For almost every app with a subscription model, ROAS (Return on Ad Spend) is essential to continuously review the success of your paid user acquisition activity. Why? Simply because it helps you understand whether your campaigns are effective in bringing in high-quality and monetised users.
It can take time to become ROAS-positive (making more money than you are spending on ads), but there are many levers you can pull within your UA campaigns to bring yourself closer to your goal. Here are our tips that you can implement today to increase ROAS through your user acquisition campaigns.
Let’s dive in!
#1 Figure out your app’s Lifetime Value (LTV) to Calculate ROAS
Let’s start with the basics – calculating your ROAS.
Although the calculation for ROAS at its very heart is simple…
ROAS = Total campaign revenue/ Total campaign cost
…this may not paint a clear picture of the real value of your campaigns. For example, if your acquisition cost is £20 per user but your app’s monthly subscription cost is only £5, this would technically be a poor ROAS of 0.25 (5/20).
What the above formula doesn’t take into account is the lifetime value of your users. Mathematically speaking, LTV is the:
“Average Transaction Value” * “Number of Transactions in a Retention Time Period” * Retention Time Period
So what does it look like in practice? If your user data indicates that the average customer renews their monthly subscription over 7 months before churning, this means that the acquisition cost is lower than the Average Lifetime Value of customers, which is £35 (£5 x 7 months = £35). This gives a contextual ROAS of 1.75 (Revenue £35/ Cost £20)
Figuring out the true LTV (we discuss LTV in more detail in this post) of your customer base is one of the trickiest KPIs to calculate, but once you do, you will become a lot clearer on what ‘good’ looks like in your User Acquisition efforts. retention, monetisation, and virality all play a part in this, and it can change over time. Don’t be disheartened if it takes a while, increasing ROAS is a continuous process of optimisation.
#2 Include testing in your user acquisition strategy to increase ROAS
A successful User Acquisition strategy that aims to increase ROAS must involve some element of testing to thrive. Kicking off a campaign without having decided what creative and audience will work, means you’re not giving yourself a fighting chance of diversification and profit. You can test two key elements of your campaigns:
a) Audience testing
Testing audiences is key to finding unmined gold and the easiest way to do this is to create personas. Creating personas allows you to prospect for new audiences and test hypotheses of users who may potentially be a source of revenue.
For example, an online shopping app may have a broad prospective user base, but they typically vary by age, location, and interest groups. By defining personas, for example ’19-year-old Male University Student’ or ’32-year-old Mothers’ and then tailoring your copy and creative specifically to this audience, you can be more granular in discovering who your best-converting users are.
b) Creative testing
When it comes to creative testing, using an iterative approach is a surefire way to achieve incremental gains and bring your CPA down in line with your ROAS. Begin with several creative concepts, and test these for a set amount of time or a set amount of budget. Then generate more creatives based on the most successful example in terms of your set KPI. This approach allows you to fine-tune your best-performing assets evolutionarily.
For example, Rosetta Stone – a language learning app, is currently advertising a variety of creative concepts including benefits, promos, and features. This approach can support app owners to determine their winning creative concepts, create granular creative testing based on winning concepts, and adjust and scale their campaigns accordingly to achieve the highest ROAS.
Pro Tip: When planning your campaigns, remember to allocate part of your budget for testing. If you already have some experience with running paid campaigns and know which audiences respond best to your advertising, you should assign 20% of your budget to testing to gather the necessary data to increase ROAS. However, if you’re just starting with paid user acquisition, consider allocating a higher percentage of your budget to testing to determine baseline results you can work from.
#3 Consider retargeting and optimising to down-funnel events
This is another great way to increase ROAS. Once your campaign activity has matured to a point that you are getting a significant volume of users, it is time to review your user data for opportunities to drive further down-funnel event conversion, such as “Registration’, ‘Free Lesson Complete’ or ‘Purchased a Subscription’
Consider creating unique assets for this activity, as these types of events generally receive a higher frequency, meaning one person will be shown your ad multiple times. Having creative specific to this can help improve conversion rates significantly by directing the audience towards your key event; be that registration, subscription, or otherwise.
Deep linking, creating links that direct a user to a specific part of your app, is another powerful tool when considering the retargeting activity, as you – of course – don’t want to direct people to the App Store or Google Play when they already have the app downloaded.
#4 Find your perfect optimisation point to increase ROAS
Whether it is the right time to focus on down-funnel events on Facebook or test different bidding strategies on Google, finding out the optimisation sweet spot for your campaigns can be the difference between being ROAS negative and ROAS positive.
It all depends on where you are in the lifecycle of your campaign. Switching focus from installs to specific in-app actions can make a huge difference to the amount of revenue your campaign generates. Let us explain.
The methodology behind this depends on the type of app you are working with. If you hypothetically have a subscription app, these will likely be your focus areas:
- Installs: you may initially run your campaigns to drive users into the app and gather essential insights about your audience.
- Registration: following this, you may seek to improve your install-to-registration conversion rate, so you would then look for users who are more likely to register.
- Free trial: beyond this, you may look for people to complete a free trial, then eventually optimise your campaigns to look for subscribers directly.
#5 Expand your coverage to different acquisition channels
Introducing new channels into your UA activity can be a great way of tapping into new audiences that can have a big effect on your ROAS.
Depending on what the app’s vertical, audience and budget are, there are plenty of options for you to expand your marketing into – whether it be social channels such as TikTok, Snapchat, or Facebook or broader machine learning options, for which there are several DSPs (Demand Side Platforms).
Before you invest your time and budget into new channel expansion, always consider your audience first. For example, if you’re targeting middle-aged women interested in gardening, it’s highly unlikely you’ll see much return on investment coming from Snapchat where the majority of users will fall into the 18–35-year-old bracket.
The same applies to your creative. Creative assets that perform well on FB won’t deliver the same results on TikTok with different format requirements and audiences. Learn the audience of the channel first and adapt your creatives accordingly.
Lastly, be patient! Testing a new channel takes a lot of learning and whatever works for one business may not necessarily work for yours. Test different targeting options and creatives over an extended period to give you a relevant picture of whether this channel is worth your time and investment.
#6 Utilise Custom Product Pages (CPP)
Custom Product Pages are a relatively new feature on the App Store and support Apple Search Ads, and recently Facebook and Snapchat. They allow app owners to create bespoke App Store landing pages for specific paid user acquisition campaigns.
If your ad is calling out a specific feature of your app, you can highlight this directly in your Custom Product Page in line with your campaign. Custom landing pages are one of the most effective ways to improve your post-click conversion rates because they are the first blocker to install after a user clicks on an ad, so persuasion and education is key.
What do you need to consider when creating Custom Product Pages? We recommend that they are:
- Contextual: keep them clear and simple and show what the app does and who it’s for
- Persuasive: ensure to present app’s value proposition in a clear and impactful way
- Focused: stay concise and avoid text-heavy screenshots
Here’s an example of Custom Product Pages by a popular language-learning app. The screenshots meet all criteria of well-optimised visual assets. They’re clear, present the app’s value proposition and are visually attractive in both, the original and custom app listing.
#7 Combine User Acquisition with App Store Optimization
Holistically approach your marketing to make your campaigns more effective. By developing your App Store Optimization efforts, you will impact key metrics to increase ROAS for your campaigns.
For example, increasing your App Store and Play Store rankings will support your organic acquisition efforts and reduce your blended CPI. Additionally, improving your page view to install conversion through on-page optimisations such as creative and preview videos will bring down your CPI costs. Priming all these acquisition and conversion points will ensure you’re doing everything to increase ROAS for your paid campaigns.
The Bottom Line
Calculating, optimising and increasing ROAS is essential in scaling your user acquisition efforts. Knowing which campaigns deliver the best results will help you manage your ad budget effectively and in the long run generate more revenue for your app. Remember that even if you don’t achieve positive ROAS from the start, there’s always something you can learn from each campaign. And in the world of mobile marketing, that’s always of value.
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If you want to find out more about how improving the mobile customer experience can impact your app marketing campaign or you have any app marketing questions feel free to reach out to the Yodel Mobile Growth Team. Additionally, you can sign up to our newsletter for exclusive industry updates and app marketing insights from the ASO Agency of the Year. Want to find out more about optimising your app? Make sure to subscribe to our Mastering Mobile Marketing video series. Follow us on LinkedIn and chat with us on Twitter @yodelmobile,
