#app, #building a product, #performance, #ROI
25 March 2021
Julianna Sykutera

How to measure the ROI and performance of your app: key steps and metrics

Every entrepreneur should be able to answer the question of whether their product is successful. Why? Because measuring the performance of your product, you can define its future and from here you can plan most of the steps for further growth. Of course, to answer the question correctly, first, you need to know how to measure the ROI of your app. 

Founders often aren’t sure how to identify factors that decide their success. They fall into all sorts of measurement traps and as a result, fail with reaching the right revenue generation plan that would help them to achieve their business goals. That’s why today we present what to measure and how to do it to know what direction your company heads to. Let’s begin!

What is ROI and how to measure it?

By measuring ROI, you get the bigger picture.

Return on Investment (ROI) is a performance measure used to evaluate the profitability of an investment. 

In other words, it’s a measure of how much financial benefit you have received from a particular investment in your business. It’s important because it informs you about what percentage of your initial investment returns to you in the form of actual profit from the product. 

You can calculate ROI by subtracting the total revenue value from the final value of the investment, then dividing this new number by the cost of the investment, and, finally, multiplying it by 100. 

Let’s move on to the key performance metrics

In general, a successful product can be defined by three characteristics:

  • recognized by the target users
  • able to solve a specific problem of the target users
  • recommended by the target users

Certain metrics will help you know if your product falls into all three categories.

Who do you attract with your product?

Often, founders look at the total number of users, and from that, they make conclusions about the prosperity of their business. It’s a common trap.

If your total number of users per month is high – it means your product is popular but may not necessarily attract your target audience. Your goal is to measure the percentage of initial visitors’ return. As we assume that your target comes from the organic source (Google search). If you continuously promote your product, then another source that matters would be referral traffic. It indicates all people who clicked on the links directing them to your product.

How to measure it?

Connect your product with a proper analytic tool. From there filter the traffic.

Organic traffic:
Aim at less than 50% traffic. The organic source is very broad and includes all people even those not included in your target audience.

Referral traffic:
Aim at more than 50% of traffic. This type of source is more specific and includes more people for whom the product is intended.

Return visitors:
Aim at 25 – 50% of visitors. Users who return are truly interested in your product. 

This is one of the ways you can check if your product is being used by your target audience. 

Does your product help solve the problems of the target users?

Your product was created for a given purpose that often is “to make people’s lives a little bit easier (in a certain aspect of it).

How do you know if people accomplish their goal using your product?
By observing the way they use it.

Designing a user interface you’ve created a path/paths that lead to goal accomplishment (a transaction, leaving contact details, activating an account, etc.). You should be able to track the user flow and see how users navigate through the platform. From here try to determine how long the path is that leads to the desired goal.

How to measure it?

Follow the bounce rate and conversion rate.

Bounce rate represents the percentage of how many people leave your website after only looking at one page. The ideal is when the bounce rate is low on pages that start the path leading to goal accomplishment.

Conversion rate represents the number of visitors that completed the desired goal out of total visitors. The conversion rate should always be high.

Is your product loved by the community?

At the end of the day, if a user doesn’t recommend your product – we can’t speak about success.

User satisfaction is a strong indicator of your product’s value as it reflects its quality. When it comes to metrics, direct traffic can be helpfull. Direct traffic refers to all people who typed your URL directly into the browser (they wanted to find your product).

Also, take a look at the Net Promoter Score – it measures how likely someone is to recommend your brand or product.

How to measure it?

User satisfaction and brand awareness can be monitored by several useful metrics.

Direct traffic:
Aim at more than 20%

Social media traffic:
Here it actually depends on how big a community you’ve built on the SM platforms and if it’s one of the sales channels

NPS:
The higher the better! 🙂

When having not satisfying results, try to understand why users don’t like your product. Maybe it’s about a particular feature that should be improved.

The most common mistakes in product management

Most importantly, avoid the measurement traps.

Taking only the revenue or turnover as an indicator for a successful product

This way, you narrow the perspective down to just one measure, which could lead to unexpected budget holes. That’s why we measure the ROI of the application to be able to see the bigger picture (reality!). Considering just your turnover, you’re trying to convince yourself that everything is fine, and the reality may be that you’ve invested 5 times as much in development and still don’t have a decent profit.

Relying on too little data or measuring wrong values

Drawing conclusions from incomplete data usually results in bad decisions. Make sure you know what data you base your opinion on and that when looking at the chart you do not ignore certain seasonality, changes in the economy or other events that may have influenced your sales. Same with choosing the right metrics.

Comparing own results to a completely different product (outside the market niche)

Some benchmarks can be misleading. Remember that each product comes with its own goal and definition of success. You should never compare your product to others that look “similar”. Unless you aim for the same target audience and your product is the answer to the same problem.

To summarize

Even, when we build products extremely fast using technologies like React Native, there would be always a moment when we need to count if it’s profitable. Because at some point we have to make decisions that will influence the future of our business.

All the metrics gathered shouldn’t be put in a report. They should help you understand how to improve your app and make it provide a remarkable user experience.

It takes time and resources to collect and analyze data and then improve what you’ve built. But… in the end, you’re able to assess the value of your product.

So it’s worth the effort 😉

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