4 Tips To Succeed With Mobile App Subscriptions
Mobile App Subscriptions — Part II
After Part I described the challenges of mobile app subscriptions, and just before we go into the big market changes in Part III, it’s time for a few insights we learned at JoyTunes for making mobile app subscriptions work.
We’ll start with launching a new app with a subscription model and then add a few highlights for the special case of moving to subscription from an existing free/paid/in-app based model.
Selling subscriptions in a new app
Below are a few principles that hopefully will be useful when considering integrating a subscription model in your app. There are more, obviously, but I think these are the main ones (let me know if I forgot a key ingredient).
- Make sure your app is fit for subscription
Don’t get blinded by the reduced revenue cut by the stores or the apparent buzz over the increased life time value. In many cases a freemium/paid app could work much better and have much higher conversion rates (see calculations below). Do you have ongoing value to users that is perceived to have clear money value? Are competitive solutions, even if inferior, charging their users? What price points would you imagine users spending on an ongoing basis? Be truthful with yourself.
- Do the math
Your revenue is the number of new users multiplied by the conversion rate and the Life Time Value (LTV) of a paying user. Your LTV in turn is determined by the price and the duration a user is retained. It’s hard to guess these numbers in advance but you can at least make educated guesses that you can then validate.
The oversimplified (yet surprisingly powerful) calculation below includes some assumptions for an average user in a freemium app with a standard $2.99 one time in-app payment vs. a $1.99/month subscription (with a not great yet non-trivial-for-consumer-services average of 3 months retention) and a paid app. With the numbers below, the subscription is actually inferior to the others (as it also requires much more work…). The results will vary wildly of course based on the duration you think customers will stick around for, and, well, everything else :)
- Demonstrate ongoing value
Users need to be utterly convinced you have plenty of value to supply them on an ongoing basis. At JoyTunes we have our ongoing flow of piano courses, but for some apps/games it might be trickier. As an example, we saw great impact when adding “coming soon” courses that mirrored our content plan and made a very clear point that new content will be added all the time.
If in doubt, you can try to add a free trial in the beginning. This will bring the burden of proof on yourself which could go a long way in convincing users of the longevity of your service.
- Build trust
Your users will really need to trust your app to approve such a difficult pricing model. It can be with social proof (awards, reviews, press recognition), high standards of design, sleek experience, explanations on how to cancel, amazing App Store presence (screenshots, description, icon), great customer support etc. You won’t necessarily need it all right away (or at all), just whatever it takes to build that elusive trust. For example, at some point we added the screen below to the purchase process in our Simply Piano app. This single change made a 10% difference in conversion rates, and over 20% when paired with other purchase flow changes. That’s another point about trust — sometimes it’s a single screen, testimonial or seal, but in other cases it will be a combination of factors that strengthen a key message.
- Know your tools
There are many options and features available from both Apple and Google that can really help introducing and maintaining subscriptions, including trials, promotional prices, subscription tiers and more. Some of these are described at the end of this post.
Selling subscriptions in a previously paid/free app
This is especially relevant now as subscriptions become available to all categories and more developers want to migrate to the shiny new model. First of all, all the principles of the previous section fully apply of course with a very strong emphasis: Sensitivity.
Your customers are used to an experience in your app and you are going to flip them upside down. Even worse, they won’t get why you need to add a weird subscription to a mobile app and have no idea how it works (remember the ‘ugly’ description from Part I??).
My advice to you is — don’t.
If at all possible, try to start the new model on new users and leave the old ones for now. If that’s not an option, either because of technical details or otherwise, do it with a lot of transparency, sensitivity and respect. Try to sugar coat it, give more benefits, explain the move, offer a discount, set a transition phase etc.
You’ll need to convince them of the ongoing value even more. True, they already know and love your app, but they were used to a different payment model. For one thing, you can explain that a subscription means your interests are aligned when it comes to ongoing value. With a paid app you don’t necessarily care so much what happens 3 months in…
It is also good practice to bombard the transition with added benefits and value. Put your dev work where your mouth is and show how much the experience is going to improve over time. This is key to a smooth transition.
Possibly useful technical details
- Apple’s new revenue calculation (Part III) works as follows — Apple’s cut is the standard 30% for the first year, and then 15% from the first renewal that is at least one day into the second year. For example, the second renewal of a yearly plan. This makes a lot of sense, but also creates some fun quirks, like if your user was a monthly subscriber for 10 months and then opted in to the yearly plan, you will still get only 70% (and not 85%) for that yearly plan. Google’s revenue cut was similarly modified but starting from day one of a subscription.
- Apple has also rolled out a bunch of subscription management changes with iOS10 which are totally worth your time, that is, if you’re in the app subscription business. Among other things, these include the ability to define tiers (like silver-gold-platinum) and have users upgrade/downgrade.
- Another cool change that Apple added is the introduction of geo-pricing which we have found to be very useful (to be described in a later post).
- Google announced they will be rolling out promotional prices for subscriptions, for example, offering a plan for $0.99/month for the first few months. Cool stuff.