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How to build an app subscription model that works

October 10, 2017 | By Peggy Anne Salz, Founder and Lead Analyst – Mobile Groove @peggyanne

A year after Apple announced the arrival of the subscription app model as part of a wider sweep of changes it made to its App Store policies, the size and scope of this new app category is exceeding analyst expectations. It is also paving the way for content companies to grow audience numbers and engagement.

Content companies that embrace the model can plan their business with high confidence that they will attract high-value users and generate a predictable cash flow. This is because consumers who buy into subscriptions commit to a recurring fee and – generally speaking – stick to their decision. Their resolve is inextricably intertwined with a concept known as the Sunk Cost Fallacy. Simply put, people who have invested time or resources in something don’t want to see it go to waste. Think of the times you rented a movie and, even though it wasn’t great, you watched it to the end. Now you’ve got the gist.

Consumer commitment colored by this fascinating bias bodes extremely well for companies that offer subscription apps. In fact, as far back as 2014, research found consumers would buy into subscription apps if the price was right. Specifically, the Branchfire research into consumer attitudes toward subscription apps found that “$10 a month is the sweet spot for subscribers.”

Are subscriptions right for you?

Fast forward, and the range of subscription apps has expanded to include much more than streaming media providers like Netflix and Spotify. Data provider App Annie reports that “in-app subscription revenue from non-game apps, particularly within the media streaming, news and dating categories, is rapidly increasing.” Overall, App Annie forecasts revenue for non-game apps to grow at an incredible rate of 25% – reaching $33.8 billion in 2021.

It’s good news that subscription apps are gaining traction. But not all media companies that can offer their app as a subscription model should do so. If you’re asking users to open their wallets, you need to offer value for money.

A crowd-pleaser across the board is fresh and relevant content. Obviously, media companies do this by definition. That said, in order to merit a monthly recurring cost, the content must be exclusive, or engaging – or both. Regularly releasing new features is also a plus.

Finally, apps that remove the friction from navigation, or help users accomplish important tasks (book a reservation, register for more information, streamline sharing) are also a hit with time-crunched consumers and multi-tasking mobile users.

Do your homework

Before you decide to release a subscription app, do your homework to make sure your audience engages frequently, and deeply enough, to merit the investment in the first place. This is where audience measurement data around the who, when and why of app usage in the form of behavioral data and insights is a must. Even better if this data spans all the platforms that encompass consumers’ daily routines.

Finland’s Verto Analytics focuses on precisely this, quantifying the user journey from one device to another and measuring from the point of consumer interaction across all platforms, media, content and devices. In April Verto posted high-level research into news access and engagement across platforms, highlighting how (and when) valuable audience segments engage with news content.

The day-in-the-life data and visualization underscores the importance of offering content to consumers on their terms – and across all platforms. But it also reveals interesting “windows of opportunity” during the day when content companies might use their presence to interest consumers in a subscription offer.

Raising awareness of your app is an important top-of-the-funnel activity. However, you also need additional data to plan your app marketing and acquisition campaigns – and ultimately benchmark your performance against your peers.

You must also consider several important criteria, which are raised in the 2017 Subscription Apps Report, such as: What is the proper price range for a subscription app? How long is too long to wait for a user to convert and commit to paying a recurring cost? When are the best months to reach and engage potential users?

Compare costs and contexts

The report finds that it costs $161.38 the cost to convert an app user into a subscriber. However, the number may skew high since the subscription app category Liftoff tracks includes Dating Apps, Utilities, and Finance. These types of apps vary significantly in the value they offer and the monthly subscription fee they charge.

It is essential to remember that subscription apps (and their users) are about long-term gains, not short-term bargains. Granted acquisition costs high, but media companies can also increase conversion rates by using all channels at their disposal – including email, push notifications and print ads in their own media properties – to reinforce their value proposition.

Provided they are powered by appropriate messaging and effective targeting, subscription app campaigns can engage and re-engage audiences all year long. This is very different to other categories, such as commerce, which take their cues from seasonal triggers such as holiday sprees or back-to-school shopping.

Companies that offer subscription apps have a huge window of opportunity in which to run campaigns and hit targets. Liftoff also finds that there are some stand-out months, such as September and March, when the “cost to acquire a user who subscribes to the app pays dividends beyond the promise of a more predictable business model powered by more sustainable revenues.”

Above all, keep in mind that driving high conversion rates for your subscription app a journey, not a destination. Regardless of your app subcategory (news, lifestyle, sports) or your campaign objective, your results will be determined by your ability to orchestrate all of your channels to take advantage of all the opportunities to communicate with consumers in ways that are easy, engaging and effective.

Peggy Anne Salz is the Content Marketing Strategist and Chief Analyst of Mobile Groove, a top 50 influential technology site providing custom research to the global mobile industry and consulting to tech startups. Full disclosure: She is a frequent contributor to Forbes on the topic of mobile marketing, engagement and apps. Her work also regularly appears in a range of publications from Venture Beat to Harvard Business Review. Peggy is a top 30 Mobile Marketing influencer and a nine-time author based in Europe. Follow her @peggyanne.

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