The following is a guest contributed post from Andreas Hassellöf, Founder and CEO of Ombori Group.
A recent report by the Palo Alto-based mobile app marketing and retargeting firm Liftoff highlights one of the reasons why brands are often reluctant to invest in developing m-commerce apps: the high cost of customer acquisition.
When I talk about customer acquisition in this context, I’m not simply looking at getting people to download the app. That’s just the start of the full acquisition process. The bigger challenge is converting those initial app downloads into paying customers. On average, only 5.9% of users who install an m-commerce app will ever use it to make a purchase. Although it’s relatively inexpensive to persuade someone to install the app – around $4.45 per install – the cost to complete the conversion process and turn them into to a paying customer is much higher. Typically that final stage costs between $61 and $104, with the average somewhere around $75. That’s around 28% lower than it was a year ago, but it’s still not viable unless they’re going to become a high-value, long-term customer. It’s also worth noting that those costs simply cover marketing and advertising, and don’t include the cost of actually developing and maintaining the app.
Faced with figures like that, retailers are understandably concerned about whether it’s worth spending the money on developing and promoting apps. It can be an expensive investment, often yielding very few actual paying customers and direct revenue. However, there are several other factors to take into consideration: purchasing isn’t the only significant metric of the value of an app. For example, many app users will use your app to browse or comparison shop, and then complete their purchase in-store or via the Web. Others will use your app to track their purchases or find out about deals. They may not be buying through the app, but they’re still using it to engage with you and enhance their user experience.
But there’s another little-known factor that most marketers don’t take into consideration. If you’re using mobile ads to reach your customers, your costs will be reduced if you have an app, especially in smaller markets such as Sweden. The cost savings on your ad buys can then be used to offset both your app development costs and the acquisition cost of new mobile customers. Even if your conversion rate is low, you can still reduce your overall marketing expenditure.
This creates a win/win situation for brands.
- Having an app boosts your engagement with your most valuable customers and also improves your SEO.
- Your mobile advertising costs go down, freeing up resources to spend elsewhere.
Admittedly, for brands relying on traditional app development methodologies, this may not be a cost-effective strategy. App development can be slow and expensive, often running into hundreds of thousands of dollars, and you’re unlikely to be able to recoup that much just by getting lower prices on your mobile ads.
But these days you don’t have to spend anything like that much to create an app. The latest generation of solutions such as React Native makes it much more cost-effective to build an app. Another approach is to use something like Ombori Grid, that allow you to quickly convert your mobile Web site into a native app. Better still, there’s no upfront cost for either development or maintenance: you only pay a percentage of your mobile sales. This makes it an even more attractive and low-risk option. If mobile sales take off, that’s great. And even if they don’t, you’re still getting the SEO benefits and cost savings just from having an app in the app stores.
