All You Need to Know About the Subscription Model

Publishing and owning an app inevitably means that, as an app owner, you need to consider how you can monetize it to earn a profit. Deciding how to do this can be tricky and will depend on your app’s unique features and services. If you’re thinking of introducing subscriptions, it’s a good idea to follow a few subscription-based app best practices to get the results you’re looking for.

Traditionally, getting users to pay to access an app has been the dominant payment strategy used, known as the pay-to-own model, where users pay a once-off fee to access an app’s features. While this model does still hold up for certain app types, the subscription-based app model enables publishers to charge users a recurring fee for access to its services. 

While the subscription model offers a host of benefits to app developers and publishers, it also can be challenging to get right. If implemented incorrectly or without careful planning, it could put off potential users or cost you existing users. 

Find out everything you need to know about subscriptions and how to properly utilize them to drive app revenue.

The subscription model explained

In-app subscriptions are recurring payments that users pay over a specified time to access an app’s features and services. At the end of this period (most commonly 6 months to 1 year), the user can choose to renew their subscription or not. 

This enables app owners to focus on increasing the lifetime value of each user and improving user retention. It also gives app owners the ability to generate app revenue without relying solely on in-app advertising or purchases.

In-app subscriptions have skyrocketed in popularity in recent years, with some of the biggest app-based brands like Netflix and Spotify using it. Statista reports that global consumer spending on the top 100 subscription-based apps in the App Store reached $13.5 billion in 2021. 

Pros and cons of In-app subscriptions

Advantages

• Consistent revenue - Because users are paying a fixed amount every month for your app, your revenue is more stable when compared to an ad model. Having ongoing revenue makes it easier to plan for your app’s growth and scaling. Even if you lose subscribers to churn, it’s still easier to predict your monthly earnings and plan for the future.
• Better user engagement - driving user engagement is something that all apps can struggle with, but subscription-based apps tend to generate higher user engagement. Users who regularly pay to use an app are more likely to actively interact with and use it, allowing owners to nurture and develop better user loyalty.
• The chance to rank higher in the App Store - in 2016, Apple began to offer subscription-based apps, with subscriptions that last over a year, the chance to rank higher in the store’s search results. This can boost your app page’s visibility to potential users and help with app-store optimization. 

Disadvantages

• Constant innovation - Users are paying for your app‘s products and services and, as a result, they expect to see routine updates, improvements and new features being rolled out. If your app doesn’t improve with time, there’s a risk of users becoming bored or dissatisfied with it and cancelling their subscriptions. 
• Onboarding can determine app success - It’s unlikely that users will commit to a paid subscription before they fully understand the app’s value. To do this, you need to offer an initial trial or onboarding that allows them to experience or learn about the app’s premium features. This can get tricky, because users may quit after their free trial or onboarding concludes but they may also hesitate at paying a nominal fee upfront. It’s best to test which method is ideal for your app. 
• Support services are essential - Paid app subscriptions come with a higher level of user expectations. Users paying for your app will expect a certain level of support services they can easily access. The more advanced your support services, the more expensive they will be, driving up your overhead costs.

What apps best suit the subscription model?

While any app can implement paid subscriptions, certain types are better suited to leverage it than others. Content apps that release new content to users are ideal for exchanging for paid subscriptions. Service apps also perform well here following the same formula.

Single purpose apps (such as a dictionary), shopping apps and mobile gaming apps generally don’t suit the subscription model although, in the case of games, they usually offer in-app purchases that are extremely popular. 

Are in-app subscriptions right for your app?

Monetizing your app by charging paid subscriptions can increase your earnings and revenue potential - but implementing it doesn’t automatically mean this will happen. 

Before making any changes, you should consider your app’s structure, product or service offerings, position in the market, existing user base and current monetization model. How would your existing users feel if you introduced a paid subscription plan? Would it drive up your churn rate? 

At Appic, we can help you leverage these and other insights to implement the best monetization model for your app. We offer a free evaluation that can give you an idea of where your app is at in performance and revenue, where it can go and how best to get there. Get in touch to learn how we can help you