Capitalize on Seasonality of Mobile App Demand
March kicks off a three month period in which mobile entrepreneurs enjoy a wave of consumer demand. The increased appetite for apps is driven by multiple factors – not the least of which is spring break.
Although this yearly pattern of demand is driven largely by entertainment apps that satiate bored spring-breakers and people traveling on vacation, fitness and lifestyle categories also see a bump. Changes in weather and the first prospect of wearing a bathing suit inspire many to seek shiny new apps that might take the edge off of getting in shape, dieting, or creating a new look.
The Opportunity for Mobile Entrepreneurs
Any predictable trend in demand presents a treasured opportunity for savvy entrepreneurs. They signal a moment when your app has a higher likelihood of being perceived as relevant and important – between the months of March and May, fitness and lifestyle apps should be investing as much as possible to reach and acquire high value users.
How to Calibrate Investment in User Acquisition
The question is not whether you should invest in marketing during this period, but rather how much, and by what means?
Answering the question “how much?” is pretty simple. In theory, you should spend as long as your CLTV outpaces your CAC. The answer to “by what means?” can come in a few different forms:
- Cash on hand allocated to acquisition
- Credit cards or bank loans
- Raise funding via VC or angel
- Access to on-demand capital
To paint a picture on how these different methods might play out, let’s consider three mobile entrepreneurs and then explore the emerging category of on-demand capital from companies like Braavo.
Entrepreneur A – Cash on hand
This entrepreneur has the foresight to budget from existing operations to capture seasonal demand – a great first step in maximizing profitability. However, 6 weeks into the period Entrepreneur A exhausts their cash pile or paces spend too slowly over the entire period. In either case, the average CLTV of acquired users outpaces CAC.
By most accounts, Entrepreneur A just got a big win. The foresight to spend aggressively while to meet demand paid off in a swelling user base and a nice boost to profits. However, could the campaign have been more profitable? The fact that the cash ran out before incremental CLTV dipped to meet incremental CAC would indicate there was more demand to be captured. Therefore, although Entrepreneur A enjoyed a boost in profit, there was an opportunity cost incurred by not having enough cash on hand to fully capture demand. This is compounded by the fact that the cash is now tied up in future value from those newly-acquired users that may take months to recapture.
Entrepreneur B – Secures a loan
In addition to some cash on hand, Entrepreneur B secures a loan or uses a credit card. With the extra capital, they are able to capture more of the opportunity and the cost of the capital proves to be a bargain as the ROAS far outpaces the interest on the loan.
However, even with the extra cash on hand there is risk of falling short of maximizing profits. The second, more risky consideration on to taking this path is what happens after the period of growth. Monthly installments don’t accommodate the rhythms of the business and make the business less liquid in the future which compounds the future challenge of capturing demand.
Entrepreneur C – Raise funds via VC or Angel investors
Entrepreneur C, seeking to maximize profit as much as possible and perhaps invest in other areas of the business, raises capital from VC or Angels. In this case, there is a specific amount of capital being raised and therefore comes with the risk of being too little to maximize profit or too much to spend efficiently, leading to substantial dilution. This can lead to a vicious cycle for entrepreneurs that is nearly impossible to escape.
Using On-Demand Capital to Maximize Profit Potential
Each of the above scenarios highlight why traditional funding models don’t accommodate certain realities of mobile startups – they weren’t established with them in mind. In contrast, on-demand capital providers like Braavo are designed specifically for mobile startups.
By integrating directly to app analytics, on-demand financing makes funds available and does the math of CLV vs. CAC in real time so you know that every incremental dollar takes you one step closer to maximizing your profit. Braavo even goes so far as to offer a free business intelligence dashboard so you can keep your finger on the pulse of your business.
Rather than being on the hook for installments or diluting your business, on-demand providers take a small fee based on the revenue you earn as you grow. The Braavo model is well aligned with founders’ interests – the more you grow, the more Braavo can offer. Simply put, you get the capital you need to grow and maximize profit and a low-cost and low-risk price.
If you’re a mobile entrepreneur with an appetite for growth, you can get started immediately. We’ll partner to give you access to the capital and technology you need to generate sustainable, predictable growth now and into the future.