15 secrets to maximizing revenue with subscription-based apps
There’s been a fundamental change in what people want over the past decade, and it’s one that has given rise to the subscription economy, subscription services, and subscription-based apps.
Subscription services are not about ownership. They’re about access. And brands that offer access are becoming some of the most popular on the planet.
Music via Spotify. Cars via Lyft. Entertainment via Netflix. Gym via ClassPass. Education via Masterclass. Food via Hello Fresh. Goodies via Candy Club. Beauty via Birchbox. Grooming via Dollar Shave Club. Pet care via BarkBox. Games via Apple Arcade or Play Pass. Or Stadia or PlayStation Plus.
This is happening via physical devices too. Apple already has subscriptions for music and fitness and news and storage, all bundled up in Apple One, and you can buy an iPhone via subscription too. In fact, that’s rumored to be a big new shift in how Apple comes to market … much like Adobe did with Photoshop years ago.
Young people are used to this. It’s how they’ve grown up with music and entertainment.
Older people … perhaps not so much.
But if you think about it, we already often buy cars by subscription. (We call it leasing.) And while it might be a shock to think of them this way, the very jobs that billions of us work at are actually kind of the ultimate subscription service. After all, we sell two weeks of our time in exchange for a certain sum of money .. month after month after month. That’s a B2B subscription service, essentially.
As everyone in mobile marketing knows, subscriptions are becoming huge in apps. They’re part of a shift in app monetization, in fact, that offers versions of products that are ad-free.
“We are moving away from [an] ad-funded tech economy towards a subscription one,” startup founder, former Google product manager, and current Twitter executive Nick Hobbs told me.
How can you build and grow subscription-based mobile apps?
There are plenty of apps that try to bolt on a subscription service to an existing product. And plenty of apps that just offer it as one method of payment. There are far fewer who build it into the core of their product offering, the essence of their product experience, and the foundation of how they market their app.
Those, ultimately, turn out to be the most successful.
Here are 15 tips for app publishers and marketers who want to be successful in offering subscription services and monetizing via subscription revenue.
1. Develop and launch subscription apps differently
When you’re building for ad-based monetization or in-app purchases, you can often build, if not a minimum viable product, a smallish version of your full vision. With subscription apps, while you don’t have to boil the ocean, you can’t release something obviously partial and expect to be able to monetize it immediately via paid subscriptions.
Your app has to be good enough, clean enough, and useful enough that you can convince someone to pull out a credit card and agree to a monthly or annual payment.
2. Have much higher product development standards for subscription apps
An ad-supported model can kinda suck, if it still does what you want.
I mean, many of us still endure obnoxious ads on live TV that take up 20% or more of our viewing time if we want to watch live sports. Most of us are OK with free apps that monetize via ads, even interstitials, as long as we get access. And rewarded ads are the ultimate value exchange that many mobile users happily agree to.
Subscription products are different:
“When you’re trying to build a subscription business, your first, second, and third priority has to be building a radically superior product.”
– Nick Hobbs
Make it so much better the value is obvious and the choice to subscribe is easy for your target audience. Your user experience has to be way better. It can’t just be like a little bit better. It has to be fundamentally a different experience that is vastly superior to what came before it.
4. Advertise your subscription-based apps differently
Many apps offer a free tier (sometimes ad-supported) and a subscription tier, which is a valid option. But that has implications for how you advertise.
First: benchmark. Not everyone is going to become a paid subscriber. And in fact, the numbers are going to seem very, very low if you’re new to subscriptions.
“3% of users become paid subscribers.”
– Vitaly Davydov, CEO and co-founder of Adaptly, a service to boost in-app subscriptions
Second, optimize on events, not value. Traditional ways of marketing to users or customers who have wildly different value — think $0 LTV to multiple thousands — don’t necessarily work for subscription customers, who might all be in one tier of value, or else in just a few tiers.
That may make it tougher to use advertising products like Facebook’s VO (value optimization):
“If you’re selling the same subscription to everyone … the LTV of those different users is actually fairly similar, which renders the whole model of value optimization a bit useless,” says mobile marketing consultant Thomas Petit.
5. Pick the right pricing
This is one of those that is super-simple to say and super-hard to actually do.
In a conversation with subscription expert Vitaly Davydov, however, I picked up a few tips about how to know that your pricing is right, and have data to back it up. First off, you have to be able to answer this question, perhaps via exit interviews when people cancel:
“Answer the question: why do people cancel their subscription?”
– Vitaly Davydov
Secondly, you need to explore price elasticity and the dependency between your pricing and your subscription retention rate. You can do this by running a test: pick a representative sample of your paying users and increase the price 10%. Try a 20% price hike with another group. If you’re losing paying customers, you might consider a dangerous option: a price reduction, or a coupon, or a free extension.
Then you crunch the data:
- Billing issues
Davydov says that in most cases a 20% increase will change very little. I you try for more, you’ll likely see some degradation … but often not as much as the increase in revenue you get from the price hike. Understanding the curve between pricing and retention is the key.
The best marketers I know … know this curve pretty perfectly among different segmentations, among different countries, different devices, different platforms.”
– Vitaly Davydov
This gets complex quickly: it matters what country you’re working with, what devices people are using, and what kind of users you have. But knowing this will help put you on the path to profitability.
6. Choose the right time to sell
Long-form sales letters might be great for get-rich-quick scheme selling. Mobile app subscriptions? Not so much.
One expert says you need to jump in right away:
“Onboarding is the first couple of screens before you dive into the main app. And our statistics show, if you sell during this couple of screens, you will have the most monetization out of your app. And I think that the big idea is: you make your sales funnel shorter.”
– Vitaly Davydov, CEO and co-founder of Adaptly
The customer journey there is very defined and very simple: have a need, search for it on Google or the App Store or the Play Store (or see an ad in another app), install the app, and start solving that problem immediately.
Your app or audience may require a free trial. If so, you’re going to have to find events leading up to or during that trial that are predictive, both on Android and iOS, as Thomas Petit learned the hard way. In one trial he fed a very early event back to Google as an optimization signal: completing a form. It turns out that the ones who were savvy enough to do that easily and quickly on a phone were mostly people under 20 who didn’t convert to paying subscriptions.
In 20-20 hindsight, the results were entirely predictable: off the charts, but not in a good way.
“What happened is the conversion between free trial and paying subscription was completely off the chart, but off the bottom … it was less than half of what we usually had,” Petit told me.
So if you’re using event optimization for ad networks to optimize on — and on iOS if you’re not getting the paid sign-up immediately you’ll need to — you’re going to have to get really smart about which event to pick. And, of course, be flexible enough to adjust it if and when needed.
“The lesson here is really look at your cohorts: don’t assume that they’re going to behave the way your previous cohorts do because as soon as you’ve got a little bit of variance we’re actually talking about big money differences.”
– Thomas Petit
7. Sell for the right period of time
Everything matters in subscription monetization:
- how you present
- what you offer
- your brand image
- the look
- the feel
- the social proof
- the timing
- the price
- and … yes … also the term
It turns out that in a lot of cases yearly subscriptions might be a better option, even if a shorter term seems like a lower level of commitment that would be easier to get.
“Selling yearly subscriptions now works better than selling monthly or weekly subscriptions, because people can’t measure it. You know, you get a lot of money up front and it’s less risky than asking a user to pay each week. And so we see now a rise of yearly subscriptions.”
– Vitaly Davydov
One decision, one big chunk of access, one moment for a year’s worth of value?
The benefit as a consumer is that your customer can make one decision for the entire year. You don’t have to make a decision every week or every month — that’s just annoying — and you can feel like you’re paying a lump sum and getting a significant term of service. Car insurance works that way, as do many other kinds of insurance, and software as a service (SaaS) increasingly has longer-term commitments for better pricing.
Personally, I like to get that payment out of the way and get down to doing whatever it is I want with the software, utility, game, or service.
8. Understand your customers’ needs better than they do themselves
Can you know your customers’ needs better than they do themselves? You might have to, if you want to build a successful subscription product.
Nick Hobbs managed Google’s iOS app, and then built Brief, a subscription news product that Twitter acquired.
“You have to understand at a fundamentally deeper level than your customers what their needs are … and then meet them. And they will feel that. They may not be able to articulate every part of it. They may not know that that one animation at the end that says ‘You’re all done,’ that’s what they love. But we know, and we guide them through that, and make sure they have a great experience every day.”
– Nick Hobbs (sold his news subscription company to Twitter)
That takes time. It takes research. It takes feel … the kind of feel that founders and product builders only get from deep personal engagement with a problem or scenario or persona.
9. Take advantage of your new ad-free user experience
Since your product is now a subscription product, you don’t have to monetize with ads. The benefit here is that you can focus every pixel of every screen on achieving exactly what a user and customer wants.
Better retention as a subscription product
“We learned that if you remove ads or lessen them in that new user experience, you will see better retention because people will get, of course for us they will get to that editing magic moment faster and not be distracted,” says Jeff Roberto, VP of growth marketing for PicsArt.
10. Add friction when you design the decision point
It is completely counterintuitive to design additional friction points into a user experience or a customer journey. In fact, it sounds suicidal.
But it makes sense.
You have to build a significant wall between what a free user gets and a customer gets. There has to be clear and obvious differentiation between free and paid, and free users needs to be continually getting enough to stimulate their appetite but not quite enough to satisfy.
Plus, they need to be able to see over the wall into the promised land of all good things: your amazing subscription service.
All of this takes artistry as well as math.
“You just can’t … you can’t look at logs, you can’t look at data and find those things. You have to get in there and deeply understand the actual user pain points.”
– Nick Hobbs
Intentionally creating friction and designing a clear differentiation between OUT and IN is important work for those who want to win in subscription services.
11. Continually delight your customers because you must must must keep them
Getting the customer decision and winning the subscription is step one.
(And note, I’m saying “customer” not “user.”)
But if you can’t continually delight the people in your app by consistently delivering a high level of value and occasionally surprising them with a new hit of “wow” or “nice” or “they added that?!?” you risk losing them.
“At the heart of recurring revenue, the most important thing is not getting more people — it’s keeping the people that you have. If you have a really leaky funnel where you’re losing people after a few months, you can acquire as many as you want and your business model doesn’t work.”
– Nick Hobbs
Translation: retention becomes your key metric, not acquisition. Acquisition matters — of course — and no-one comes into your bucket without it. But focusing on acquisition when you don’t have retention nailed will just simply kill your economics.
“80% of subscribers unsubscribe pretty quickly in just three months or four months.”
– Vitaly Davydov, CEO, co-founder of Adapty
You’re facing an uphill battle. Victory goes to the prepared.
12. Become an expert in lifecycle marketing
Lifecycle marketing is about the entire customer journey, not just the part where you get them. And since succeeding in subscription marketing is about keeping customers even more than initially winning them, it’s critical.
“Lifecycle marketing basically has three pillars … there’s conversion, engagement, and retention,” Thomas Hopkins, former head of performance and lifecycle marketing for Masterclass and current CEO of Perfect Storm Studios told me. “And each one of them plays a different role depending on the time of the product’s life cycle.”
Getting really good at lifecycle marketing means that users you acquire turn into customers you keep, via engagement and retention strategies. And that requires knowing both your product and your customer very well, and also knowing a lot about how your customers engage with your app.
It also means you look at your metrics differently than a pure acquisition marketer.
“The last piece is retaining them and making sure that you can keep them,” says Hopkins. “In terms of metrics … we’re specifically looking at the number of emails we send to the ratio … of people that actually convert.”
– Thomas Hopkins, CEO of Perfect Storm Studios
Of course, that might be email, or it’s more often going to be in-app ads or web ads, or other marketing campaigns. But the key insight is you’re not tracking CPI as much as CAC. Cost per install matters, but cost of customer acquisition is much more important. As is, of course, LTV in order to determine the CAC you can profitably sustain.
13. Earn the double thank you
Don’t forget that every day, people can cancel. They can forget. They can get busy. They can get out of their subscription.
“You can use a product for three months, then forget about it. Then again after three months, you can write to Apple Support and say, ‘Hey, you know, I really don’t like this product anymore.”
– Vitaly Davydov
That means you need to embrace the concept of the double thank you … every day, every week, or even every time someone uses your app and engages with your product.
What is the double thank you? It’s what you do pretty much every day in the real world.
“The idea of the double thank you is it’s that moment when you go to buy a sandwich and you hand them the $5 and they hand you the sandwich, and you say ‘thank you’ and you’re so happy you got that sandwich for $5, and they say ‘thank you’ because they’re so happy they got your business.”
– Nick Hobbs
Every single time they use your app, earn the double thank you.
14. Surprise your customer … in a good way
I’ve talked about product and quality and subscriptions, and how subscription-supported apps need to be better, easier, more worthwhile than ad-supported apps.
Don’t forget to surprise people (in a good way) ever so often.
“How do you keep and retain and keep people’s perception of the brand very high? And so the way that we think about it is that our goal is to treat it as a membership. And what does a membership mean? It means early access. It means additional opportunities that being a nonmember you wouldn’t have.”
– Thomas Hopkins
Make it special. Make it white glove. Make it early access. Make it red carpet. But only for your paying subscribers.
(Of course, just like at the nightclub, it doesn’t hurt to let everyone else see the high rollers get in quick and easy.)
15. Be scrupulously honest and aboveboard
It may seem silly, but if you want long-term success with subscription apps, you have to be extremely honest and aboveboard with everything, including how to cancel and not pay. Yes, it’s counterintuitive, but it’s about trust and brand, and earning long-term committed customers who boost your retention rates to the stratosphere.
“If you sign up to a 7-day free trial for our courses package, we will send you four emails I think during that period of time saying, ‘Listen, you’ve got a 7-day free trial here and it’s going to automatically bill you on this date,” Christopher Plowman, the founder of CEO of Insight Timer, a 20-million-plus-member mediation app, told me recently. “’So if you don’t want to be billed, unsubscribe, click here. Here’s the link.’ We send them a link, we send them the button.”
That’s radical honesty and openness.
And customers who are treated that way learn that you respect them, respect their finances, and respect their commitment to your app. In turn, it earns you customer loyalty.
Bonus tip #16: Become multi-platform and multi-channel and multi-media
There’s a lot to do when building a successful subscription app or subscription business. For apps, do your best to become multi-channel in your messaging and value delivery.
That means you offer, when and where possible, value via:
- And more …
The multiple platforms is business insurance against problems on your platform, whether that’s iOS or Android. The multiple channels and multiple media is to deliver value however your customer wishes to consume it.
Singular can help
Growing subscription apps is hard. You need great data from all sides: spend, attribution, in-app, and more. And you need insight on how to grow.
Book some time with a Singular expert to learn how we can help …