A mobile project can only get a green signal after thorough economic assessment. The feasibility assessment seeks potential benefits that must be higher than the cost of development, promotion and running it.
It is critical for a mobile website, unique or native app. Even after conducting technical, schedule and operational feasibility test and outlining favorable results, the decision about the project remains contingent to the its economics. So what really does the board consider in a feasibility report?
· The benefits of the project, their details, quantified and justified results in financial terms
· The cost of the project for its entire lifespan
· The point of breakeven and the time when the project reaches that point.
If you’re looking for guides or studies on economic feasibility of mobile projects, chances are you wouldn’t get any further than this infographic by Kona. So, on what basis will you be able to convince the board that your mobile project would benefit them? You can always ask experts who’ve been there, and who’ll tell you the basics of it, just like Webryze that offers best search engine optimization Toronto.
Here is a 4-step model that gives an overview of extracting the benefits and creating convincing reports for the mobile project.
Step 1: Establishing Benefits of Your Project
You can establish the benefits of your project in 3 steps
1. Create well-defined goals of the project. Goals should be identified and rationalized through customer research, stakeholder interviews as well as competitor analysis.
2. Key Performance Indictors (KPIs) must be associated with each goal. These are actually the metrics which will become the basis of success of your project.
3. Quantify the value of these goals in financial terms. It’s a difficult task compared to identifying KPIs, but not impossible.
If it’s a customer-facing app or mobile site, its goals, KPIs and financial value can be:
Goal: Improved Brand Awareness
KPIs: social media and media mentions
Financial value: the cost of KPIs through other activities, such as advertising and PR.
Goal: Improved Mobile Search Results
Increased use of website by mobile devices and reduction in mobile users abandoning site.
KPIs: use of web analytics to track mobile users on the site; improved time on site; conversion etc.
Financial value: How much these KPIs cost when you’ll apply other activities, such as search engine marketing, ads or PR campaigns.
Goal: Generating footfall instore, to restaurant or event etc.
KPIs: increased mobile visits, tracking these visits via vouchers and tickets; monitoring the store finder tool.
Financial value: you can compare footfall that can be attributed to other media and the cost of generating similar traffic improvement via TV ads or print marketing.
Similarly, you can do the same for the following goals
· Business leads
· Improved loyalty
In general, goals and KPIs for app or mobile website include:
§ Volume of regular users
§ Time of engagement
§ User retention
§ Revenue from paid app downloads Vs web/app advertising.
Be realistic while calculating and identifying goals and KPIs
Step 2: Establishing the Cost
Identifying the entire cost of the project is really critical. It includes all the criteria of technical as well as operational feasibility test. Gather or estimate all the costs including the following:
· Designing and construction
· Running and maintenance
· Periodic updates
· Wages and training, and of course
Here is another segregation.
It includes different phases, such as research and discovery phase, concept phase, prototyping and design, technical solution, development and integration, testing and launching, and post launch phase.
It might include the cost of staffing and training, running cost of content updates, cost of promotions; cost of customer support; cost of managing content providers as well as partners etc.
There must be a promotional strategy for mobile app. Native apps require more efforts than emails, social media posts and blogs. You have to convince the visitor to download the app from the app store. So, calculate the cost of directing visitors from owned media (your subscribers), paid media (ads, social media and third party apps) as well as earned media (blog, press release, social media coverage)
Step 3: Calculate Life Expectancy
As the time progresses, the benefits of the project will diminish and eventually it will be obsolete. You need to think about new versions and refreshing your content in order to prolong the life of the project.
The rate of decay of native applications is particularly severe, due to the intense level of competition from competing apps for the limited amount of space on each user’s smartphone.
50% of the native apps lose half their users within 3 months, while some apps have better half-lives;
· News apps have an average life of 7 months
· Health, communication and business apps can last for 6 months
· Tools apps can survive up to 5-1/2 months.
There is no particular way to measure the life of the app. Anyhow, you can always stretch the life expectancy through new content, good rankings, regular enticements, SMS, social media marketing and more.
Step 4: Cost vs Benefits
Several methodologies and models are there to compare cost and benefits. However, two methods are more common:
1. Payback analysis
This method identifies the point at which the project starts to generate revenues. It is also known as break-even analysis. If the project costs $300,000 and it is expected to deliver financial benefits of $100,000 annually on average, it will not be considered feasible unless it has a life expectancy of more than 3 years, as it will take three years to meet the break even.
2. Return on investment (ROI)
This method compares profitability over lifetime and considers alternatives such as outsourcing vs company-owned resources, web-based vs native apps. It also compares one project with other competing project that have same investment funds.
Finally – Should You Consider It?
The return on investment for most apps has been quite fast. It takes as little as 3-5 months if you invested up to $500,000. The reason is increased productivity and savings. Start-ups on the other hand take 12 – 18 months before they start to earn revenues. Considering the fact that majority of startup companies last no longer than 3 years, it seems they ended up in a failure. Anyhow, a good report with all whereabouts can help you get approval for your mobile app project.