Subscription apps have become the next big thing in the app space. However, when it comes to app monetisation, subscription models aren’t for every app – you have to weigh up the app’s purpose and the way in which it provides value to the user. And for those that do decide to go with a subscription model for their app, there is an art to getting the user to subscribe at the right moment.
Subscription Apps vs. Other App Revenue Models
Subscription apps can provide a great opportunity for users to test out your app and see the value it brings before agreeing to pay. It also incentivises app businesses to provide users with new content and features to try to gain loyal users that renew their subscriptions and allowing the business to earn more revenue as a result.
Effectively Monetising Subscription Apps
The key to making the subscription model work is to make sure users experience enough value in the free version to convince them that they would benefit from paying for more. There is a fine line between offering too many free features that users feel no need to pay or too few that users don’t see enough value from the app and don’t convert.
What are the different benefits subscription models for apps can provide users?
- Full feature options – this is the most common type of subscription model. It enables users to access all the features a product has to offer, whilst the free version is much more simplified and offers a taster of the product.
- Full usage – some apps choose to offer free versions which allow the user to trial the app with a limit to the amount of storage they have or the amount of users they can add.
- Removal of advertisements – some subscription based apps can upgrade the user experience when the user starts paying, for example Spotify encourages users to subscribe by offering an advertisement-free experience
Most subscription based apps offer a free trial for a set period of time, that could be 3, 7 or even 30 days. This allows users to trial either a freemium version of the app or even the full app for a set amount of time.
In-app advertising and purchases
If you intend to advertise or offer in-app purchases you need to have huge volumes of traffic from the offset in order to get a profitable return on investment. Only 5% of users in app stores actually purchase anything in apps, which means you are unlikely to ever make a profit on the other 95%. In-app purchases can also make it a lot harder to predict revenue month-to-month.
In-app advertising allows you to display ads in your app and make money for clicks or impressions. Apps remain free for users, which means that you can have a greater chance of acquiring a higher volume of users. However, on the flip side, advertisements can quite easily disrupt the user experience and cause users to churn.
You can mix in-app advertising with other monetization strategies. A good example is to provide a paid premium version of an app that is ad-free. This will allow you to benefit from customers willing to make an in-app purchase and those who don’t want to spend any money at the same time.
Improving Conversion Rates from Free Trial to Subscriber
If you are looking to update your app marketing strategy to improve your conversion rate from free trial to paying subscriber it helps to know what a reasonable conversion rate to aim for is. You will never be able to convert 100% of users, instead you should use your existing data and KPIs to forecast a realistic increase in conversion.
Improving your App Onboarding
The most effective tactic for converting free trial users to paying customers is to have a streamlined and simple onboarding strategy that guides the user through the experience. It is important to help your users through the trial phase to ensure the user is activated. By focusing on the onboarding experience, you are able to use a step-by-step approach to showcase every functionality and added benefit of using your app, as well as highlighting its unique values. A free trial period then allows the user to experience these values for themselves.
Your onboarding UX and UI will also be important. No one wants to read a long set of text to understand what the benefits are, this is when people will switch off. Visualised and clear information is always better. As an example, ensure the free trial is clear in the sign up. Having a ‘sign up’ button may confuse users who were expecting a free trial and may cause them to drop off. Instead, changing the button to ‘free trial’ will avoid any confusion and increase conversion from install to sign up.
To Free Trial or Not to Free Trial?
Whilst a free trial is not essential, it can be extremely impactful in encouraging more users to download your app as well as convincing them to pay for it. It is particularly important if your app has a lot of existing competition. For example, a free trial period would be fairly crucial for a language learning app as it would provide an opportunity for users to understand why yours is unique in comparison to others in the space.
If you do decide to have a free trial period, how and when you ask someone to subscribe will play a part in determining whether they will or not. You want to hit people at particular success points and it will be important to test what points during the user journey convert the highest number of free trial users to paid subscribers. If you have a fitness app, for example, whilst a common success point is normally seen to be once a user finishes a workout, asking a user to convert at this point may actually decrease your chances of seeing them become a paid subscriber. This is because their desire to do another workout at this point is probably very low. Instead, intent may be higher when a user is browsing for a workout.
Test, Test and Test Some More
You can also test your free trial offering to see when users are most likely to convert. You can test different free trial period lengths, for example, users may see the benefit of your app in 7 days and a 14 day free trial may actually end up being detrimental. You could also compare subscription rates between users who have a free trial and those who do not to see if your app really needs a free trial – your onboarding process could be strong enough to do the job!
You can test your approach to free trials using specific mobile tools, such as Optimizely, which gives you the capability to test in-app screens and upsell ux at the same time amongst certain audiences. This should be done with caution as it is considerably more complex to have different monetisation models going at the same time and if something fails to work it could cause quite a bad user experience. Alternatively, you could test different models concurrently. This is slightly less accurate as you are at the mercy of fluctuations in the industry, seasonal factors, and other external factors, however it can still help to get a better understanding of what works best amongst your typical users.
Sending targeted email onboarding campaigns can help with guiding the user through the app journey and continuing to build the relationship with the user, boosting their odds of subscribing to your app. This is a particularly helpful channel to target users who do not subscribe on initial prompt. Email campaigns could help to remind users of your app or even to include discounts to the subscription to incentivise users and get them to sign up through the website instead.
Prioritising LifeTime Value
One thing that is often not considered enough when it comes to using a subscription model is Life Time Value. If 90% of your users subscribed to your app for a month or two, converting them is not going to impact your return on investment that much. Instead, focus on the 10% who are likely to stay subscribed for the long-term. Whilst LifeTime Value may be harder to measure as it requires tracking and testing over a long period of time, building out a forecast will be far more impactful for your business and getting a return on investment than focussing on conversion rate alone. When incorporating a subscription monetisation model, you need to ensure you are targeting the right users, hitting them with the option to subscribe at the right time in the user journey, and continuously providing updated and valuable content.
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