Why Good Apps Are Not Good Enough

A Forrester Consulting Thought Leadership Paper Commissioned By IBM

Why Good Apps Are Not Good Enough Measure And Move Your Mobile App To Greatness

October 2015

Table Of Contents Executive Summary ........................................................................................... 1 The Mobile App Journey: From Bad To Good To Great ............................... 2 Opportunity Is Beating At The Door For Great Apps .................................... 5 Enterprises Must Tackle Persistent Challenges .......................................... 10 Understanding App Performance And Impact ............................................. 13 Key Recommendations ................................................................................... 14 Appendix A: Methodology .............................................................................. 15 Appendix B: Supplemental Material .............................................................. 15 Appendix C: Endnotes ..................................................................................... 15

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Executive Summary There’s nothing wrong with a good mobile app, except that it isn’t great. On the surface, a good mobile app may appear to satisfy customers and generate revenue. But separating the great apps from the good reveals significant, long-term differences in customer loyalty and spend. With companies competing for customers’ precious mobile moments, the opportunity is ripe to meet and exceed their expectations and reap the financial rewards. In August 2015, IBM commissioned Forrester Consulting to evaluate what turns consumers and other users both off and onto a mobile app (and its authoring brand), focusing on the following questions: What elevates a good, serviceable, and even profitable app into the realm of great? And if a mobile app achieves greatness, what is the impact? Forrester Consulting conducted a survey of 1,000 consumers in the US, UK, Canada, and India who use mobile devices, a survey of 200 technology and business professionals in the US, UK, Canada, and India responsible for mobile apps, and six qualitative interviews with mobile app initiative leaders in enterprises of 500+ employees. Forrester found that companies that produced mobile applications they defined as great achieved remarkable results, even over those who produced mobile apps they defined as good. KEY FINDINGS Forrester’s study yielded four key findings:

Firms must measure the things that will lead them to create great mobile apps. .

2 1 A great app not only works flawlessly, it also provides immediate and relevant mobile moments.

Great apps increase revenue, reduce cost, and engage customers exponentially more than good apps.

3 Firms must invest to create great apps.

4

2

The Mobile App Journey: From Bad To Good To Great In August 2014, IBM commissioned Forrester Consulting to examine the impact of “good” or “bad” mobile applications on a company’s brand, revenue, and cost structure. The study found that bad apps cost the business a great deal of revenue opportunity and were, at best, a waste of development time and resources; at worst, they were damaging to brand reputation. But good apps generated revenue and operational efficiencies. While enterprises and consumers agree a bad app is a waste of time, what about the difference between a good app and a truly great one?

FIGURE 1 The Top Five Things Consumers See In A Great App

“Is your app crash-proof?” “Consumers still insist on the basics: stability, performance, basic functionality. Are those flawless?” Does not crash/freeze/ display an error Does not suck down my battery or take up a lot of memory Saves me time

GOOD TO GREAT: THE SUM OF THE PARTS DOES NOT EQUAL THE WHOLE The 2015 Forrester Consulting study commissioned by IBM followed up on the 2014 surveys and focused on finding the difference between good and great apps. If a mobile app achieves greatness, what is the impact on the business? Is it worth going from good to great? There is no magic definition of a “great app.” What makes a mobile banking app truly great might not work for a mobile ride-share app. But on a higher level, there are basic attributes of mobile apps that must be present for a mobile app to be good — and must be flawless for a mobile app to be great. In this study, consumers and enterprises appear aligned on what they value in the app’s qualities. A mobile app must master the basics (Figure 1): •

It should not crash.

•

It should not use too much power.

•

It should save time.

•

It should provide quick, easy access to features.

Consumers are surprisingly uncomplicated at first glance. They value performance and connection over design bells and whistles. So why create a great app if good is good enough? This study found that great apps provide astonishing and compelling returns to those companies determined enough to make them. To do this, they add a key secret ingredient to flawless performance. The secret ingredient is the mobile moment. Forrester defines the mobile moment as that moment where a customer gets anything she wants, immediately, and in 1 context. The enterprise understands its customers and is obsessed with winning, serving, and retaining them. This blurs the distinction between the physical and digital worlds

55%

Sets my privacy settings to my preferences Gives quick access to features I use most

50% 45%

42% 39%

Base: 1,000 consumers in US, Canada, UK, India who use mobile devices Source: A commissioned study conducted by Forrester Consulting on behalf of IBM, September 2015

and challenges the way companies do business and use technology to help. As an example, Forrester Consulting asked 1,000 consumers to name their favorite mobile app and why that app was their favorite. The wide variety of answers to the “why” question reinforces the power of context in the mobile moment. The themes ranged from how easy the app was to use to the connection, fun, and context that the app provided (Figure 2). UNDERSTANDING CONSUMER MOBILE APP BEHAVIOR REVEALS THE IMMENSE OPPORTUNITY It is critical that any business that creates mobile apps understands how transformative the mobile moment is ® (Figure 3). From Forrester’s Consumer Technographics research on mobile use, we know that:

›

Mobile moments transform commerce and service experiences. Smartphones are now the majority of all mobile phone sales. More than 50% of US online adults access interactive content on their phones at least daily. And this phenomenon is global: Among online consumers, 47% of UK consumers, 56% of urban Brazilian consumers, 84% of urban Chinese consumers, and 74% of urban Indian consumers connect to 2 interactive content at least daily.

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FIGURE 2 Why Consumers Love Their Favorite Mobile App

users focus on the best apps. Winning and keeping a spot in this coveted top five is challenging.

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Easy use anywhere touch weather Because update saves check need Fun all free good keep

friends

find great keeps communicate info love most games way instant music chat

time stay

like

useful

access

helps

money convenient

family app

game

Work flawlessly in terms of uptime, power use, and speed.

Quick

•

Be easy to access and use anytime, anywhere.

•

Give the user control over the interaction.

•

Provide relevant contextual experiences.

Base: 1,000 consumers in US, Canada, UK, India who use mobile devices Source: A commissioned study conducted by Forrester Consulting on behalf of IBM, September 2015

›

To go from good to great, a mobile app must: •

connected

›

Momentum will build in mobile apps that generate and use insights the fastest. This contextual data will enable pushed, rather than pulled, moments as mobile app professionals better anticipate customers’ needs.

news

anytime people sports easily information connect gives

shopping

›

Mobile commerce is on the rise. Currently, mobile accounts for 10% of online sales, and that will continue to 3 grow. But the bigger opportunity is mobile’s influence on sales in-store. Like search, the value of mobile lies in the 4 clues the data offers about purchase intent.

Consumers spend over 85% of their time on smartphones within apps. They do lots of things on their smartphones and even on their tablets, like checking mail and checking the Web. But they click and stay for most of their time within an app downloaded from an app store. Consumers consolidate their mobile moments into a handful of experiences for their own convenience. On average, just five apps that consumers download from the app store make up a sizable 84% of the time spent in mobile apps. Given the glut of choice of mobile apps,

“A great app provides our customer with whatever information and services that he or she wants at whatever point he or she wants it, while keeping the interface simple and clean but being very responsive and quick.” — Director of product management, mobile commerce at US retail chain

In other words, a great mobile app masters the mobile moment for the customer. Is it really worth it? The next section explores the enormous opportunity of a great mobile app.

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FIGURE 3 The Transformative Opportunity Of Mobile

Source: “Mobile Moments Transform Commerce And Service Experiences,” Forrester Research, Inc., February 11, 2015

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Opportunity Is Beating At The Door For Great Apps Great apps outperform good apps in four key areas:

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Creating direct revenue. The revenue creation difference between a good app and a great app is astounding. Mobile professionals in this study who thought their best-performing app was “good” reported an average of $9.5 million in additional revenue from direct sales, advertising revenue, or other direct revenue sources. Those who thought their bestperforming app was “great” saw an average of five times that (Figure 4). Mobile commerce is steadily increasing as more mobile users download apps and become more confident in the security of transactions. Furthermore, digital wallets and other conveniences such as digital coupons are making it easier for customers to conduct mobile transactions, and consumers also use mobile in-store to research and cement their purchase decision, increasing sales even more.

“What we’ve noticed is that a customer who engages with both the online site and the mobile app tends to spend 6X more than an in-store-only customer.” — Director of product management, mobile commerce at US retail chain

FIGURE 4 Key Area 1: Creating Direct Revenue

Make an average of 5x more revenue with a great app

$45,609,066

$9,526,037

Great apps

Good apps

Base: various mobile app professionals, sorted by respondents who self-rated their best-performing mobile application as either “great” or “good” Source: A commissioned study conducted by Forrester Consulting on behalf of IBM, September 2015

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Influencing sales in other channels. Mobile commerce revenue pales in comparison to mobile’s influence on sales in the store or on the Web. Consumers are using mobile devices to research products that they purchase at a later time; they can use them to compare prices, check ratings and reviews, and access QR codes to get more information while shopping in a physical store. After completing a purchase, consumers are almost as likely to use a smartphone as they are to use a desktop/laptop; this is the first point on the customer journey where mobile devices are as popular as desktops/laptops. The reason? Flexibility. Consumers appreciate that they can use a variety of options — emails, text messages, messaging 5 apps/chat functions, online communities, social networks, or traditional voice calls — to get answers and assistance. And if the mobile app is a great one, the halo effect results in an average increase of almost six percentage points (Figure 5).

“We’ve seen 10-figure sales through mobile devices. But that number is insignificant until you attribute sales in-store to mobile — for each dollar spent online, it influenced $5.00 in in-store purchases.” — eCommerce director, US discount retailer

FIGURE 5 Key Area 2: Great Apps Add Six Points To Revenue From Other Channels

Great apps increase sales in other channels “By how much would you estimate the app influenced sales through other channels (website or in-store)?”

Average increase

Average increase

44.1%

38.3%

Great apps Good apps


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Lowering costs. Well-designed mobile apps streamline a service and can decrease operational and capital costs (Figure 6). Personnel costs associated with serving customers in brick-and-mortar locations, such as selling on the retail floor, taking reservations over the phone, or handling customer inquiries and complaints, can be reduced through apps that also improve their productivity — sometimes by enough to save on full-time equivalents. Apps that significantly change the way customers do business could lead to closing or consolidating locations.

“Our prescription refill feature had a twofold impact — it prompted a bump in our customer satisfaction scores, and led to operational efficiencies because customers were using their phones [to order refills] rather than picking up the phone and talking to a pharmacist.” — Director of mobile commerce, US drugstore chain

FIGURE 6 Key Area 3: Great Apps Save Money And Boost Productivity

Great apps go right to the bottom line Great apps beat good apps on cost savings by 12 percentage points. Productivity rises an additional 10 points. Great apps

Good apps 44%

34% 29%

17%

Decrease operational costs

Improve employee productivity


8

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Increasing customer engagement and loyalty through improved customer experiences. Perhaps the most significant long-term impact an app can have on customers is an increase in their engagement and loyalty (Figure 7). More engaged customers become more valuable return customers who spend more money and recommend products and services to other friends. The best mobile experiences provide their users with immediate value from the moment they download and open the application. These leaders prioritize relevant functionality and perform reliably throughout the experience. The laggards? They hassle customers with unnecessary content and disappoint — or crash — in moments of 6 need.

“The mobile channel . . . has proven to be a large driver of sales and customer satisfaction and engagement. We are proportionately aligning our mobile investment with that growth.” — Director of product management, mobile commerce, US retail chain

FIGURE 7 Key Area 4: Great Apps Generate Higher Rates Of Customer Engagement, Experience, And Loyalty

Great apps serve the customer Great apps improve customer loyalty rates by 15 percentage points. Return customers spend more and cost less. Great apps

Good apps

50% 44%

47%

46%

36% 32%

Customer engagement

Customer experience

Customer loyalty


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THE COMPOUNDING FINANCIAL IMPACT OF A GREAT APP A great mobile app truly propels an organization forward when it both drives sales and increases customer satisfaction. A great app generates five times more revenue than a good app. Furthermore, compared with a good app, a great app increases customer engagement by six percent, increases customer experience by 10 points, and increases customer loyalty by 15 points. Engaged, loyal customers spend more than average customers. Compounded over time, a good app and a great app diverge further and further, setting one competitor ahead of another and on a course that can’t be imitated easily (Figure 8). FIGURE 8 The Compounding Financial Impact Of A Great App Revenue

Competitor B: Great app

Compounding Financial Impact: • The app generates 5X revenue while decreasing costs. • The app leads to increased customer experience and loyalty.

5

4

• Loyal app users recommend the company and app to friends and family.

3

• The app leads to increased spend from loyal customers. Engaged app user

Revenue

2

1

Competitor A: Good app

Source: A commissioned study conducted by Forrester Consulting on behalf of IBM, September 2015

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Enterprises Must Tackle Persistent Challenges ENTERPRISES ARE UNDER-RESOURCING DEVELOPMENT EFFORTS Of the respondents surveyed, 58% plan to spend less than $2 million in total on mobile app development: 23% plan to spend between $1 million and $2 million, 19% plan to spend between $500,000 and $1 million, and 16% plan to spend less than that. For most of our respondents, that amounts to less than 1% of their overall revenue. Yet they plan to create several new apps in the next 12 months (Figure 9). Depending on the situation, $2 million might be enough, but companies must understand that the total investment in

mobile apps may require additional ecosystem investment as well. A common pattern: A customer-facing mobile app informed by real-time contextual data drives revenue via eCommerce services and activates operations via existing systems of record. Such new digital business scenarios demand interconnections between domains, require 7 unprecedented integration, and can be complex and costly. Under-resourced development plans could doom the best “great app” intentions.

FIGURE 9 Enterprises Are Under-Resourcing Development Efforts Firms have big ambitions . . . Mobile apps to double in the next year 3% 13%

20+ apps 6-20 apps 1-5 apps

. . . but spend relatively little Between $1M and $2M

23%

42% $501K to $1M

3% 7%

$0 to less than $500K

19%

Current

19%

16%

Plan to build in next year

Base: 200 US, Canadian, UK, and Indian decision-makers responsible for mobile app initiatives at companies of 500+ employees Source: A commissioned study conducted by Forrester Consulting on behalf of IBM, September 2015

58% of enterprises spend