A healthy cash flow is always one of the most important factors in a company’s ability to grow. In a thriving economy, when money can be borrowed nearly at cost, cash flow tends to be less of a concern. However, in an economy where interest rates are skyrocketing due to inflation, a lack of proper cash flow can be devastating for companies. That’s when the ability of your marketing to generate quick ROI becomes critical.
During times of financial unpredictability and economic downturn, the spotlight has shifted to achieving positive cash flow. One of the more common strategies is to neglect long-term growth metrics, such as Lifetime Value (LTV), and concentrate on short-term ROI. Investments are made in opportunities with the potential for short return, ideally within the first 30 days.
I will spare you any additional Economy 101 lessons and get to the practical actions that can help you make your campaigns yield returns faster.
Priority Shift: From LTV to Quick Pay Times
Adjusting your focal metric can significantly refine your marketing strategy to prioritize cash flow. It’s essential to assess which traffic sources result in quicker pay times and concentrate on those.
Occasionally, the groups of users who contribute to the fastest cash returns may differ from those who optimize the LTV:CAC ratio. It’s also possible to identify segments with similar ROAS but varying pay times, such as users who convert sooner (accelerating revenue generation) or those attracted to offerings with higher initial value.
Strategies for Increasing Your Return on Ad Spend (ROAS)
To maximize efficiency, the ideal scenario is achieving breakeven rapidly—right after the first purchase or within a month. But how can this be achieved?
Achieving faster ROIs requires a holistic approach, integrating various KPIs that impact both acquisition and monetization, not just improving ROAS, as it:
- Optimizing Acquisition Costs (CPI, CPA): Lowering costs like CPI and CPA can boost both ROAS and the return period, provided the traffic quality remains unchanged. This delicate balance involves not just cutting costs, but enhancing the organic visibility of your offerings, perhaps through better referral systems or making your app more shareable. This can attract additional users without increasing media spend, thereby lowering the overall acquisition cost and shortening the time to payment.
- Cohort Analysis for Enhanced Monetization: Identifying which user groups monetize best allows for more focused ad spending and insights into which strategies are most effective. This entails understanding the best sources, messaging, creatives, and user journeys, and applying these insights across campaigns.
- Boosting Down-funnel Conversions: Increasing user revenue can significantly reduce pay times. This often falls under product development, such as optimizing paywall triggers and layouts. However, marketers can contribute by ensuring a consistent journey from the initial ad to the app store (via tailored CPPs and aligned messaging), and even through the onboarding process with deep linking and personalization strategies.
- Leveraging CRM and Retention Strategies: Effective CRM and retention strategies are key. By engaging users through personalized communication and rewarding loyalty, companies can enhance the lifetime value of each customer, contributing to a healthier ROI in the long run.
- Understanding User Journeys and Personas: Deeply understanding your user personas and their journeys can lead to more effective targeting and personalization. This not only improves the user experience but can significantly impact the bottom line by optimizing the conversion paths.
By focusing on key areas, balancing acquisition, monetization, and maintaining traffic quality and engagement you can improve ROAS and ensure investments turn into profits faster.
Refining Monetization and Pricing for Quicker ROIs
Monetization strategies and pricing play a crucial role in accelerating financial recovery, sitting as a key component among the marketing mix’s four “P”s. Diverse approaches exist to optimize for faster revenue generation.
Some apps reveal that price adjustments minimally affect conversion rates, an insight supported by Chung, Ahn, & Chun (2018). Their research indicates that strategic price setting, influenced by inventory and reimbursement rates, can stabilize prices, impacting ROAS and payment durations.
Introducing an annual subscription as the primary option can speed up payment collection, but it does require a nuanced design. This method, by billing the entire first year upfront, contrasts with the gradual income from monthly payments.
Moreover, offering a lifetime subscription at a higher price could not only enhance early revenue collection but also serve to make annual plans more attractive by comparison.
The implications of altering pricing models demand deep analysis, as the effects are multifaceted. In situations where immediate cash flow is paramount, securing revenue at the outset, rather than distributing it over time, can be a strategic advantage.
Trends in subscription models show flexibility, with some apps presenting only annual plans or revealing monthly options upon initial rejection. A strategic layout starts with the developer’s preferred plan, offering alternatives behind a subtle “view all plans” option, emphasizing the strategic depth in pricing for quicker financial outcomes.
Strategic Monetization Timing
The timing of monetization plays a pivotal role in how quickly a product begins generating revenue. For subscription-based services, it’s common to see monetization strategies implemented right from the start, during the onboarding process, even before users have fully explored the product. Alternatively, some services choose to delay monetization, allowing users to first recognize the value of the product, which could potentially increase long-term value (LTV) but also delay immediate revenue.
When the goal is to enhance cash flow swiftly, introducing monetization options at the early stages of user interaction can be a critical strategy.
Monetization strategies can broadly fall into three categories:
- Immediate Monetization: Implemented as soon as the user engages with the service, often before they’ve had a chance to explore its features fully.
- Post-Onboarding Monetization: Adopted at the conclusion of the onboarding process, this approach is frequently used to smoothly transition new users from exploration to paid conversion.
- Delayed Monetization: Waits until users have had a tangible experience with the product, betting on the quality of the initial experience to drive conversions.
Transitioning strategies, such as moving from offering all users premium features upfront to initiating a trial period right away, demonstrate an evolution aimed at engaging users more effectively from the beginning. You can read more about this in my previous post titled ‘Beyond Features: Why Your Customers Buy on Emotion, Not Information.’
Promotional Offers to Accelerate Revenue
Using promotions to expedite revenue collection is another effective strategy. Early offers, like significant discounts on in-app purchases for users who engage with the product beyond the initial hurdles or who have encountered multiple paywalls without converting, can pull future revenue forward.
Optimizing these offers by adjusting the timing (e.g., introducing discounts earlier in the user journey or after fewer paywall encounters) can be particularly effective. This approach is invaluable for products with retention challenges, aiming to convert users before they disengage completely.
Renegotiate Contracts and Cut Out the Middleman
Additional ways to improve ROAS include renegotiating contracts to reduce fees and improve payment terms. Economic downturns affect everyone, including platforms, which may prefer to lower their fees rather than lose clients. Additionally, finding ways to redirect user transactions off-app can reduce intermediary expenses, increase margins, and accelerate payment times.
Improving the investment to return time will have a significant impact on your cash flow, particularly during economic downturns when you need it most. Remember to shift focus to immediate returns, renegotiating contracts to lower fees, redirecting transactions off-app to cut intermediary costs, and adjusting monetization and pricing for faster revenue. Make sure to stay vigilant by measuring and recording changes, analyzing them, and adjusting accordingly.
Have any questions about slashing those pay times? Schedule a consultation meeting with one of our experts today.
