Inventory purchase: optimize your app with performance marketing
In digital marketing, different purchase inventory models allow advertisers to promote their products or services efficiently. These models are essential in performance marketing, as they help measure and optimize the performance of advertising campaigns.
In this article, we explore inventory models: CPI (Cost Per Install), CPA (Cost Per Acquisition), and CPM (Cost Per Thousand Impressions), look at their relationship to LTV, and answer some questions on this topic.
What are inventory purchase models?
Inventory purchase models are pricing structures used in digital marketing to purchase advertising space on different platforms, such as mobile apps, websites, or social media.
These models allow advertisers to pay for specific results, such as app installs, product or service purchases, or simply for the exposure of their ads to a selected audience.
"Inventory in the digital marketing industry all the advertising space that exists outside: an Instagram post from an influencer, a YouTube video, a banner, etc".
Patricio Ábalos, Head of Customer Success at Rocket Lab | Mobile App Growth
How many purchase models are there?
There are several inventory purchase models in performance marketing, but the most common are CPI, CPA, CPM, and CPC.
CPI (Cost per Installation)
The CPI purchase model means the advertiser pays a certain fee each time someone installs their app. This model is popular for companies that want to increase the number of downloads and users of their applications.
CPIs are subject to many factors (region, ad format, vertical application, etc.), so it's important to always refer to historical data.
CPA (Cost per Acquisition)
In the CPA purchase model, the advertiser pays when a specific action is taken, such as a purchase, subscription, or filling out a form. The main goal of this model is to drive conversions and get high-quality leads.
CPM (Cost Per Thousand Impressions)
The CPM purchase model means that the advertiser pays for every thousand impressions of their ad, regardless of whether an action is taken or clicked. This model is suitable for increasing the visibility and reach of the brand since you pay for exposure to a specific audience.
CPC (Cost per Clic)
The CPC (Cost Per Click) inventory purchasing model is a strategy in which advertisers pay for each click that users make on their ads. It has two features: a fixed cost per click, and advertisers only pay when users interact with their ad by clicking on it.
In this purchasing model, advertisers have greater control over their budget. It also allows the optimization of marketing campaigns based on the results obtained.
What is the model that advertisers look for the most?
Advertisers prefer the CPA model because they pay only when a specific result is achieved, and it gives them greater ROI security.
What is the best model?
The best inventory purchase model varies depending on the type of business and marketing goals.
The best thing to do is research thorough analysis of all data, make tests, and experiment with different models to determine which one offers the best results for a particular business. Evaluate campaign performance to make informed decisions about which model works better in each case.
There is no single model that is best for all advertisers.
How can inventories be purchased? Patricio Ábalos, Head of Customer Success at Rocket Lab | Mobile App Growth clarifies what Mobile Inventory Purchasing Models are in our podcast episode.
How to measure the performance of your campaign? Look at ROAS and LTV
Return on advertising spend (ROAS) and customer lifetime value (LTV) are two´s fundamental metrics in digital marketing performance.
What is ROAS? (Return On Ad Spend)
Patricio Ábalos, a Rocket Lab benchmark, says that ROAS is here to stay. ROAS is a metric used to measure the effectiveness of an advertising campaign in terms of return on investment made in ads. How is it calculated? Measurement is simple:
It is calculated by dividing the revenue generated by the campaign by the total cost of ad spend and multiplying by 100 to get a percentage. ROAS allows advertisers to assess how profitable their advertising spending is and make informed decisions about budget allocation.
And the LTV?
Apps must acquire high-value users who will continually visit your app, engage frequently and actively with its features, and make in-app purchases.
LTV is calculated by multiplying the Average Revenue generated by the customer on each purchase by the Average Purchase Frequency and the Expected Duration of the Customer Relationship.
It is relevant to measure LTV to understand the different media one uses and to know what type of LTV users bring. This can vary according to promotions and seasons, says Patricio Ábalos.
The relationship between ROAS and LTV is critical, as a campaign can have high ROAS but low LTV, indicating short-term profitability but a lack of long-term sustainability.
To optimize the campaign performance is necessary to find a balance between ROAS and LTV, ensuring that the revenue generated in the short term does not compromise the ability to obtain long-term benefits through retention and increased value of the campaign.
What are the most common goals that apps look for in their remarketing campaigns?
Generate sales and conversions. Many apps seek to increase sales of their products or services. To reach this goal, an inventory purchase model oriented to customer acquisition (CPA) is ideal.
Increase brand visibility. The focus of the apps is on increasing the recognition and visibility of your brand. In this case, the goal would be to use an inventory buying model that allows you to reach a broad audience and maximize ad exposure, such as the CPM buying model.
Get app downloads. If the goal is to promote a mobile app, the focus will be increasing the number of downloads. The CPI purchase model would be relevant since you would pay for each app´s installation.
Generate leads and prospects. The CPA purchase model would be the best since you would pay for each lead acquisition.
Improve return on investment (ROI). It means using inventory-purchase models which deliver strong results relative to ad spend.
When starting a new performance campaign, keep a few recommendations in mind to maximize success and get the best results.
1. Define your goals
Do you want to increase sales, generate leads or increase brand recognition? Setting clear goals will help you measure the campaign's success and adjust your strategies as required.
2. Know your target audience
Who is the campaign for? Conduct market research and demographic studies, and analyze your existing customer data to understand deeping of who your ideal customers are and what motivates them. Understanding your target audience is essential to creating relevant ads and messages.
3. Select better channels
How to reach your target audience? They can be social media platforms, websites, mobile apps, or other specialized channels.
4. Choose the correct purchase models
Is it CPI, CPA, CPM, or CPC? Evaluate the pros and cons of each model and choose those that give you the best balance between cost and results. Consider those that best align with your goals and budget.
5. Test and optimize
Don't settle for just one version of your ads. Run A/B tests to test elements like design, message, call to action, etc. Analyze the results and optimize your ads based on the data collected. The ongoing optimization process will help you improve your campaign performance over time.
Remember that success in performance marketing takes time, patience, and a continuous improvement mindset. As you collect data and learn from your past experiences, you can adjust and refine your campaigns to achieve better results.