Mobile apps and subscription monetization are a match

Promatics Technologies
Published on Nov 06, 2017 in Mobile App Marketing
Mobile apps and subscription monetization are a match

App monetization is not new to the app economy. Companies invest heavily in mobile app development and they need to continue doing so in coming years. And you need funds for it. Not everyone desires free apps, a large number of users are ready to pay for a mobile app if they have unique features and they stand out from the rest. Also, users favor apps that are continuously evolving and mobile app developers need to update their apps regularly to keep the users impressed.

LOOKING BACK AT HISTORY

Paid apps have not been so successful as mobile app developers only receive a one-time payment from the user and the app developer has to offer minor and major updates at no extra cost. This revenue model of mobile apps is not sustainable in today’s times. Even the app monetization does not work fully in the app developers’ favor as the one-time payment, which is generally in smaller denominations, does not provide enough funds to support mobile app development in the future.

UNFOLDING THE NEW TREND

A new trend is increasingly becoming popular in the app monetization model and leading app stores like Apple’s App Store and Google’s Play Store have taken note of it. Welcome to the world of app subscription monetization. As the name suggests, the subscription monetization requires the user to pay a certain amount to unlock premium features but the access is time-based (for 3 months, 6 months or a year) whatever the app owners feel right.

There are different reasons to consider the subscription model:

3rd party changes

Once your mobile app is in the store, you need to ensure it keeps functioning properly. If the user faces any issue due to any bugs you need to fix the issue as early as possible or risk losing the user. Apps depend on third parties like Google, Apple, and Facebook, Twitter or SoundCloud. If Google or Apple releases a new OS or updates its current OS or Twitter or Facebook change their API, you need to ensure your mobile app stays compliant with the new changes.

In most cases, you will be required to update the mobile app to ensure it functions properly after the change in the software environment. If you intend to continue supporting your app through years, you will need consistent revenue streams which can be achieved through subscription monetization model.

Apps need to be updated

Having a mobile app is a continuous process; you don’t develop an app for a limited period of time. Since many mobile apps are used for communication and more frequently, you can’t develop an app and forget about it. App owners that take mobile marketing seriously update their mobile app more frequently. Some update their apps every week, while some update their app every month. Whatever the case, the truth is mobile apps need to be updated to maintain compatibility with changes in software and hardware environment and stay relevant to customer’s needs.

Updating apps requires funds and one-time fee collected from your users are not enough to fund the mobile app development costs. The subscription monetization model ensures your current users continue funding the development of the app and that they will always have the latest product releases. The subscription monetization model ensures your company is not starved for funds and your app will not look outdated on new Android OS or newly launched iPhones.

Mobile apps and subscription monetization are a match

Add new features

Your users expect improvement or introduction of features as technology changes rapidly. Hence you need to live to the expectations of the users and work towards the introduction of new features. Also, users expect new features in the shortest span of time possible as there is always a risk of your competitor app offering new features before you do.

It is no secret app development heavily relies on the availability of funds. The subscription monetization model can be used to introduce new features. App Developers like Promatics can offer new features through in-app purchases on a subscription model where users can try the new features by paying a small fee. If the new functionality is a hit you can expect the users to renew their app subscription which will ensure a continuous flow of funds to sustain the app development and updates.

BENEFITS OF THE SUBSCRIPTION MONETIZATION MODEL

Recurring revenues

The recurring revenue is one of the main reasons for app owners and mobile app developers to embrace the subscription monetization model. The mobile app pricing has evolved in three models: freemium, paid and subscription. The freemium app pricing model is one of the most popular but app developers have begun to realize the benefits of the subscription model as well. The subscription model generally has an auto-renew feature that allows the app owners to have a steady income. It gives the developer the ability to predict future earnings that are essential in the financial unpredictability that surrounds mobile app business.

When you are able to predict your future earnings you can plan major upgrades and be confident about marketing efforts without constant fears of failure. Knowing your existing user base will be paying you for next 6 to 12 months will give you the much-needed confidence and every newly added user will only make you financially stronger.

Build better user relationships

The core strength of subscription monetization model is based on stronger user relationships. The one-time payment is considered to be one-and-done sale that does not provide a platform to build relationships. When you embrace a subscription revenue model, you go that extra mile to keep your users happy and implement engaging plans and retention techniques that are not possible with one-time payment model. To ensure bright side for repeat transactions, mobile app owners have to gauge the value the app offers through different engagement techniques and provide fresh content and new releases to keep the user engaged.

Higher user lifetime values

Customer lifetime value is an important metric to analyze the success of your mobile app. Unlike one-time payment or occasional in-app purchases, the subscription model is monthly or yearly. By giving fresh content and bring more value to the experience, the mobile app developer can lure to continue with the subscription which increases the average revenue per user.

Higher revenue split

Earlier, the subscription monetization model was considered predatory and not favored by app stores. However, according to the announcement made by Apple in 2016, the subscription model has higher user lifetime values that change the perception about subscription monetization model. Apple has made several changes in the revenue sharing policy and has reduced its cut from 30% to 15% from 2 years onwards. App owners who embrace the subscription monetization model will keep a larger part of earnings. Google has sweetened the deal by offering to reduce their cut to 15% beginning from the first year.

Mobile apps and subscription monetization are a match

Unique retention options

If a user unsubscribes, you have the option to rope back the user by offering a discount on future monthly subscriptions. There are many cases where the unsubscribed user continues using the app as the discount pushes them to stay put.

The subscription-based apps also have higher retention as app owners have the option to lure users with a discount on 6-month and yearly subscriptions. Users like to save money and they are happy to extend their commitment in exchange for a low price plan.

Higher user engagement

With the competition ever rising, app owners find it hard to maintain app engagement. But things are different for apps embracing subscription revenue model. Since the user is paying money regularly, they will be using the app more to get more value for the money. They will be providing more feedback and suggestions for improvements to ensure they get maximum value out of your app. Since they are paying every month, the users feel more obligated to use the app and the result is you have a more engaged audience.

Higher revenues

It is not only recurring revenues that makes the case strong for embracing subscription revenue model. According to Visionmobile study report, subscription-based apps earn 2-3 time more than apps that follow a pay to download or advertising revenue model. The subscription-based apps earn 50% more than an app that relies on in-app purchases.

WRAPPING UP

There is no doubt the subscription monetization model offers a reliable and powerful revenue stream that is attractive for app owners and mobile app development companies. Another fact to be noted is that subscription based apps have higher perceived values as the users will not be interested in spending their hard earned money until your app offers more value than your competitors.

Subscription based apps are held to different standards when it comes to pricing and the value they offer. A professional mobile app development company can suggest a great subscription model for your app that not only will deliver value to your users, but will also help you build a lasting revenue strategy.

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About the author
Promatics Technologies
Promatics Technologies
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Promatics is a young, rising software development agency from India. They have wide expertise ready to take on the most demanding projects on web and mobile app development, e-commerce, digital marketing, cloud solutions, quality assurance and IT consulting. In the mobile field, they have expert app developers ready to work on Android, iOS, HTML5 and wearables projects.

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