Payback Periods
For every ten User Acquisition teams we explore a partnership with at Bamboo, I hear at least six different ways they define their own success.
Primary KPIs range from Install Volumes, Cost Per Install, First Purchaser CPA, D1 Return on Ad Spend, D7 Return on Ad Spend, D28 Return on Ad Spend, CAC to LTV ratios, and the list goes on…
My personal favorite for User Acquisition teams is to focus on Payback Period.
Focusing User Acquisition teams on Payback Period does a few great things:
It aligns UA teams around their true business purpose. Despite all the day-to-day noise and proxy metrics we use, we exist to earn our ad buying investments back quickly and then make the firm a profit from each cohort after that.
It requires the team to monitor historic cohorts over time to ensure Payback is being achieved and that the team is achieving Payback faster over time.
It forces healthy business discussion between UA and every other team around goal achievement and what levers are available (from UA, Product, Retention, Leadership, etc) to help achieve those goals in an even better way for the firm.
Optimizing for Payback Period is simple, but not easy.
It requires full organizational buy-in (not just from UA, but from almost all internal teams who can support), robust attribution and analytics infrastructure, and UA teams that have the know-how and capacity to optimize for true long term returns.
We partner with some of the most innovative growth teams in mobile apps and digital commerce and we are still not uniformly optimizing for payback period across all of our clients — often because of the reasons outlined above and a number of others.
Payback Period isn’t the perfect success metric (no individual metric is) but I hope to see more UA teams use it as their primary KPI in 2020 and beyond.
I know the Bamboo team will continue pushing our clients to do so.
To long term returns!