Retail Apps: How To Calculate ROI

February 20, 2019 app, apps, ecommerce, mobile, mobile app, mobile apps, mobile commerce, mobile marketing, mobile website, return on investment, roi, small business, strategy

Retail Apps: How To Calculate ROI

Did you know that 50% of online retailers cite mobile apps as a top priority for their 2019 omnichannel strategy (source)?

Are you aware that apps generated 66% of all online mobile revenue in Q4 2017 and that apps converted sales 3X better than mobile websites (source)?

The case for an app has never been stronger. Yet many retailers remain hesitant and wonder if consumers will download their app. They wonder if new app revenue will give them a solid Return On Investment (ROI).

In this article, I will do three things. 1) Set the stage with usage and conversion growth stats for retail apps. 2) Cover the 3 most common ways retail apps are built. 3) Describe how retailers can calculate ROI for an app build.

Note: When I use the term “app” in this piece, I am really talking about TWO apps (iOS and Android).

App Usage Stats

Before we talk about ROI, it’s important to look at some app usage statistics. Stats show that consumers strongly prefer apps over mobile sites, and apps outperform mobile websites, regarding conversions and revenue generation.

According to Comscore, apps accounted for 87% of all US mobile traffic measured in 2017 and that number is accelerating (chart below). Year-over-year “Shopping” mobile app usage grew 54% in 2017- the biggest jump of all categories measured (source)

Consumers are using shopping apps like never before and we can look to the recent 2018 Holiday Season for proof. According to Internet Retailer, consumers downloaded nearly 10M shopping apps on the 5 days of the 2018 Black Friday weekend.

While mobile commerce continues to skyrocket, app adoption stands out. Retail app usage by consumers doubled in 2018 (source).

The vast majority of time spent on mobile is spent on apps. According to a report by Criteo, native retail apps generated 66% of all mobile commerce revenue. That’s twice as much revenue as mobile websites. Apps even outperformed desktop eCommerce sites. Apps account for 44% of all online sales in Q4 2017, versus just 33% for desktop in the same period.

And consumers like using apps. According to Business Insider, the app millennials rated as “Most Essential” was Amazon (35%), beating out all social media apps (chart below).

As compared to older mobile users, millennials are 3X more likely to embrace apps and be excited about new features added to apps they already use (ComScore). Most millennials are looking for new apps and wish they could better utilize the apps they have on their phones

Options For Building Retail Apps

Now that we have looked at the stats, let’s shift gears. Let’s take a look at the three most common approaches for building native mobile apps. One option I do NOT cover here is an “app wrapper” approach. That’s one where your current mobile web experience is simply “framed” inside an app. This is not a real app experience and offers few of the benefits.

Note: Shopping apps must be integrated with the e-commerce platform a retailer is already using (Magento, Shopify, BigCommerce, etc.) Using a solution provider that has experience in this regard is key.

The three most common approaches for building a native app are:

The Agency Model.
This typically means hiring a design agency to create the UI and then having the code written. These projects are typically in the $100K+ range and require the retailer to support the app code (for both apps). Remember, most agencies do not have deep e-commerce integration experience. So, while they might deliver stunning designs, their lack of e-commerce platform integration experience might come back to haunt you.
The In-House Model.
A retailer staffs up and has the resources to design build, and maintain both apps, in-house. This may be the right choice for big retailers who want their native app experience to be a core competency. Specifically one they want to strategically invest in, via resources and infrastructure they own.
The SaaS Platform Model
A retailer works with a third-party Software As A Service (SaaS) platform that already integrates with the published APIs from most major e-commerce platforms. The solution provider delivers custom designs on top of this proven “foundation” for both iOS and Android. The partner builds and hosts the apps and provides a secure control panel to the retailer, for changing imagery, sending push messaging, etc.

So, as you consider these three approaches, keep the Total Cost Of Ownership (TCO) in mind, over the long term. Both Google and Apple introduce new device platforms and software updates quite often. A big part of having an app is supporting that app and keeping things smoothly integrated with your e-commerce platform and generally up-to-date.

Calculating ROI – Conversions, Conversions, Conversions

ROI is simply a matter of generating enough revenue to pay back the investment on a net basis. This can be calculated via pure math, but there should also be a value placed on a better user experience. While the latter is harder to quantify, the former is literally a matter of tracking app sales and applying the net upside (after margin) to the cost of the project. With proper GA tagging, this is as easy as looking at your analytics dashboard.

Native mobile apps convert sales at a rate significantly higher than mobile sites served via a browser. This all-important conversion rate metric is the first place to look when considering how to calculate app-build ROI.

Online retailers should start by knowing their current mobile website conversion rate. Put simply, this is the number of people who had a chance to buy (site visitors) and then did so (transactions) and Google Analytics breaks this out. Typically, mobile sites offer conversion rates stuck in the 1.5-2.0% range (about half that of the desktop conversion rate). Native mobile apps, on the other hand, boast conversion rates averaging 6%, according to Forrester.

While this conversion rate lift should be reason alone to build a native app, here are some more stats to further the case:

App users browse more products (22 on average vs. 5.7 for mobile web).
App users add more to the cart (24% vs. 13% for mobile web).
App users complete more purchases, once they add an item to their cart (54% for apps vs. 44% for mobile web).

So, if your conversion rate from mobile traffic to your responsive website is stagnant (and you should find out), a native app can turbocharge this all-important conversion rate stat and allow you to reap the rewards in terms of additional revenue.

Calculating ROI – Personalized Engagement With Your Best Customers

But more revenue from higher conversion rates is just PART of the reason to build an app. Statistically- speaking just 10% of your customers generate a whopping 40%+ of your sales and these are the VIP customers that are most likely to download and use your app. An app provides important engagement benefits for these customers and here are some specific ways an app can help you take personalized customer engagement to a deeper level:

Push Notifications:
Unlike email blasts that you lose in the clutter, specific calls to action delivered via in-app push messages only render to opt-in customers who have your app. These being the very customers most likely to act upon the offer presented. Click-through rates for push messages averaged 7.8% in 2018 (source).
In-Store Engagement:
App features like location awareness, barcode scanning, product image recognition, AR, beacons, and buy online and pick-up in-store (BOPIS) can all be used to drive app users to physical stores. This cross-channel appeal is key to understanding.
Loyalty:
Apps are perfectly suited to incorporate Loyalty Programs because the interaction with the app is inherently personalized. When the app is opened, the user is ALREADY logged in. The experience is tailored to them, including the display of points earned, discounts awarded, etc. Treating your app-download customer base as a special subset of your loyal customer base can generate big rewards.
Augmented Reality/Visual Search:
Apps can activate the camera on the phone and then overlay real products into a scene, by way of Augmented Reality. Apps can also trigger visual search via image recognition to allow in-store interactions to drive sales. More and more retailers are experimenting with these app add-ons and the results are impressive. After all, 83% of consumers ages 18 to 44 used a mobile device in stores in 2018 (source).

These examples of app-based interactions add personalized, deep engagement to the mobile shopping experience which can, in turn, drive more sales. They also link the digital and physical worlds so an app can support retail locations, as well as better online sales metrics.

Calculating ROI – Faster Checkout, Less Cart Abandonment

Cart abandonment is a BIG problem on the mobile web, with over 85% of all mobile website carts abandoned (source).

Retail apps can help combat this in a number of ways. The first is that, by simply opening an app, the consumer is already logged in. This means no need to enter a password, address, or credit card data. This greatly reduces checkout friction, boosts conversion rates, and lowers cart abandonment rates. Apps also typically feature mobile wallets at checkout like PayPal, MasterPass, and GooglePay which further speed up the checkout process.

As consumers come to expect an experience tailored to them across all touch-points, apps provide a unique opportunity to not only track the buyer’s journey but enhance that journey by providing an integrated and personalized experience. While this can take many shapes and deliver various benefits, faster checkout and reduced cart abandonment rates add money to your bottom line and drive the ROI.

Calculating ROI: Speed Wins

According to a Google study, when mobile page loads get to 10 seconds, the probability of a bounce increases by 123%. The same study showed that the average mobile website loads in 9.6 seconds. In comparison, over 50% of current native iOS apps load in less than 5 seconds.

As desktop websites become more and more clogged with features, responsive design mobile sites are slipping farther behind regarding performance. Even the best responsive web design mobile sites cannot hold a candle to app speed and convenience. Put simply, apps are faster because they use on-device caching to store the data used to render the shopping experience. A native mobile app is literally always on and in the device. Your best customers interact with you for 3+ hours/day (source).

Conclusions

Retailers considering building an app should do so with ROI in mind. After all, who wants to invest in a new omnichannel mobile retail experience that does not pay for itself? Higher conversion rates are the best metric for generating this revenue. That said, there are many other reasons to offer an app. Personalized, deeper engagement with your best customers can pay off too.

Remember, you will need 2 apps (iOS and Android) and retailers should be wary of design-heavy proposals from agencies that do not include maintaining or updating your apps, once delivered. Bringing app-build capabilities in-house is always an option for retailers with deep pockets. Retailers who want to leverage a custom design AND an API integration into the e-commerce platform they are already on can consider a platform-build approach, so data and orders flow seamlessly to/from current e-commerce operations.

Retail mobile native app adoption and usage is growing. Smart retailers will offer a native app to drive deep, personalized engagement with their best customers AND yield a rapid return on investment via improved conversions, lower rates of cart abandonment, and better/faster performance. Remember, 70% of millennials are looking for new apps and 50% of retailers surveyed have prioritized an app for 2019.

In closing, ask yourself this: When did you last visit Amazon’s mobile website using a browser on your phone? You most likely never have. Why? It’s because the personalized, fast, and convenient tools Amazon adds to their native app make using the mobile site obsolete. The same logic should apply to retailers looking to win in 2019. If done right, a rapid ROI will be the result.

Have more questions about developing a native app for your business or calculating ROI? CLICK HERE

Author: Wilson Kerr, VP Business Development and Sales. February 20, 2019. Copyright Unbound Commerce.

The Highly Targeted Mobile App

April 30, 2013 apps, mobile, roi, strategy, tergeting

Mobile apps have mass appeal. Regardless of business type or size, a mobile app can also have an incredible ROI. The key word there of course, is can. While the marketing aficionados and business book gurus out there preach a certain lesson all the time, it is difficult to apply it to your own business when, quite frankly, you want all the customers you can get.

As it stands, the gurus and aficionados are right. The best way generate a positive ROI for your app is focus.

Now, there is obviously some built-in targeting for your app. The individuals most likely to download a mobile app are tech savvy. They are likely on Twitter and Facebook. They play Angry Birds and have a positive attitude towards businesses that go mobile. You can definitely cater to that audience.

But even then, the focus is not tight enough. Putting aside the fact that all of the above behaviors can be just as easily applied to both a hip college kid and his parents, the fact is that the “tech nerd” is dying. We are all tech nerds now to some extent, and so the term is increasingly ineffective as a differentiator.

So how do you focus your mobile app? Get ready for a frustrating answer.

It really depends on you.

Truthfully, mobile apps provide a framework for you to pursue your existing targeted marketing efforts (and you do have a target consumer, right?). Certain modules work well for certain businesses, but the effectiveness of those modules relies on the power of the business itself to identify and speak to a certain audience.

Identify your target audience, demonstrate the fact that you know what they want and are able to give it to them, and your mobile app will let you cut through the clutter of a customer’s inbox and Facebook feed. Mobile apps are highly flexible. They are as remarkable as you.

ROI of Mobile Apps for Business

July 12, 2012 app, business, roi, small business, value

Why would my clients want to spend money on a mobile app? What is the return on investment (ROI) for a business mobile app? This blog post draws upon a white paper we wrote a little while back helping Value Added Resellers and end businesses understand why gaining a mobile presence with an app has a positive impact all the way to the bottom line.

As with any new product or service a business is considering, mobile app ROI is important. Let’s estimate the ROI for a representative small businesses to give you a more concrete idea of what it might be for your clients.

For this example we’ll look at a hypothetical day spa. Let’s set up some assumptions first. Our assumptions are:

– Day Spa paid $300 upfront and $29.99/month fee for their app.
– Average spa treatment is priced at $100
– Average Profit Margin for a spa treatment is 50%
– Day Spa has 500 customers who have downloaded app
– Day Spa sends one push Deal per week, or 4 per month
– Each Deal is for 25% off regular price
– Open Rate for “Deal” push notifications sent by Day Spa to customers is 30%
– Conversion or redemption rate for a Deal sent by Day Spa is 2.5%

So, taking all of these numbers into consideration let’s calculate the ROI of Day Spa’s mobile app in the first year.

– First, based on the numbers above, we’re saying that 4 push Deals were sent in the month and that 150 customers opened the Deal each time for a total of 600 Deal opens.
– Based on a Deal conversion rate of 5% that means we sell 15 incremental treatments during the month with the push of Deals.
– Based on assumption laid out, the normal profit margin of a $100 treatment is 50%, or $50.
– In this instance the Deal is for 25% off, so average treatment is priced at $75. This means profit margin in dollar terms is $25 per treatment sold from the push of the Deals.
– 15 incremental treatments sold X $25 profit per treatment equals $325, multiplied by 12 months equals $3,900.

So we calculate Return on Investment with the following formula:
((Return-Investment)/Investment ) x 100

In our case then, ROI would be:
(($3900-($300+(12*$29.99))/($300+(12*$29.99)) x 100 = 491% Return on Investment

Obviously a 491% return on investment is a nice result for any business. When taking into account the fact that it will be so much easier for customers to interact with a business from their smartphones for calling, booking appointments and sharing with friends, and that they’re likely to see your brand multiple times per day if your app icon is on their smartphone screen then it’s easy to imagine actual ROI is much, much higher.

Having a mobile app and mobile optimized presence is becoming table stakes for businesses as web sites were in the late 90’s and 2000 era. Combined with their high ROI potential, getting a mobile app makes sense for almost all small and medium sized businesses, organizations and non-profits.

How Do You Measure the Success of an App

April 25, 2012 app, metrics, roi, success

How do you measure the success of a mobile app? There are several common metrics that should be examined when considering the success of an app. I’ve laid out a few of them here:

Metric	Definition
Number of downloads	Number of people who have downloaded the app
Number of daily or monthly active users	People who have downloaded the app and use it for its intended purpose
Number of loyal users	Number of people who open an app a designated number of times
Average time on an app	Can include average time in a section of an app
Number of items users engaged with	For publishers: number of items readFor video distributors: number of videos viewedFor e-commerce apps: number of products viewed, put in shopping cart
Transactions	Number of items purchased, subscriptions, or registrations
Retention rate	Percentage of users who installed an app during a specific time period and are still active users of the app for a designated time period

We built the EasyApp platform from the beginning with analytics in mind. We give easy access to the data outlined above so you can always objectively evaluate the performance of an app and how to use it to grow your or your client’s business!