How to be profitable: app acquisition vs. app retention costs

Growth is the defining metric for many mobile teams. Whether in the form of scrappy growth hacking or big-budget brand advertising, there’s no denying that acquisition is one of the most sought-after marketing goals.

After all, you need a growth plan to acquire your app’s first users — and keep growth steady.

But without a solid retention strategy, your growth dollars are wasted. That’s why we’re equipping you with all the facts you need to rock app retention.

Leanplum’s report, titled Retention, Revealed: The Need-to-Know Facts Behind App Retention & ROI, takes on the real prickly problem that mobile teams face. Paid acquisition is not cheap, and retention rates on mobile are lacking. App publishers are paying to acquire users only to lose them before they generate any revenue.

Want to make your app profitable? Here’s a hint: retention is the key.

Why Is App Retention Important?

In the US, the average cost per install (CPI) ranges per app vertical and platform. The average is around $2, but goes up to $3.34, according to Fiksu. The same report shows that the cost per loyal user is well over $4. When apps spend so much money on acquisition costs, factoring in App Store Optimization (ASO) strategies, advertisements, and much more, allotting budget for retention can sometimes fall by the wayside.

What’s more, you need a ton of downloads to be considered a mainstream success. Analyzing the top 100 apps in the App Store, the top-ranked apps have at least 5MM downloads. That’s almost $17MM spent in acquisition.

However, the majority of users abandon these apps after the first day of use. That’s why it’s increasingly important to protect your acquisition investment and retain users throughout their lifetime.

In other words, without a retention strategy, your app is bleeding money.

Opportunities for Better App Retention

So what’s the current benchmark for app retention?

Let’s start by looking at retention split a few different ways. As you can see in this chart, apps lose the majority of their users after the first app open.

Some highlights:

• By day one, apps only have a 21 percent retention rate.
• By day 10, this number reduces to 7.5 percent and stays steady through the first month. By day 90, number drops to 1.7 percent.

This chart shows an interesting opportunity for app managers. The day 10 through 30 retention rates are consistent. By focusing on improving the day 10 numbers, you can positively impact the retention of a user throughout their first month. And since the majority of abandonment has already occurred within the first month, you may be able to increase retention for all your users in the long-term.

How Much Does Low App Retention Cost You?

To put the average retention rates in perspective, there’s a scene in the TV show, Silicon Valley, where the characters discuss the number of downloads their app has versus the number of daily active users (DAU). In the show, the app has 500,000 downloads, but only 19,000 DAU.

Drawing from the previously mentioned CPI data, this means that the characters spent around $1MM on user acquisition, but only retained about 3.8 percent of users. Judging by these numbers, their retention rate is on the higher side of average, but they lost a significant sum of money — $962,000 — with users who never returned to the app.

How Can Apps Be Profitable?

Apps should focus as much on retaining users as they do on acquiring.

A strong marketing strategy involves spending half as much money on acquiring the right kinds of users. Then, spend the remaining half on retaining those users throughout their lifetime.

But how do you invest in retention? Of the many possible solutions, one of the top solutions we found was push notifications.

Implementing push notifications into your marketing strategy has been proven to increase retention for many apps by at least 20 percent. For such a simple solve, the impact of this is huge.

Yet it gets even better. Personalizing push notification send times based on individual behaviors can increase retention by 7x.

In the chart below, you can see that push notifications sent regardless of individual behaviors saw an average retention rate of 1.58 percent by day 90. But push notifications that factored in individual behaviors saw an average retention rate of 7.48 percent. That’s a huge difference.

So … how do you personalize push notification send times?

Push Notification Personalization — Made Easy

Of course, the fact that personalization can increase engagement is no surprise. Everyone prefers personalized content to generic content. But what’s the easiest way to personalize push notification send times, without costing your team tons of time?

Some marketing solutions (like Leanplum) offer an algorithm that analyzes individual app usage patterns to automatically send messages when people are most likely to open. While all the hard analysis is done on the backend, all the mobile team sees is a checkbox — making personalized send times easy as pie.

So if Erica is more likely to open a push notification in the afternoon, but Max is more likely to open at night, checking that little box will ensure they both receive the same important content, at different times. This means you catch all your users when they’re most likely to be in your app anyway.

Ready to Increase App Engagement?

Personalization doesn’t have to be hard. With the right solutions, it can actually be pretty straightforward.

In this post, you learned:

• The current state of app retention
• How to create a marketing plan that balances user acquisition and retention
• Simple strategies that will increase retention and save your app money

Dying to learn more?

Our report offers must-read tactics to increasing your retention. Download Retention Revealed to learn how personalized push notifications can increase your retention by 7x.

Co-authored by: Stefan Bhagwandin and Brittany Fleit at Leanplum

This post was originally featured on Mobile Masters Magazine. These opinions are expressed by Leanplum, and do not reflect the opinions of Appsee. Appsee is not responsible for the accuracy of any of the information supplied by Leanplum.