What is the right price for a performance mobile user acquisition campaign?
Although fundamental for mobile advertisers, this simple question has no straightforward answer. There are indeed a lot of factors likely to influence or even determine the success of a mobile user acquisition campaign, especially if it’s run on a performance basis.
Strong of our experience of running performance campaigns for over 500 mobile advertisers, here is what actually matters when it comes to getting the right price…and the price right.
Determining the Price Starts With Knowing How Much You Can Pay
Price is what you pay. Value is what you get.
Warren Buffet
The initial consideration for all user acquisition efforts and therefore for campaign pricing should always be the final goal of the advertiser. At AppLift, a large majority of our customers measure the lifetime value of their acquired users and have clear performance goals.
In this regard, the basic formula of calculated lifetime value vs. cost-per-install (CPI) is a good starting point to determine the expected value of new users. However, this can only result in the determination of an average upper limit for the right pricing (the breakeven point) and does not necessarily lead to the maximum return for the efforts.
Right pricing is about finding and constantly adjusting the sweet spot to maximize absolute return.
Key Factors to Influence Mobile User Acquisition
Key factors influencing the sweet spot for pricing include, for example, the availability of inventory. If good inventory for the app is scarce, a higher price is required in order to drive volume. Other apps, be it directly competing business models or apps from the same category may also compete for the same inventory and drive prices up. Additionally, the format of the creative and type of inventory used drive both prices and quality. Further factors comprise the existing user penetration of the app, general attractiveness of the vertical, geographies addressed, and even day of the week or time of the day.
The table below summarizes the key influence factors to determine CPI prices:
The most important point being that price itself is never a good indicator of the value of acquired users. It is indeed always paramount to compare price to both the forecast and the actual return of the user. Additionally, instead of a one-time pricing exercise, a constant evaluation and adjustment of pricing guarantees optimal returns.
For us, the following six steps have proven to work:
- Define success indicators. Those are typically basic lifetime value KPIs.
- Determine return expectations.
- Assess benchmarks of comparable apps and targeting settings (geo, platform, timing, other pricing influencing factors).
- Set a CPI starting point.
- Adjust the CPI, based on quality returns and volumes delivered.
- Optionally, carry out selective pricing based on quality as well as total volume to maximize the absolute yield of the campaign.
To summarize, pricing is a complex topic. Doing it right requires clarity on the objective of the user acquisition efforts, practical experience as well as the efficient leveraging of past performance data. Having said that, it remains 80% science but 20% art, especially when new apps or new geographies are targeted. A proper and agile pricing process is key to optimize user acquisition efforts on an ongoing and sustainable basis for absolute return.
Which factors were most influential for your campaigns? Let us know in the comments or drop us an email directly at blog[at]applift.com.