Page 90 - MYM 2016

Engaging Customers in the App World
based on CLV. Customers with very low CLV may not be ideal candidates for o ering subscriptions. A segmentation process has been shown in this study which incorporates all the suggested metrics.
In a highly crowded app store with over 2 million apps each in both Google and Apple’s App Stores, it might be natural for companies to focus on market share by looking at only acquisition and retention. Kumar, Reinartz, and omas (2005) investigate how to optimally balance acquisition and retention investments via a resource allocation model. However, it is important to look at the net pro tability over the long run which is achieved
by CLV. It costs ve times more to acquire a cus- tomer than to retain one (Keiningham et al., 2005). us, it is highly bene cial for the app developer company to identify and retain the customers with the highest CLV. To calculate CLV, we need to take both marketing and operating costs into account. In an app industry context, the various sources
of marketing costs are summarized in the table below. ere are some costs that are mainly associ- ated with customer acquisition and win-back like search engine marketing, social media marketing
and app-store-related cost. Expenditures on email marketing and promotions are generally used for customer retention.
ere are operating costs other than marketing costs such as one-time registration payments to the app store, developer cost, adaptive designing and testing for multiple platforms, continuous devel- opment, hosting, content generation and other personnel-related costs that have to be factored into the calculation of CLV.
computing clv
CLV calculation (see Figure 5) requires cus- tomer-level transaction data on multiple purchases, so depending on the frequency of purchase, it can be for a quarter to as much as a year in the app world along with real-time marketing and operat- ing costs. As smartphones, operating systems and apps are continuously being updated, we recom- mend a more granular approach by taking daily transaction data for a year. Once the CLV has been calculated, the customers can be segmented and customized subscriptions can be o ered.
fig. 4: Marketing costs (acquisition & retention) in app industry setting
type of Marketing cost
application in app industry
Nature of expense
Mobile App Indexing
Integration of mobile app downloads with web search engines
One-time
Search Engine Marketing (SEM)
Sponsored advertisement by companies on internet search engines with goal to appear at the optimized position to encourage tra c
Recurring
Social Media Marketing (SMM)
Advertisements on social media, either free, content-driven or sponsored
Reccuring
App Store Optimizations (ASO)
Improving the visibility of the app in the store through targeted keywords or other rich media preview content.
Recurring
Sponsored App Search Results
Paid listings in app store homepage to promote downloads
Recurring
App Remarketing
Retargeting people based on their website or app visit by placing cookies
As per requirement
Television Advertisement
Taking advantage of second screen phenomenon where 85% of viewers use cellphones/tablets along with watching television (Nielsen 2012)
Recurring
(Higher during app launch, speci c events)
Email Marketing
Sending emails to take surveys, feedback and customized o ers. Also a good tool for after-sale service and reminders.
Recurring
(Mainly Retention)
O ers, Incentives for referrals and Discounts
Mainly to promote loyalty and referral marketing
Recurring
(Based on subscription)
90 | MINd YOUr MarkETING OCTOBEr 2016