Why Cost Per Install (CPI) Is A No-Mans-Land Metric
In a land of delightful acronyms, it is no wonder why some people go for the first one in the buying funnel - cost per install or CPI to those who use it A LOT!
It is a common situation but education is important because CPI is not the be-all metric you think it is, or what you want it to be.
Cost per install is the cost associated when a user downloads your app and opens it for the first time. It only counts when the app is opened because this is the first time the user's information can be captured by whatever software development kits (SDKs) you have within your app. Be it Facebook, Google or any other tracking and analytics partner. Only the app stores can track a triggered download before it is opened, the trouble is they can't track any further.
CPIs are the first in what can be a long line of cost associated metrics: CPI, CPR, CPATC, CPP, CPA - top points for identifying them all! What's more, is CPI is a purely volume-based metric and not a volume that really defines much because volume at the top of the funnel does not always correlate to a lot of volume at the bottom of the funnel.
When, and if, you tell a marketer, be it an agency, freelancer, or internal padawan that you want to get the highest number of downloads for the cheapest cost, you are neglecting the thing that really matters to you: user value.
Let's say you have an eCommerce app and you are driving people to buy products. If you drive 10,000 downloads are they providing you with any value at all except for numbers on a screen that you can report to stakeholders and investors? Nope!
The mindset shift is easy because if you all of a sudden change it to wanting 10,000 purchasers then you can assign a lifetime value (LTV) and work out your maximum cost per purchase metric.
If the average user is going to give you £50 then you want £500,000 in revenue. Let's say you have a blanket profit margin of 40% then you can afford to pay up to £20 per user to generate that revenue. However, that is breaking even and anything below that cost per purchase/acquisition (CPP/A) is going to be money in your pocket.
All of a sudden you now have the numbers to work out things like estimated media spend and how long it will take to get that £500k in revenue. The math would suggest £200,000 in media spend to break even or £100,000 at £10 CPA to make a good margin. The next steps is ensuring you have the right growth strategy to achieve it.
You see, that is why CPI is a bit of a no-mans-land metric. It doesn't hold anywhere near the same weight as the event at the end of your funnel. You can't draw down specific metrics from it, in fact you could apply a conversion rate model and go from installing to registration to purchase and work it out based on that initial cost, but, you're better off with a more valuable metric.
We have a white paper out - The Absolute Guide To App Growth.
In it, we talk about growth and data strategies and how you can make your app data-rich with the right process put in place to save you 40+ hours a month growing your app.