It’s easy to follow the hype and think that if your startup gets press coverage, Twitter mentions and some decent amount of app downloads, you’re doing fine. But it is actually just the time to closely watch your mobile MVP metrics, carefully introduce little tweaks and get ready for removing features that users don’t care about. Here we will talk about metrics used to measure a success of a minimum viable product.
Startup stages
According to “Lean Analytics”, one of the must-read startup books, there’re 5 stages of startup development:
- Empathy
- Stickiness
- Virality
- Revenue
- Scale
In this article we will focus on Empathy and Stickiness. On Empathy stage you find a problem to solve, decide what your solution will be and conduct 15+ interviews to learn whether users will care about your startup. Here you learn what to put in the first iteration and build an MVP — minimum viable product containing all the vital features you want to test.
On Stickiness stage you put your MVP in the wild and test it with a small audience of first users (for example, launch in one city or country) to see whether people stick to your solution. You make changes when you see fit and experiment to make product even more attractive for your audience. Clearly, this startup process needs some serious metrics.
Pre-MVP considerations
Before building MPV founders of successful startups follow lean approach, get out of the building and conduct 15 or more interviews with potential users and rank their engagement for each of these aspects:
- Whether the problem you are trying to solve is really important to users (low — 0 points, medium — 5 points and high level — 10 points).
- Whether users are actively trying to solve this issue now with other services or self-made solutions (low — 0, medium — 5, high — 10 points).
- Are they active during the interview (low — 0, medium — 4, high — 8)?
- Do they agree to come and discuss the solution with you when it’s ready (low — 0, medium — 4, high — 8)?
- Do they agree to refer other people to you (low — 0, medium — 2, high — 4)?
- Are they ready to pay for the solution right away (low — 0, medium — 1, high — 3)?
After adding all the points for each interview you should get 31+ score. If the score is lower for several interviews, compare them and try to figure out what is causing this, fix it and organize new interviews to check whether your assumptions were correct.
Two more considerations:
- You should also think about whether enough people care about your solution (for example, if you are targeting art students and they respond well to your offer you need to look up statistics and figure out approximate number of art students in locations you will be launching in). ‘Enough’ will depend on whether you are selling to mass-market (Uber) or to a very small group of people (Engage, Twitter app for celebrities)
- Learn about the daily routine of your target audience and think how your solution will fit into it. For example, for Instacart (on-demand delivery service) it’s pretty easy: people are tired after work and don’t feel like going to the market so they gladly order grocery online.
Learn When the MVP should be preceded by the prototype development.
MVP metrics for apps
With data from the interviews learned and analyzed your are ready to check experimental hypothesis by building and launching MVP. But what metrics should you pay attention to when it is in the wild? Such metrics as growth, user engagement, customer acquisition and churn rate are universal. But let’s look at something more specific: free mobile apps with in-app purchases (such as Tinder, WhatsUp or free-to-play games), one of the most popular mobile startup monetization models nowadays. MVP metrics for freemium mobile apps are:
1. Download and launch rate. Download and launch rates are clearly showing whether your offer resonates with users enough to make them try out your solution. After its initial launch Meerkat, a startup for video streaming, got 160,000 users in its first month and then grow to 2 million user base.
Another important consideration here is to make your app size less than 50 MB for a faster download over slower connections.
2. User ratings and store placement. Naturally, you are aiming for a high score in store but user ratings are a good source of feedback. Rating click-through is important as well. Also, is your app easy to find?
3. Customer acquisition cost (CAC). How much does it cost to get a new user? A paying customer? This metrics helps you to learn whether your marketing efforts need improvement (spending on acquiring customers more than you earn is a bad sign). You can calculate this metric for each of the traction channels you’re using:
CAC = Amount of money spent on traction channel / Number of customers acquired through this channel
4. Percentage of active users.77% of users never use an app again 72 hours after installing it so download and launch rates aren’t everything. You should know how many daily active users (DAU) and monthly active users (MAU) you have and closely study their behavior.
5. Percentage of paying users. It’s disillusionment time! How many people are actually paying? Who are they? How exactly are they using your app? How much time passes between first launch and first purchase?
For example, Tinder has about 50 million users worldwide but only about a million is paying for premium features.
6. Monthly average revenue per user (ARPU) is revenue from in-app purchases divided by the number of active users. Also don’t forget to monitor which items bring the most purchases.
ARPU = Total revenue for month / Number of active users this month
7. Customer lifetime value (CLV) basically means how much on average users spend before stopping to use your mobile app. The formula is:
CLV = Profit from customer x How long have they been using your app – Acquisition cost
8. Churn is a percentage of people who uninstall your app or stop using it weekly, monthly, etc. Since you have both free and paid users churn for each of this group should be measured separately. The formula for this metric that matter is:
Churn = Number of churns per week (month) / Number of users at the beginning of week (month)
Typical values for MVP metrics
Okay, so you’re measuring those MVP metrics and accumulating startup data. But you are probably wondering how to find out a typical value for metric to be sure that your MVP products are doing fine. Authors of “Lean Analytics” point out that typical is never good enough for a startup so your goal is to always do the best you can. Nonetheless, authors still offer some tips and hints as of satisfactory values of some metrics we discuss above:
- Expect a big chunk of acquired users to be one-time launchers. But with time decline should become more gradual. If it is not happening, your MVP is problematic.
- Make sure at least 10% of registered users open app once a day and 30% — once a month.
- Review rate for free apps is normally significantly less than 1%.
- Customer acquisition cost should be ⅓ or less of the total value customer brings you over a lifetime. For app it is typically $0.75/user or less.
- Having about 1.5% of users who are buying something from your app is typical.
The current situation on the app market harsh: your app success on App Store and Google Play is mostly determined by the number of reviews and downloads and the fact whether you’ve been featured or not. But as you’re still on the MVP stage and working towards stickiness, it shouldn’t stop you: work with what you have, watch your startup metrics, identify problems and decide whether to pivot a little of a lot.
Check out our portfolio: studio stfalcon.com offers MVP development for startups and creates mobile apps and websites that satisfy the most demanding clients.
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