Do you have a new app that’s adding users, getting positive reviews, and generating attention? Are you trying to figure out what comes next?
In most cases, the next goal is to significantly grow the user base and achieve scale. However, “buzz” doesn’t necessarily mean your app is ready to scale. AJ Yeakel perfectly defines the metrics that best indicate when an app is ready to scale:
Virality: A constant flow of user referrals
Monetization: Daily avg. rev. / user growth
Retention: One-Day User Retention Rate of at least 30% (ideally 50%) with drops of no more than 10% per week over the next 4-5 weeks
User acquisition: Ad campaign performance is competitive
Ad spend ROI: Does Avg. CPI – LTV = acceptable profit/loss
If you’re currently hitting all of those metrics, you’re ready to scale. In this blog post, I outline five key points you need to know as you work towards preparing your app for aggressive user base scaling.
1. Review analytics consistently and set KPI targets
When operating at a scale of thousands or millions of users factors like retention rate, user lifetime value, etc. become incredibly important. That’s why Yeakel emphasizes tracking goals for fundamental KPIs and making sure you achieve them before scaling. If you’re not keeping tabs on them already, it’s imperative at this stage to track KPIs and review the data consistently.
Retention rates: Measures how many users return to your app after one day, two weeks, a month, etc.
User lifetime value: Helps explain monetization, virality, and retention together. It also explains user engagement over time between the first install and when a user no longer uses your app. This is a great predictor of future retention rate and projected ROI.
App ratings and review analytics: The overall success of your app will be impacted by ratings and how you communicate with your customers when making improvements based on their feedback.
Monetization: The amount of money the average user spends on your app until they no longer engage with it.
2. Keep releasing updates until you hit your goals
Which KPIs need improvement before you think you’ll be ready to scale? Is it retention, lifetime value, etc.? Focus on those issues and release updates aimed at improving them.
Source: How to Conduct Successful UX Research for Your Design Project
One method to identify possible changes is by conducting UX research. Use this question: Why do your users act they way they do? If you have a low retention rate, ask users why they stopped using your app.
Was it because of a lack of fresh content, was it too confusing, or did they not get the purpose? With that insight, you’ll have a better idea of where to focus your efforts. You might need a better onboarding experience or a revised navigation structure. This process should be iterated on as cost-effectively as possible until your KPIs hit their targets.
3. Invest in user acquisition campaigns
Before aggressively scaling your app, you should also invest in a limited user acquisition campaign. By doing so, you can acquire a limited user base to help test your app and make sure it’s providing a positive experience. And secondly, you can test the effectiveness of your marketing campaigns to ensure that the CPI is reasonable—this will also allow you to see an ROI in time.
If you’re going to run marketing campaigns at scale, it’s important to have some confidence that you can successfully reach prospective users in your target audience, persuade them to download your app, and convince them to stay once they do.
If you have leaks in that funnel, it’s better to identify them at this stage so you can work on resolving them. It might require changing your targeting parameters, changing the ad copy, or changing the way you onboard and retain users once they’re in the app.
Also, don’t expect users acquired through advertising to automatically behave the same way organically acquired users will, because as much as we want them to, they probably won’t.
4. Have a monetization plan
Whether or not you need monetization before scaling is a topic that generates a lot of debate. On one hand, people remember the dot-com bubble which featured soaring valuations for companies with lots of buzz but ultimately no revenue. On the other hand, plenty of tech firms and startups have caught fire, acquired millions of users, and only later, after burning significant investor cash, figured out the key to unlocking significant profits from that network.
Here’s a breakdown of what steps you should take according to your financial situation:
If you’re not generating revenue, you can still move forward with an aggressive growth strategy. So do your homework to make sure you have enough funding to cover your projected burn rate while you execute your growth and monetization strategy. There’s nothing worse than unexpected costs leading to a higher burn rate that shortens your runway. It negatively impacts the performance of your growth strategy and leads to a scenario where you might have to raise more funding at a bad time—resulting in a down-round.
b) Incoming revenue
If you are generating revenue and believe that you’ll need more money from your new users to cover the expected growth in costs during your growth phase, then you need to measure the user lifetime value to ensure a scaling user base will provide you with the revenue you need.
So say on average your users generate $10/month in revenue, you earn a 50% margin, and your churn rate is 10%. Your customer LTV would be $10 * 50% / 10% = $50. Meaning, you can spend up to $50 to acquire a new user and still have that customer’s lifetime relationship be profitable.
When making your projections, be conservative and check how all of these variables will scale up with a larger user base. Can you expect new users being acquired through advertising to generate the same $10/month your users are generating now or might that go down? Will the costs associated with your growth strategy shrink your margins six months from now? How confident are you that your churn rate won’t change as your user base scales?
If you have a headache, you’re doing it right. You need to run the projections, and be confident you’re leaving yourself enough runway to make adjustments to your expenses on the fly to ensure you’ll have sufficient revenue一before your user base scales.
5. Make sure your team is ready
Once you start operating with a scaled user base, every bug becomes more urgent because of the number of people impacted and the potential lost revenue. For example, more business opportunities will present themselves that you’ll want to capitalize on, and new feature ideas and expansion opportunities will accelerate. Will your team be able to handle it? The time to solidify a scalable team infrastructure is before you get to that point.
To do that, you need to assess how you currently have your development team structured. Here are a few common scenarios that happen when scaling:
What would happen if you needed to ramp up to ten developers? Who on your team would be responsible for handling the hiring, vetting, training, etc.?
Do you have a sufficient management structure and workflow procedures to handle a dev team of that size? If not, what would it take to create one?
Are you confident the quality of your app will hold under the strain of a larger user base and that the quality of future updates won’t suffer if more coders are contributing to the code base?
It’s important to understand these points before scaling because you’ll have a leg up and you won’t be in for any last minute surprises. Once you have a solid grasp on the five concepts, your startup will be in great shape to begin scaling.
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