Retarget mobile users by remembering the day 0 dilemma

Imagine you owned a restaurant and hired an agency to help you increase sales. The agency tells you they can drive revenue by as much as 20 percent by changing your menu and training your waiters to upsell wine during the lunch rush. They test the strategy by splitting your tables into two groups. Group A receives the special menu and wine pitch. For Group B, it is business as usual. At the end of service, you see that Group A did, in fact, spend an average of 20% percent more than your control group.

Every restaurant owner is looking for ways to get new guests in the door, but who wouldn’t want to drive revenue by increasing the spend of existing customers? And yet, app developers are overlooking the mobile world’s version of a similar tactic. Most marketers reserve retargeting strategies for lapsed users. They focus on people who haven’t used the app in three days or seven (“Day Three” and “Day Seven” users, respectively), and they ignore active users - the “Day 0” segment.

But for almost all apps, the majority of revenue comes from a small percentage of users. In fact, a recent study found that more than 80% of mobile app ad revenue is generated by just 20% of app users. Targeting “Day 0” users who have not lapsed is a proven way to increase revenue, much like upselling in the restaurant business. It is not easy, though. Marketers using this strategy face immense challenges, which may be why many skip over it all together. Common missteps include wasting spend by serving ads to people who would have taken action anyway, failing to measure campaigns correctly, and using the wrong creative. The tips below will help you circumvent these pitfalls, so you can retarget active users, and in turn drive performance for your app.

Retarget mobile users by rethinking your measurement strategy

App marketers often use Return on Ad Spend (ROAS) to measure the value of their ad spend. To calculate ROAS, they compare their investment with the profit of their campaign. Spent $5K on a campaign that generated $9K in sales? Your ROAS is $4K.

This metric isn’t the right one to use when you are targeting active users, though, because you could end up crediting the campaign for actions that would have happened anyway. Say you are serving retargeted ads to big spenders, your “whales.” You can’t just compare the cost of the campaign to how much users spent over the same time period because odds are, some of those purchases would have happened even if you hadn’t served any ads.

To solve for this, mobile app marketers need to use incrementality, the measure of revenue lift generated by your ad spend. To calculate incrementality, you divide your target segment into two groups - one that receives ads and a control group that does not. This allows you to track how much active users are spending on their own and compare this figure to the spend of active users who were served retargeted ads. The difference in these values - the lift - is an accurate barometer of the value for your retargeting campaign.

Fail to use incrementality and risk wasting ad spend and giving your advertising more credit than it deserves.

Double down on personalization

When you are targeting active users, the message is extremely important. Casting a wide net is fine if you are chasing new customers. Testing out creative is part of the process and will help you determine what works and what doesn’t, so you can optimize accordingly. But the Day 0 segment knows your app already. Serving an irrelevant message is not only a waste of an impression - it leaves the user feeling misunderstood and probably annoyed. Draw on the valuable data you have collected on users’ behavior and spend and serve relevant ads that reflect their preferences, progress in the app, past purchases and so on. Personalized ads are always powerful, but for Day 0 users, they are absolutely critical.

Be sure they hear a ticking clock

Remember, you are trying to entice active users to spend more than they would have otherwise. Offering a high-value, time-sensitive offer is a great way to do just that. For example, you can offer to double any purchase made over a certain time period, e.g., “buy one item and receive two if you purchase by the end of the weekend.” You can even promote a limited time period in which the deal is sweetened even more, e.g., “purchases will be doubled this weekend and tripled if made between 6-8 p.m. Saturday.”

Now you have transformed your ads from interruptive commercial messages into valuable offers Day 0 users will want to take advantage of. This is key to targeting active users.

Certainly, mobile app developers can grow top-line revenue by reaching new customers, but as most marketers know, one of the most effective and efficient ways to drive revenue is to target people who have already downloaded the app. Yet with retargeting, the default move is to focus on lapsed users, which means many marketers are overlooking an effective strategy for improving app performance. With the right measurement and message, marketers can derive even more value from their Day 0 audience segment.