Sean: Hey, welcome to today's episode where I'm going to be sharing the three biggest mistakes app business owners make, costing them millions of downloads and sales, and how to fix them. So, stay tuned.
Hey, I'm Sean Casto, and I have helped thousands of apps over the years to go from zero to millions of downloads and sales, turn their app dream into a reality and become financially free. And it's now my mission to help others like you succeed. So, how do you build and grow an app business from nothing to millions of downloads and sales? Well, this is the “App Secrets Podcast.”
I recently spoke with an app business owner, and for privacy purposes, I'm not going to disclose his name, but he has an amazing new health and fitness app, and he came to us a little over six months after initially launching the app on his own and spent over two years in $500,000 developing the app. [01:09.5]
Guess how many users he has in the past six months after launching it on his own? He shared his original goal was to hit 100,000 downloads upon launch, but it wasn't 100,000. It wasn't 10,000. It wasn't even 1,000. He had 200. He only had roughly 200 users. Spent two years developing it and over $500,000, and has 200 users to show for it.
I could tell he felt frustrated and discouraged. Maybe some of you listening right now actually feel a similar way. You’ve launched and just aren't getting the traction that you've hoped for and feel pretty frustrated and discouraged about that. I mean, he built this great fitness app to positively impact the lives of others through improving their health. Yet, no one even knows the app exists. [02:06.3]
Had he avoided these certain mistakes in the first place, I have no doubt that his app would be generating millions of downloads and sales today. We see this time and time again, and I don't want you to make the same mistakes.
So, today I'm excited to share the three biggest mistakes that we see app business owners make, costing them millions of downloads and sales, and how to fix them. Let's go ahead and just jump right in.
The first biggest mistake we see app business owners make is treating their app like a hobby and not a successful business. You see, a business makes sales and revenue, right? A hobby does not. A successful app business requires having a strong revenue model in place prior to your launch. [03:00.5]
Not only do most not have a strong revenue model for their app, but most also don't understand the lifetime value of their users. For those unfamiliar, a lifetime value, also known as LTV, is your primary revenue metric. It's the core revenue metric that all the top apps monitor. The reason why they call it lifetime value is because it represents the total financial value of a customer. It is how much revenue each app user generates in his or her lifetime.
This is important because, if you understand how much to spend on marketing to acquire a user, you must first understand how much a new user is worth to you. It’s okay if this is an estimate when first starting off and launching, since you don't have any sales, but all the top apps not only have a strong revenue model, but they know exactly how much a new user is worth to them. [04:00.2]
Uber is a great example. When first starting off, Uber offered new users with a $25 credit upfront to use on rides. I believe this is still actually used today, but think about it for a second. Uber is giving away free money. Why would they do that? Why would Uber be willing to lose $25 upfront for every new user?
The answer: it's because they understand their lifetime value per user is far greater than that $25. They knew that for every $25 they give upfront to a new user, they get far more back in return over the lifetime value of that user. $25 is what? Roughly two rides on average? How many rides have you taken so far with Uber? I bet far more than probably two.
You see, an app business requires a business model with the right pricing, right messaging, right delivery channel to the right target customer, and the key is to sell what your users want and then deliver what they need. This will not only keep your app alive, but it will cause it to continue to grow. [05:15.2]
Now I know what you're probably thinking. You're probably saying, That's great, but I'm not Uber. I don't have billions of dollars of spend, Sean. Well, Uber actually offered this before they were even a billion-dollar app, but that's not the point.
The point is, if you can implement a strong monetization strategy and know your lifetime value, you will automatically be far ahead of your competitors. So, once you know how much your users are worth, a.k.a. your lifetime value, you can then determine how much you can spend to acquire new ones.
I encourage you to think, how can you position your app so that users are not only interested in paying you for it, but are willing to do so two, three or even 10 times over the course of the year? Just like Uber, you need to shift your mindset from upfront sale to long-term sales. [06:10.6]
All right. The second biggest mistake that we see app business owners make is not spending enough on the right marketing strategies. This means both paid and marketing.
Most make the mistake of seeing marketing as an expense instead of an investment. They say, I've allocated $50,000 or $100,000 total marketing budget for this app, and they see it as an expense. But the reality is it's an investment.
Let me ask you a question. If you gave me $1 and I gave you $5 back, that would be a pretty good deal, right? That's a pretty amazing return on investment. You give me $1. I give you $5 back. How many times would you do that deal? You'd want to continue that growth momentum for as long as possible, right? Or would you do what most do and just allocate a certain amount and miss out? [07:09.2]
This is how you need to think about marketing. That's how the multimillion-dollar and billion-dollar app creators think. They see their marketing as a variable cost. Instead, most make the mistake of thinking of marketing as a total expense for a fixed cost.
Most launch an app because they want to make a difference, and the reality is that your app won't be able to impact the number of people that you set out for, without a substantial marketing budget. Like the example I shared earlier, you could spend $500,000 on developing your app and two years creating it, but it all goes to waste if your app launches and you get … what, 200 downloads?
We advise spending probably equal, if not, double, the amount you spend on development towards marketing. If you spent $50,000 on development, you should probably think about spending a minimum of $100,000 to reach your initial launch goals. [08:05.1]
One of my favorite quotes from the legendary marketer, Dan Kennedy, states, whoever can afford to spend the most to acquire a customer, and still be profitable, wins. Let me repeat that again because there's so much truth to that statement. Whoever can afford to spend the most to acquire a customer, and still be profitable, wins. This is how the top, most successful app business owners think. Marketing is an investment because it's the number one driver to getting you to reach your app goals.
All right, the final third biggest mistake we see app business owners make is incorrectly measuring and tracking success. As an app creator, you most likely spend significant time each week on either development enhancements of the app or marketing. But what if you found that your development enhancements and marketing efforts were not actually driving and bringing in any more downloads? You would probably change your efforts, right? [09:13.1]
Many make them mistake of focusing their attention on the wrong things. The truth is, you're app marketing initiatives probably follow the 80/20 rule. In other words, 20 percent of the marketing you do accounts for 80 percent of the additional downloads you get. If that's the case, it becomes important to identify which 20 percent it is so you can do more of what works and less of what doesn't.
This all comes down to tracking your key performance metrics, meaning tracking your most important business metrics on a continual basis to know what to improve. This may sound like common sense, but I assure you, it's not common practice, and something we see time and time again that most miss out on, and I don't want that to happen to you. [10:03.9]
Without tracking key performance metrics, you won't understand what's driving downloads, where your engaged users are coming from nor what's really driving your revenue.
Studies have shown that apps using app analytics outperformed competitors who just trust their intuition 3:1. Your analytics is your roadmap to success, and the data your analytics provides will leave you breadcrumbs to follow. Analytics allows you to understand what works and what doesn't to obtain actionable insight you can begin incorporating into your app right away. If you follow them, they will really lead you to the Promised Land.
Let's go back to Uber as an example. Uber, they reported that when tracking Uber's revenue and retention, Uber found that more than a rider uses the app, the less willing they are to wait for a car to arrive and pick them up. In other words, they’ve found that users are less likely to wait the more they used the app. [11:06.5]
Their analytics showed that in 2013, for example, users were willing to wait up to 12 minutes before an Uber car arrived before canceling in the app. One year later, the same user was only willing to wait eight minutes before canceling the app. If they did not continually track and improve the time it took for a car to arrive and people to cancel, many would simply switch to a competing ridesharing app. Uber therefore needed to continually raise the bar to improve their user experience, to stay competitive and retain users.
The key to this story is you must correctly measure your key performance indicators, for Uber, if they had never tracked this key metric, it would result in a loss at tens of millions of dollars per month, if they didn't find out that users were canceling the app by waiting too long. Therefore, they needed to enhance the innovations, and the ability to be able to have people come and pick up their riders quickly and efficiently, so that they would be able to drive more people and drive more revenue. [12:13.9]
As a side note, given this data, it's safe to say the next billion-dollar app to compete with Uber will be competing on the user experience—that is the time it takes for a car to arrive and transport the user to their destination.
So, I encourage you to think, what are the key performance metrics that you are tracking? How do you measure success? What do you define as success? Without tracking your growth or decline, you won't fully understand how or what to improve. It's so important that it's one of the first things that we cover with our private clients. Remember, you can't improve what you don't track.
To wrap it up, to avoid the three biggest mistakes –
1. The important thing to understand is that you need to always think about your app as a business and not a hobby. And just like any business, you need to have a strong revenue model. [13:11.6]
2. You must also consider marketing as an investment as it's the number one driver to getting you to reach your goals.
3. Lastly, number three, correctly measuring and tracking your success.
After this episode, I encouraged it, go back and think, which of these areas do you need to work and spend more time on?
The reality is there's a huge opportunity right now in the app industry with new million-dollar apps created every single week. Avoid these three biggest mistakes and you'll be on the path to becoming the next huge success.
If you liked what we actually talked about today and want to go deeper, then I have a special bonus gift for those listening right now. I have just purchased, actually, a number of copies of my number one bestselling book, App Secrets: How to Create a Million Dollar App, and to give away to our community for a limited time only. [14:06.3]
Today, while we still have copies left, my team and I want to send you a physical copy of my number one bestselling book for free. This is the same book you can get on Amazon right now for $25, but right now we'll buy the book for you. We just request that you pay for shipping. We have limited numbers available, so it's first come first served. But if you want access to that, go ahead and click the link in the show notes or head on over to AppSecretsBook.com.
That’s it for today's episode. In our next episode, I'm going to share how to launch billion-dollar app. We'll be covering the three pillars, Snapchat, Tinder and Airbnb use, so make sure to stay tuned.
As always, I appreciate you, and I encourage you to live a bigger life, a bigger app business, as you continue to make your dream a reality.
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