What Are the Top 7 KPI Metrics of a Personal Financial Advisory App Business?

As the personal financial advisory app market continues to evolve, small business owners and artisans face the challenge of accurately measuring their performance in this dynamic industry. Key Performance Indicators (KPIs) are essential for evaluating the success of any business, but in the artisan marketplace, they play a crucial role in understanding customer behavior, sales trends, and overall business health. In this blog post, we will delve into 7 industry-specific KPIs that are indispensable for personal financial advisory apps. From customer acquisition costs to retention rates, we will provide unique insights and practical tips to help you optimize your financial performance and make informed decisions for the future of your business.

Monthly Active Users (MAU)

Definition

Monthly Active Users (MAU) is a key performance indicator that measures the number of unique users who engage with a platform or app within a given month. This ratio is critical to measure as it provides valuable insights into user engagement and retention, both of which are essential for the success of a personal financial advisory app like WealthScope. By tracking MAU, businesses can understand the level of user activity, identify trends, and make informed decisions to improve customer satisfaction and loyalty. Ultimately, MAU is critical to measure as it directly impacts business performance by indicating the app's popularity, stickiness, and overall user experience.

How To Calculate

To calculate MAU, take the total number of unique users who have engaged with the app within a 30-day period. This includes users who have either signed in, completed a transaction, or performed any other meaningful interaction within the app during the month. Divide this figure by the total number of days in the month to get the average number of active users per day.

Example

For example, let's say WealthScope had 10,000 unique users engage with the app in the month of June, and there were 30 days in the month. To calculate the MAU, we would divide 10,000 by 30, resulting in an average of 333 active users per day for the month.

Benefits and Limitations

The benefit of tracking MAU is that it provides a clear understanding of user engagement and retention, allowing businesses to tailor their strategies to improve customer satisfaction and loyalty. However, one limitation of MAU is that it doesn't distinguish between casual and power users, so it's important to complement this metric with others to gain a comprehensive view of user behavior.

Industry Benchmarks

In the personal finance advisory app industry, a typical MAU benchmark could range from 20,000 to 50,000 users for an average-performing app, with above-average performance reaching between 50,000 and 100,000 MAU. Exceptional performance levels could exceed 100,000 MAU, indicating a highly engaging and popular app within the industry.

Tips and Tricks

• Invest in user acquisition strategies to attract new users and increase MAU.
• Focus on enhancing user experience to encourage repeat engagement and retention.
• Offer personalized incentives and rewards to keep users coming back to the app.
• Analyze user feedback and behavior to continuously improve the app's features and functionalities.

Average Session Duration

Definition

The Average Session Duration KPI measures the average length of time users spend on the WealthScope app during each visit. This ratio is critical to measure as it provides insight into user engagement and satisfaction with the app's features and content. In a business context, this KPI is important as it helps assess the effectiveness of the app in capturing and retaining users' attention, which directly impacts user retention, app utilization, and overall customer experience. A high average session duration indicates that users are finding value in the app and are likely to return, resulting in improved business performance and customer loyalty.

How To Calculate

To calculate the Average Session Duration, divide the total duration of all sessions by the number of sessions. The formula can be represented as follows:

Example

For example, if the total duration of all sessions in a day is 100 hours and the number of sessions is 500, the Average Session Duration would be 100 hours / 500 sessions = 12 minutes per session.

Benefits and Limitations

The benefits of monitoring the Average Session Duration include gaining insights into user engagement, identifying popular app features, and improving the overall user experience. However, it's important to note that this KPI does not provide context for the quality of user interactions, and long session durations may also indicate difficulty in finding desired information, causing frustration for users.

Industry Benchmarks

According to industry benchmarks in the US, the average session duration for a financial advisory app is approximately 9-10 minutes, with above-average performance considered to be around 12-15 minutes. Exceptional performance levels for this KPI could reach 20 minutes or more, indicating highly engaged users.

Tips and Tricks

• Optimize app navigation and user interface to make it easy for users to find information
• Create engaging and interactive content to increase session duration
• Analyze user behavior to understand which app features are driving longer sessions and focus on improving those aspects
• Offer personalized recommendations and notifications to keep users engaged during their sessions

Customer Acquisition Cost (CAC)

Definition

Customer Acquisition Cost (CAC) is a key performance indicator that measures the total cost a business incurs to acquire a new customer. It is crucial to measure because it directly impacts a company's profitability and helps in assessing the effectiveness of marketing and sales efforts. By tracking CAC, businesses can understand how much they need to invest in acquiring customers and optimize their strategies accordingly.

How To Calculate

The formula for calculating Customer Acquisition Cost (CAC) is: CAC = Total Sales and Marketing Costs / Number of New Customers Acquired. The numerator represents the total amount spent on sales and marketing activities, while the denominator is the number of new customers gained within a specific timeframe. By dividing the total costs by the number of new customers, businesses can determine the average amount spent on acquiring each customer.

Example

For example, if a company spent $10,000 on sales and marketing in a month and acquired 100 new customers during that same period, the Customer Acquisition Cost (CAC) would be calculated as follows: CAC = $10,000 / 100 = $100. This means that, on average, the company spent $100 to acquire each new customer during that month.

Benefits and Limitations

The main benefit of tracking CAC is that it provides insight into the effectiveness of a company's customer acquisition strategies and helps in determining the return on investment for marketing and sales activities. However, a limitation of CAC is that it does not consider the long-term value of acquired customers. This means that while a low CAC may seem advantageous, it's essential to also consider the lifetime value of customers to evaluate overall profitability.

Industry Benchmarks

According to industry benchmarks, the typical CAC for businesses in the US ranges from $7 to $14. However, above-average performance is seen in industries where the CAC falls below $7, while exceptional performance is achieved when the CAC is below $5. These benchmarks can serve as a guide for businesses to assess their customer acquisition costs and make necessary adjustments to improve their performance.

Tips and Tricks

• Invest in targeted marketing efforts to attract high-quality leads and reduce overall acquisition costs.
• Optimize the sales process to improve conversion rates and maximize the impact of marketing investments.
• Implement referral programs and customer loyalty initiatives to enhance customer retention and increase lifetime value.
• Analyze customer acquisition channels to identify the most cost-effective strategies and allocate resources accordingly.

Customer Lifetime Value (CLTV)

Definition

Customer Lifetime Value (CLTV) is a key performance indicator that helps businesses estimate the total financial value a customer will bring throughout their entire relationship with the company. This ratio is critical to measure as it provides insights into the long-term profitability of acquiring and retaining customers. In the business context, CLTV is essential as it allows companies to understand the worth of different customer segments and tailor their marketing, service, and retention strategies accordingly. By measuring CLTV, businesses can make informed decisions about resource allocation and customer acquisition costs, ultimately impacting their bottom line.

How To Calculate

The formula to calculate Customer Lifetime Value (CLTV) involves determining the average purchase value, the average purchase frequency rate, the customer lifespan, and the average lead-to-customer conversion rate. Each of these components contributes to the overall calculation by providing a comprehensive understanding of customer behavior, purchasing patterns, and retention rates.

Example

For example, if a customer makes an average purchase of $100 every month, with an average purchase frequency of 2 times per month, and they remain a customer for 5 years with an average lead-to-customer conversion rate of 20%, their CLTV would be calculated by multiplying these values together.

Benefits and Limitations

The main advantage of using CLTV is the ability to identify high-value customer segments and allocate resources accordingly, leading to improved customer acquisition and retention strategies. However, a potential limitation of CLTV is that it assumes customers will continue to behave consistently over their lifetime, which may not always be the case due to changing market conditions or customer needs.

Industry Benchmarks

According to industry benchmarks in the US, the typical customer lifetime value for a financial advisory app like WealthScope is approximately $5,000, with above-average performance reaching $7,500 and exceptional performance exceeding $10,000. These benchmarks reflect the long-term value that a customer can bring to the business and serve as a guide for evaluating the effectiveness of customer acquisition and retention efforts.

Tips and Tricks

• Focus on increasing average purchase value through upselling and cross-selling techniques.
• Enhance customer retention by providing personalized and proactive financial advice through the app.
• Invest in targeted marketing efforts to attract high-value customer segments with the potential for long-term relationships.

Conversion Rate from Free to Paid Users

Definition

The Conversion Rate from Free to Paid Users KPI measures the percentage of free users who upgrade to a paid subscription or service. This ratio is critical to measure because it directly impacts the revenue and growth trajectory of the business. By understanding this KPI, companies can assess the effectiveness of their free offerings in converting users into paying customers, ultimately influencing the bottom line and overall business success. It is important to measure this KPI as it provides insight into the conversion funnel and helps identify opportunities to improve user engagement and monetization strategies.

How To Calculate

The formula for calculating the Conversion Rate from Free to Paid Users KPI is:

This formula utilizes the total number of paid users and free users to determine the percentage of free users that convert to paid users. By multiplying the ratio by 100, the result is presented as a percentage.

Example

For example, if a financial advisory app like WealthScope has 5,000 free users and 500 of them upgrade to a paid subscription, the Conversion Rate from Free to Paid Users would be calculated as follows:

This means that 10% of free users converted to paid users, indicating the effectiveness of the app's monetization strategies in converting the user base.

Benefits and Limitations

The key benefit of measuring the Conversion Rate from Free to Paid Users KPI is the ability to identify areas for improvement in conversion funnel optimization, ultimately driving revenue growth. However, a limitation of this KPI is that it only provides an overview of the conversion process without deep insights into user behavior or the specific reasons behind the conversion or non-conversion.

Industry Benchmarks

According to industry benchmarks, the average Conversion Rate from Free to Paid Users for personal finance apps in the US is approximately 5-7%. Companies with exceptional performance in this KPI may achieve conversion rates of 10-15%, indicating highly effective user conversion strategies.

Tips and Tricks

• Implement targeted promotional offers to incentivize free users to upgrade to paid services.
• Use data analytics to understand user behavior and identify key touchpoints for conversion.
• Create a seamless and intuitive upgrade process to reduce friction and improve conversion rates.
• Offer personalized recommendations based on user activity to showcase the value of paid services.

Net Promoter Score (NPS)

Definition

The Net Promoter Score (NPS) is a key performance indicator that measures the likelihood of customers recommending a company's product or service to others. It is critical to measure as it provides a clear indication of customer satisfaction and loyalty, which directly impacts business growth and success. NPS is important in the business context as it helps companies understand the overall perception and advocacy of their brand in the market, as well as identify areas for improvement to enhance customer experience and retention. It also serves as a leading indicator of business performance and can be correlated with revenue growth.

How To Calculate

The formula for calculating NPS involves subtracting the percentage of detractors (customers who are unlikely to recommend) from the percentage of promoters (customers who are highly likely to recommend). The result is a score that can range from -100 to +100, where a positive score indicates a higher volume of promoters than detractors.

Example

For example, if a company has 60% promoters and 20% detractors, the calculation of NPS would be as follows:

NPS = 60% - 20% = 40

This results in an NPS of 40, indicating a strong likelihood of customer advocacy and positive word-of-mouth for the company's products or services.

Benefits and Limitations

The benefits of using NPS effectively include gaining insights into customer loyalty, facilitating the identification of areas for improvement, and correlating the score with business growth. However, limitations of NPS include its simplicity, as it does not provide detailed feedback or offer a comprehensive view of the overall customer experience. Additionally, it may not account for variations in customer segments or market dynamics.

Industry Benchmarks

According to industry benchmarks within the US context, an NPS score above 50 is considered excellent, indicating strong customer loyalty and advocacy. A score between 30 to 50 is generally considered good, while a score below 30 may indicate that the business needs to focus on improving customer satisfaction and loyalty.

Tips and Tricks

• Regularly survey customers to gauge NPS and identify areas for improvement.
• Segment your customer base to understand NPS variations across different groups.
• Use NPS as a leading indicator to drive strategic decision-making and customer-centric improvements.
• Implement follow-up actions based on NPS feedback to enhance customer loyalty and satisfaction.

Churn Rate

Definition

Churn rate is a key performance indicator (KPI) that measures the number of customers who stop using a product or service over a specific period. It is critical to measure because it provides insights into customer satisfaction, loyalty, and the overall health of the business. A high churn rate can indicate that customers are not finding enough value in the product or are unhappy with the service, impacting the company's revenue and growth potential. On the other hand, a low churn rate reflects strong customer retention and satisfaction, which is vital for sustained business success.

How To Calculate

The formula for calculating churn rate is the number of customers lost during a specific period divided by the total number of customers at the beginning of that period. This percentage is then multiplied by 100 to express it as a percentage. The number of customers lost is the total number of customers at the start of the period minus the total number of customers at the end of the period. This ratio provides a clear indication of customer attrition and retention, offering valuable insights into the business's performance.

Example

Suppose a company starts with 1,000 customers at the beginning of the year and ends with 900 customers at the end of the year. The churn rate would be calculated as follows: Churn Rate = ((1,000 - 900) / 1,000) * 100 = 10%. This means that the company lost 10% of its customer base over the course of the year.

Benefits and Limitations

The advantage of tracking churn rate is that it provides a clear indication of customer satisfaction and retention, allowing businesses to identify areas for improvement and implement strategies to reduce customer attrition. However, one limitation is that churn rate on its own does not provide insights into the reasons behind customer churn. It is essential to complement this KPI with customer feedback and other qualitative data to gain a comprehensive understanding of customer behavior.

Industry Benchmarks

According to industry benchmarks, the average annual churn rate for subscription-based businesses in the US is approximately 6-7%. However, high-performing businesses typically maintain churn rates below 5%, while exceptional companies achieve rates as low as 2%.

Tips and Tricks

• Offer exceptional customer service and support to enhance customer satisfaction and loyalty.
• Implement customer feedback mechanisms to understand the root causes of churn and take proactive measures to address them.
• Personalize customer experiences and offers to increase perceived value and reduce the likelihood of churn.
• Regularly monitor and analyze churn rates to identify trends and patterns, enabling timely intervention and improvement efforts.