Mobile Services: How to calculate the ROI and justify the budget you need

Few consumer-facing product and service companies AREN'T working on their mobile strategy today. Everyone is thinking about how best to engage with their customers on their cell phones. And, can you even do NEW customer acquisition with teenagers or young adults without a mobile option?

Many mobile initiatives start without a plan or a strategy. They start with:

"Our CMO was observing his teenage daughter use her cell phone ...."

"Our competitors have an iPhone application. My boss told me to get one for us."

It's not ideal to start a mobile strategy this way. Not such a bad way to begin the thought process at least. Once companies get started developing a mobile strategy (and we hope they use POST), they soon begin to realize how much it could cost. Then they start asking questions like this,

"Is it even worth it given that only x% of our customer base is using mobile banking/travel/(fill in)?"

"Is anyone buying anything on their cell phone."

"We didn't budget for mobile for this year."

First, for many consumer brands, products or services, they can't afford NOT to be doing anything in mobile. That would be analogous to no Web presence in circa 1999. Secondly, consumers ARE making purchases on their cell phones. (See my 2010 predictions) Some companies are aready doing tens of thousands each day. Mobile will INFLUENCE many more purchases offline and online as well.

Revenue is just one benefit of mobile. Other benefits include cost savings as well as all of the benefits (e.g., increased customer satisfaction) derived from providing consumers with better or more convenient experiences. The "R" in the ROI of mobile will likely have many additive streams over time that sum up to one larger "R."

On the flip side, there are many costs - software, message delivery, development, marketing, employee training, etc.

In order to get budget, your mobile objectives must roll up into someone's business objectives. (See the "O" of Mobile POST). More and more of our clients are being asked how mobile will impact the bottom line.

The ROI calculation of mobile may seem straightforward for those who have done calculations for IT investments or spend before. Unlike internal projects/products/services used by your employees, however, you can't dictate that your consumers will use your mobile service. They won't use it unless mobile is more convenient (see framework for convenient mobile services) and better than other means of achieving their end goal. This is one of the most difficult elements of the analysis - forecasting consumer adoption and usage. Much of what you see in the press is consumer adoption - "55% of all adults use SMS." Yes, but is my mother who uses SMS once a month really going to use SMS for mobile banking? Probably not. Setting expectations around consumer adoption and usage of your service will lie more so in usage behavior than adoption. How fast will they adopt or increase usage? Many factors ranging from how much you spend on marketing to how well you design the service.

We outline the process for calculating the ROI of your mobile services here in this new report. It walks through identifying and quantifying both the benefits and the cost elements one by one.

Comments

How to calculate the ROI and justify the budget you need

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re: Mobile Services: How to calculate the ROI and justify the b

Nice piece Julie. A few other things I would add...

When developing a mobile strategy most companies today are actually driven by the needs of a particular line of business. While a first project helps to drive a strategy, it many times drives it the wrong way. So much focus then goes into the specific requirements of the first app, the overall strategy often gets lost. Developing a strategy before an app has to be delivered allows for bringing in stakeholders across the business, IT and leadership to ensure that mobile does not break the bank. Consider the financial impact of having to now build every app for desktop and for mobile, support both and do something for consumer applications as well. Mobile development has its own experience and knowledge requirements, which is much different than building desktop and web applications. An understanding of carrier connectivity, handling that connectivity, transaction flows over that connection are just a few items.

The most important consideration to begin the strategy discussions is how much the enterprise wants to embrace mobility. A few starter questions are:
Are there needs for multiple internal applications?
Is there an interest in building/maintaining applications internally?
Is there a desire to produce consumer applications?
What is the value of the applications I will provide?

As mentioned in this article, there is a trend similar to the rush to build websites of the early 90s which is moving mobility to the forefront. The iPhone has brought additional pressure which is melding the consumer and enterprise app and device market. The real change becomes the need to provide apps to consumers with much higher value than the informational apps of the past. To get that edge most leading companies are trying to provide targeted content and enterprise data in their applications. This forces a higher level of security, an ability to manage applications, and a deeper enterprise system integration. The saturation of the mobile applications market means the app must be useable, well thought out and provide valuable services and information. The old put up a site with a few blurbs to show market presence doesn’t work today. Mobile apps are a boon when well thought out.