Calculating the ROI of in-app messaging

In this guide we explore how to explore the business case for in-app messaging by effectively assessing the potential and actual return on investment.

Who is this guide for?

If you're analysing the potential—or actual—return on investment for in-app messaging in your organisation, this guide is for you. We share how Atomic customers assess the benefits, and share practical examples of the messaging use cases that underpin the suggestions provided. every organisation is different, so naturally, you'll need to complete your own assessment factoring in your unique situation.

Why consider investing in an in-app messaging channel at all?

For most companies that operate in digital channels, their app or authenticated web portal should be their primary engagement channels.

Most teams we encounter who are looking to improve their in-app messaging typically fall into one of three categories:

  1. They have tried and failed to add an in-app messaging channel to their app or using some of their enterprise tech to deliver it is something they’ve tried; or
  2. They have a plan to add in-app messaging on their backlog; or
  3. They have built a basic messaging channel, but the functionality is too limited, hard to use, or is broken.

Most have realised they’ll never deliver the functionality to a quality and timeline that will help them win in market. So comes the question of how to measure the ROI.

Estimating ROI

An important point to make is that before you integrate an in-app messaging channel to your app, a majority of the benefits can only be estimated (not measured).

The best approach to estimating ROI should consider the benefits and the costs of the software. Here's the classic formula:

Return on Investment calculation

Return on Investment (ROI) = (Estimated (or actual) benefits - Costs) / Costs

This guide will focus mainly on the benefits below.

Estimated (or actual) benefits

The benefits from an in-app messaging channel span 3 categories:

  1. Decreases in costs
  2. Increases in revenue
  3. Reduction in risk

These three categories overlap more often than not.

ROI Examples

Below are six examples of how to calculate ROI for a customer journey.

Decrease in costs

Example 1: Two Factor Authentication SMS Replacement
Bank A sends 1,000,000 SMS messages per year for a 2FA user journey. Each SMS cost the bank $0.02.

The current cost for sending that message is $20,000, and they would need to continue sending it to 30% of the customers.
So the total cost savings (estimated benefit) of sending the one SMS as an in-app message is $14,000 per year.

Example 2: Proactive notification of Delayed payments
Bank A received 1,000,000 phone calls a year, and is estimated many of them could be self-service journeys completed in-app, with an easy to use and actionable UI.

If they could replace calls with self-service in-app journeys for 5% of call volume, then they would receive 50,000 less calls, which would result in savings (estimated benefit) of $75,000

Increase in revenue

Example 3: Home Loan Renewal Prompt
Bank A has 795,000 customers with home loans, and 300,000 renew each year. If through an easier refixing journey, they could retain 0.5% (150) of the customers who switch each year, then the increase in revenue (estimated benefit) is $3,300,000 per year.

Reduction in risk

Example 4: Collect Net Promoter Score feedback from your customers
Imagine being able to take many of the items on your product backlog, and deliver them to customers almost immediately.

Example 5: Collect missing customer details
A missing email address for a customer may be more likely to churn, and is worthy to your company.
If collecting an email is worth $500 and you estimate 10% of the 1,500 customers who have missing email addresses will not churn, a benefit for launching that use case of $75,000.

Example 6: Urgent Scam Alert
Getting scam alert messages to customers in a timely manner to help prevent them becoming the victims of fraud.

If the company sends 10 warnings per year, and has 1,000,000 customers, 90% of whom would see the message, the estimated value is $40,500.

If we add up the combined ROI for just these six use cases, we get more than $3,500,000.

Other benefits to consider

Opportunity costs for developers

The opportunity cost of having developers focus on building and maintaining a messaging channel, rather than improving core flows and functionality.

Retention of Staff

There are also other benefits from using best-in-class software.

Urgent messaging convenience

It’s difficult to estimate the value from having a channel when you can send messages directly to customers, and target only those it is relevant for quickly and easily.

Win market share through product experience

In delivering a beautiful user experience effect customer retention and acquisition through referral.

Deliver true personalisation to customers

Deliver real-time, data (or AI) driven and channel-appropriate messages that go beyond basic personalisation — i.e. “hi first_name”.

Costs

On the costs side, be sure to include the subscription costs, time to value, and implementation costs.

Estimating ROI

Return on Investment calculation
For example (yearly)

  • Estimated (or actual) benefits = $5,000,000
  • Costs = $1,000,000

ROI = $4,000,000 / $1,000,000 = 4

Measuring ROI

The single best way to prove the return on investment is to run a proof of value to provide the proof of return on investment ROI.

Atomic has inbuilt tools that enable you to track the performance of a journey, for example a time or cost savings.