When building mobile apps, developers often ignore an important first step: Determining whether it makes financial sense to build it in the first place. Measuring return on investment (ROI) of mobile apps is notoriously difficult to do. But in an interview in SD Times with Adam Fingerman, Chief Experience Officer at app design and development firm ArcTouch, Editor Madison Moore lays out five steps you can take to help figure out the ROI of any mobile app. Here’s how to do it.

Create a Plan to Measure ROI

Before building the app, determine how you’ll measure the mobile app ROI. If it’s an ecommerce app, for example, you may want to use the number of checkouts as the gauge of success. For internal business apps, you may want to measure how many people use it, and determine the overall efficiency increase it leads to. Take care to spend a good deal of time on this, and look for the input of important stakeholders.

Calculate the Lifetime Value of a Customer

If the app is a consumer-facing one, calculate the customer lifetime value (CLV) each new customer will bring your company. How to do it? If your company has a website, use the CLV of website visitors as a starting point, Fingerman says. If you believe the CLV of a mobile user will be higher, adjust it accordingly. And once you’ve determined the CLV, multiply it by the expected number of users to get the app’s expected overall value.

Recognize Not All Users Are the Same

When figuring the benefits from users you expect to get from the app, keep in mind that not all users will be equally valuable to your business. Fingerman says that many businesses have found that existing customers who download their apps are more valuable than people who are not yet your customers. That’s because existing users have already proven they’ll be loyal to your business because they are satisfied enough with it to download your app.

Calculate Your Costs

ROI needs to take into account not just revenue, but costs. Start off with the expected development costs. But don’t stop there. How much will it cost to support and maintain the app? How much will have to be spent for developing new versions? And how much will you spend in marketing?

Make Sure Your Metrics Are Actionable

When choosing the metrics you’ll use to measure ROI, make sure that you can take actions based on them to improve app performance or business performance. For example, a retail application may set as its primary success metric the number of people who complete the buying and checkout process. That’s simple to measure, but also simple to improve: You can test different checkout designs and see which leads to the most completed checkouts. As Fingerman says in the interview, “An app is a living thing; you have to be committed to giving it the care and feeding on a regular basis.”

Further Reading

To read a case study on how one company measured ROI on their new mobile app (and saved $300,00 a year in mobile data costs), click here.

Read how to use analytics to increase the value of your ROI here.

Read this recent survey data that shows why investment in mobile can lead to such high ROI.

To find out seven critical capabilities your mobile app development software must include, click here.