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Month-over-month, year-over-year, and quarter-over-quarter are all terms to measure rates of change and growth comparing two identical periods of time.
For example, how does revenue over this time period compare to a previous time period? This is where month-over-month (MOM) comes in as a valuable metric for growth marketers to understand.
In this article, we cover MOM growth, teach you how to calculate, provide a calculator, and discuss which metrics are most important for mobile marketers to measure.
Growth on a MOM basis is a common metric measured by most functions of a company, whether it’s finance, product, marketing, or sales.
The finance team tracks expenses and revenue MOM, the product team tracks progress on feature requests, bug fixes, and usage MOM, and the marketing team tracks leads, conversions, retention, and more every single month.
Growth on a monthly basis is a great indicator of momentum in the short term. As the period duration increases, such as with QOQ or YOY growth, the data becomes even more important as the time horizon offers reliable historical performance.
The benefit of month-over-month growth is the power of compounding. Even if MOM growth is small, the benefits of compounding become clear rather quickly and contribute to exponential growth.
Percent increase (or decrease) = (Period 2 – Period 1) / Period 1 * 100
As an easy example, let’s say your revenue grew from $100 in month 1, to $200 in month 2. Here is how you would calculate the MOM percent increase:
MOM increase = ($200 – $100)/$100 * 100
= 100%
This calculation can be used to measure the growth of users, customers, revenue, employees, and much more. As you grow MOM and quarter over quarter, the power of compounding begins to take effect year over year.
CMGR, or compounding monthly growth rate, is the average month-over-month growth over a longer-term duration, typically 6-18 months.
The formula for calculating CMGR is:
CMGR = Measurement in Last Month/Measurement in First Month 1/[Last Month – First Month] – 1
As an example, let’s say you are a mobile marketer who wants to measure the growth of total users MOM for the full year since you launched your app. You would use CMGR to find an average, versus calculating each month individually.
At the end of month one, for example, you only acquired 100 users but by the end of month 12, you had 5,000 active users. Here is how to calculate the CMGR in your situation:
CMGR = 5,000/100 1/[12 – 1] – 1
= 42.71%
Every month, on average, the number of active users increased by more than 42%. This is a total percentage increase of 4,900%. While 42% growth MOM is huge, the power of compounding becomes evident when you look back at the year and realize you grew 4,900%.
One metric that is common in SaaS and other subscription-based business models is monthly recurring revenue (MRR).
MRR is the amount of money your business consistently and predictably can expect to earn on a monthly basis. This is a powerful metric that indicates healthy, sustainable growth and retention rates.
Monthly recurring revenue is an important metric to measure and one you will want to see increase MOM.
MRR growth can come from a few places. Perhaps your app acquired and onboarded new paying users this month, or you were able to upgrade users to a higher paying tier. Either way, MRR growth is a great signal of growth.
Although MRR growth is a great signal of overall growth, it may not be a sign of sustainable growth. If the user economics are not sustainable (ie. it costs you more to offer the product or service than you earn in revenue), MRR growth can increase the speed towards the business’s ultimate demise.
As a growth marketer, it can be a challenge to navigate your company’s mountainous range of data to find the metrics worth reporting on.
This is why many people report on vanity metrics. Below are the 3 metrics we find most valuable for mobile marketers to track:
Understanding your app’s retention rate is vital for your business’s longevity. Many businesses fail because they allocate the vast majority of their resources to acquiring new users, without making adequate investments and efforts to retain them.
Customer acquisition numbers can sometimes cover up a steep decline in retention shortly thereafter, but unless retention is growing in parallel to acquisition, the losses from acquisition costs will begin to stack up quickly.
For example, if your customer acquisition cost exceeds your customer lifetime value as a result of a low retention rate, your business model will almost certainly fail. Similar to a physical product company losing money on every product manufactured is a basic unit economics blunder, losing small amounts of money on each user is a basic user economics no-no.
MOM churn rates can be used to monitor the performance of recent feature releases, updates, bugs, and engagement tactics. If you notice a drastic increase in churn, it could be a signal that a recent change has disappointed customers, driving them away from your app.
On the other hand, A retention rate that grows MOM is one of the strongest indicators of a sustainable business. But no matter how small your churn rate is, it’s important to understand what may have caused users to leave.
This metric will depend on your business’ KPIs.
Perhaps your app is built on the freemium model, but since your unpaid users still cost money, upgrade conversion rates to paid accounts is an important metric to track MOM.
Another popular conversion rate to track is opt-ins and sign-ups. If you are a mobile marketer for a news, media, or any business with a content creation team, the number of sign up conversions is a north star metric to track MOM.
What monthly recurring revenue is to the business team, monthly active users is to the product team.
Strong MRR growth paired with MAU growth is one of the best indicators of a strong business model. This can also be the sign of a strong viral coefficient and growing network effects.
Even though a lot can happen in the span of a month, it is still a short window of time in the life of a business. Seasonality and random fluctuations can impact your MOM metrics and lead you to make unnecessary changes. This is why most publicly traded companies report on a quarterly basis.
It’s important to measure your metrics on a monthly basis but confirm a problem exists and understand it fully before jumping to fix it.
If your MOM retention metrics are not sustaining your app’s growth, consider watching our webinar about the mantra for sustainable growth. You can also sign up for a demo (to help our MOM metrics) and learn how to use CleverTap’s all-in-one customer engagement platform.
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