel's unparalleled ability to deliver a personal experience and the opportunity to be with a customer everywhere they go, the notion of lifetime value (LTV) has become even more important. As inbound marketers, many of us have felt first-hand the effects of measuring traffic sources and understanding that the most relevant, invested, interested customers are our most profitable customers. We are past the days of trying to acquire every customer possible and have moved on to doing much more value-oriented great marketing, marketing which invites our customers into an ongoing conversation that is more give and take and less broadcast and pray.

When you create meaningful relationships with customers, customers see your company as a more human organization, one capable of listening and learning. Along with this more personal perception comes a more robust public image — consumers give your company leeway and understand that you will make mistakes along the way. Developing organizational tolerance for mistakes extends to your customer base: a deeper understanding of the people behind the app helps you keep your base of supporters on board when you make mistakes.

Because of the mobile device's always on, "five minutes of use at a time" paradigm, it's incredibly important to try and become a habit of some sort for your consumers. By putting a personal face and voice to your communications with customers, you're more likely to earn that habitual usage of your app, resulting in outstanding performance.

Finally, a bonus: presenting the case

We know that as marketers many of you struggle to make the case for new initiatives, investments and strategies inside of your organization. Often the question of where to put resources comes down to an analysis of cost/benefit or, put another way, ROI. As we've worked with a number of companies where this has been an important piece of the puzzle, we've created a simple sample equation you can use to highlight the benefits of investing in customer retention and happiness.

In this example, we're making very conservative assumptions about the impacts on installs and retention and not even assuming any impact on ARPU. Many businesses find that their happiest customers spend 1000% or more of the average consumer, so this is a place where a lot of ROI is uncovered over time as well.

Feel free to borrow it for your own purposes, we hope it'll help you grow your business and be more successful.

Finally, please let me know in the comments if you have other tips for making the case for customer engagement and retention or if you've employed other tactics that I haven't mentioned.