Mobile app marketing + the holy grail of total yield optimization

In the beginning was the banner ad. And the banner ad sucked.

On the second day Amazon invented affiliate marketingGoogle created AdWords and a brave new world of performance-based digital marketing was born.

Stretching this allusion to the breaking point, it’s now roughly mid-week, and performance marketing has exploded into dozens of niches (many of them disreputable and some downright scammy) — from lead gen and pay-per-call, to retargeting, social referrals, “offer walls”, lead exchanges and more.

Never before have marketers had more ways to put a bounty on a new customer prospect — turning demand on or off through a simple application of cash.

But while all this goodness was happening on the marketing front, a quiet revolution was also taking place in sales and customer support. The SaaS-ification of enterprise software has made “big company” tools for data-based customer relationship management (CRM) and yield management (YM) accessible to smaller and smaller enterprises.

Today, companies of almost any size are able to track individual customers from prospect (traditionally Marketing’s turf), to closed business (owned by Sales), to profit or loss over the entire customer lifetime (a team effort spanning Product Management, Customer Support, Accounting + Finance, Operations, etc.)

At the individual customer level this is merely interesting — it’s handy to be able to say definitively whether any given customer relationship is profitable or not — but in the aggregate, accurate customer lifetime value (CLV) reporting is the magic insight that can align behavior and effort across the entire organization. 
Feed your CLV + cohort data back into your customer acquisition funnel and watch your priorities snap into focus.

Instead of Marketing just focusing on the cheapest leads, or Sales on the easiest prospects to close — with each department throwing locally-optimized customers over the wall to the next — CLV-driven customer lifecycle management allows every step in the marketing / sales / support funnel to be tuned to deliver maximum value to the entire enterprise over time.

Airlines and casino operators were early pioneers in yield management, fiddling ticket prices and slot machine odds in real time to wring the last nickel from their capital-intensive operations.

Major online players like Zynga, Google and Facebook are now elevating the discipline to a new level to wrest profits from their mostly “free-to-play” offerings — and figuring out how to tap new data sources (like social network demo- and psychographics) to add precision to their offer targeting abilities.

The holy grail of total yield management and customer lifecycle marketing is now in sight — and mobile is the final frontier.

True customer lifecycle management and yield optimization requires instrumentation of the *entire* customer lifecycle — from top-of funnel demand generation, through initial conversion, and then at every key interaction point over the life of the relationship (e.g., upgrade, follow-on purchase, customer service interaction, uninstall, save attempt, etc.) until the customer’s really gone for good.

Native mobile applications deliver a level of sustained, data-rich customer intimacy never before achieved by any business (even the world’s oldest profession). Just the data exhaust from a well-instrumented mobile app (with the proper permissions and privacy controls in place, of course) can tell you more than you’ve ever known about your customers — and that’s *before* they’ve even swiped a finger.

It *should* be straightforward to wire up your most important user actions with logging triggers, bucket those behavior patterns into cohorts, assign lifetime value scores to those cohorts, then play back the tape to find out how you acquired your best cohorts and see if you can do it again. Lather, rinse, repeat — until every action in your organization is tuned to acquire and delight the most profitable types of customers.

Sadly, this idealized future isn’t here just yet…

This all sounds great in theory, and lots of important pieces of mobile yield optimization are already in place, but there are a few key areas where the reality is still catching up to the dream, including…

  • App Store Search

    Google made it possible to discover any website in the world — and also gives website owners free, real-time analytics on the keywords, locations and referrers that drive the most traffic to their sites. Unfortunately for app publishers, the App Stores are black holes for search-based discovery, offering no public data on search volumes, top-performing keywords or search rankings. Luckily, MobileDevHQ (disclosure: I’m an investor) has been tracking both iOS and Android app stores since 2009 and is advancing the discipline of “app store optimization” to mirror the long-standing Web practice of SEO.

  • Conversion Tracking

    By forbidding the use of Unique Device IDentifiers (UDIDs) for sales tracking, Apple has made it fiendishly difficult to connect pre-sale demand generation activity to actual installs. Apple is reportedly working on a privacy-protecting marketing identifier scheme, but meanwhile the problem is being hacked by folks like Mobile App Tracking, Fiksu and Apsalar (disclosure: I’m an investor in Apsalar). Android is better, but still not nearly as transparent as the web-centric affiliate world has led us to expect.

  • In-App Analytics

    Most in-app analytics providers don’t support fine-grained instrumentation of user behavior.  If you want to track installs or in-app purchases, you’re all set; but if your LTV triggers include location, or social actions, or content creation, or any other non-standard user activity you’ll need to roll your own (as big shops like Zynga have done). A TechStars Cloud company — — is working on wrestling this one to the ground for the rest of us.

  • Mobile Customer Engagement + Activation

    Getting an install is one thing; turning that install into an active and profitable customer is quite another. Push notifications are the secret weapon here — we’re all conditioned like Pavlov’s famous dog to look at our phone whenever it asks us to — but need to be handled with care so you don’t wear out your welcome and trigger the dreaded uninstall. Urban Airship is the acknowledged leader in this space, and is working hard to educate the market about “good push” vs. the other kind (disclosure: I’m an investor here as well).

  • A/B Testing + Real-Time Optimization

    Apple’s draconian app approval process has made it equally hard for app-based businesses to practice one of the Web marketer’s favorite tricks: real-time page optimization, showing randomly assigned versions of the same page to different users until the best-performing one wins, and then automatically making that one the default. Right now, app testing + version changes require a full code review — usually a two-week affair at minimum — acting as a huge brake on customer-driven optimization. Startups like Apsalar and are also in the fight here.

The future really *is* coming… it’s just not here yet.
Google’s “Project Glass” is a pretty good indication of where we’re headed with all this: mobile apps will become ambient, always-on companions and problem-solvers for both work and play. And the providers of those apps will be in a position to track and target their customers — wringing value out of them at every step — to a degree never imagined by marketers of the Mad Men persuasion.
You don’t have to love this vision of the future, but if you’re in the software business you’d better understand how to play the game, because it’s going to be here sooner than you expect.