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The subscription app model is one of the prevailing business models for current software. Tinder is leading. As of 2019, this dating app registered transactions for $497 million. Netflix earned $339 million through the App Store and dropped to second place in this indicator among non-gaming projects. Tencent Video is in third place. The video service from China earned $278 million in revenue. So what exactly is subscription model, and why is it so useful for business? Let’s answer this question together. Read on.
The subscription app model gives users monthly/yearly application access for a fixed price. In turn, app creators have to continually work on customer retention as well as update their brainchild. The USA revenue shows that more and more online shoppers are switching to the subscription model. This way, last year alone, their number grew by 15%. Subscription growing popularity is a natural process, and it is easy to explain.
First of all, it is convenient for customers: instead of buying the same things/services once a month, they simply pay money and get that stuff on the go. Those who have already appreciated delights of a subscription are not limited to one: more than half of online shoppers have at least two of them.
In 2017, subscription-based apps boosted the App Store revenues accounting for $10.6 billion. Subscriptions, together with other trends, will bring the App Store $75.7 billion by 2022. In 2019, Google Play revenue was $7.7 billion, up 24% from previously spent $6.2 billion.
According to Sensor Toer, the App Store and Google Play programs have collectively received $ 397 billion in revenue for 2019, which is 15.4% more than in 2018.
Now applications are getting cheaper, but total revenues contrary growing. Functions expansion, version upgrades, additions, new paid options create a growing positive balance due to rightfully chosen monetization strategy.
Subscription-based apps are perfect solutions for business that deals with access to content, or is engaged in re-service.
In the first case, you provide premium content only to that user who most wants it and get the best results from it. The resulting approach will help you create more quality content and always remain relevant to users.
The second case concerns a business that deals with physical products or digital services. The resulting approach will help you make your product as a service.
A subscription site means that you have your standalone platform where customers can become members and access premium content for a recurring fee. For example, International Living is a magazine subscription app. It provides an engaging and relevant blog about traveling, thereby encouraging prospective users to subscribe for $69 per year.
Study Gateway is an app for people of faith. It offers a free 7-day trial. After that, consumers study the Bible with unlimited access to more than 2500 video lessons on any device for $7.95 per month.
Conventionally, subscription boxes are divided into three groups:
Let’s look at some examples.
Sephora is one of the predominant subscription-based apps that offers branded personal care kits. Users can try new brands or products, as well as learn and get tips on their use. For $10 a month, they can get useful advice, support and nice bonuses.
For book lovers, the Book of the Month app will definitely become interesting. For $14.99 per month, users get access to books of various genres together with their design feature, as well as gain new editions before they appear in bookstores.
Dollar Shave Club adopted app subscription model too. For $5 per month, consumers get a catalog of goods from razors unto personal hygiene products. User gain individual support and excellent quality at affordable prices.
Netflix subscription model is fairly innovative plus efficient tool for video content creators. Netflix is well-known as an “over-the-top” (OTT) content provider. With this model, you become the Netflix in your niche offering on-demand video content to paying subscribers anytime, anywhere. This model is considered the most useful for enterprises that focus on eLearning, fitness/yoga, entertainment. But it can also be used for any other industry.
Netflix made video streaming as we know it today. As a result, it got a lot of followers furthermore competitors, such as Apple TV app/TV +, Disney or kweliTV.
Masterminds provide group or individual support (online or personal coaching), help achieve goals together for a certain period, with a high level of mutual responsibility. One good example is One Year No Beer app.
It helps people with alcohol addiction to control or completely get rid of it. Clients can choose registration periods (28, 90 or 365 days) starting from $30 per month. They receive daily help along with guidance online, video and audio programs, as well as useful eBooks for better motivation. This business model is not difficult in using and gives hope and user support.
If your business is limited to seasonal or periodic content, but you want to maintain activity with customers as well as get revenue, then this subscription model is for you. The Wanderlust, for instance, is a periodic yoga festival with annual events in more than 20 countries. They stay in touch with subscribers and provide an opportunity to visit the festivals interactively.
The service creators found an opportunity to keep subscribers engaged with Wanderlust TV. Thus, each user has an opportunity to experience practices with the best instructors, and try services provided before buying tickets to events. This is a wonderful business move, isn’t it?.
This is a business subscription app that offers good free content, limited amount of disk space for storing data, users number, some basic features, leaving the best for a subscription. Slack, Dropbox, Trello are great samples of freemium subscription-based apps. This is a strong marketing approach as it helps to reduce barriers to entry for new customers.
So, if you are interested in a subscription model app, you should consider a few points. To get started, personalize your offer. Otherwise, clients with you will linger for a short while. Then make sure that you give customers access to what they have not yet received. This will foster their satisfaction and interest. And you can use your existing brand assets to create a subscription model. Amazon, YouTube Premium, etc. are existing examples whose subscriptions are involved in their infrastructure.
Determine goals, desired outcomes, pricing policy in advance. Since your profit depends on a monthly or annual subscription, thinking over a strategy in the long term is crucial in business development. And with the help of the right approach, you will be able to understand the needs of customers, thereby developing a model of an ideal customer, as well as functionality with its price rates.
To ensure stable growth in expected income, you should consider monthly recurring revenue (MRR), track accounting rate of return (ARR), outflow indicators and operating costs. This will give you opportunities to provide an improved and predictable experience to your user and team.
Registration is an essential aspect of attracting customers, and therefore increasing profit. It should be super simple on every channel you use: from social networks to sites/apps. This will encourage customers to subscribe.
Unreliability of billing system may lead to undesirable losses: both reputational and commercial. Ensure your system streamlined and secure, intuitive and fast.
Your app user is who your business is built on. You can have a unique product, affordable prices, coolest marketers. But if a user is not satisfied, then everything is in vain. Thus, think wisely over app subscription terms/conditions, respect and value consumers loyalty, so that each user can stay with you for years to come.
Here are some tips that will help you evaluate your product correctly.
Since buyers can try free version, they know for sure whether they like your application or not. More users use your application, more popular it is on market areas.
Product prices do not standstill. Subscription app companies rarely leave initial prices in future use. Markets and needs are developing at a tremendous speed. But here it is important to do prices increase carefully because it can scare your customers. Our advice is to reward existing customers and, if possible, raise prices only for new subscribers.
Customers who like simpleness will choose a fixed or tiered pricing system, rather than a usage-based one. Adjust prices level and your primary customers’ feature level and don’t just do it as you like.
No matter what industry you work in, the subscription model is a way out. Ready to get started? Drop us a line. We are here to help to turn your subscription app into a booming business.
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