The subscription industry is booming. Since 2016, Apple has been incentivizing developers to use subscriptions, including the App Store Small Business program’s recent introduction, allowing apps that made less than $1 million per year to halve the App Store sales cut.
According to numerous studies, the subscription model aids in customer retention as it creates a sustainable usage contract: by choosing to pay, again and again, users reaffirm their perceived value of the app over time. Today, Apple’s bet seems victorious: apps with subscriptions account for 96% of consumer spend in top non-gaming apps.
Average Americans spend $33 on monthly app subscriptions, with streaming services Spotify and Netflix included. In other words, the subscription market is immensely competitive, and developers need to price their products appropriately.
We can divide apps with subscriptions into three major categories:
We’ll focus on the pay to use and pay to upgrade categories. 3rd segment, pay to pay less, is challenging to analyze as you have to dive deep into the core business of the services themselves so we will leave it for another day.
Think about the value you’re providing. The frequency of usage could serve as a useful proxy. You can call for a higher price if your app is usually used daily, compared to the one used on a monthly basis.
Also, consider the pricing threshold that you have in the b2c world. It’s no wonder that most subscriptions we know are priced below $15. Consumers are unconsciously comparing your subscription to the price they pay for Spotify or Netflix, the subscription model pioneers. Such services are usually more fundamental to users’ lifestyles than yours, so you might think twice if you are opting to exceed this price tag.
According to recent research, most apps offer monthly or annual subscriptions with an average discount of 49% to push users to favor the annual over the monthly plan.
There is widespread conviction that developers should push for annual subscriptions instead of shorter plans. There are several reasons to do this: you can immediately reinvest into your growth; your users, invested, might be more committed to using your app; by pushing for annual, you are mitigating the churn risks, which remain a massive problem considering iOS 5 percent retention rate on Day 30.
But there is another side to the story. While everything above might be right, annual plans remain by far the least profitable option for any developer, even without taking into account massive discounts. There’s more: from our experience, the vast majority of the teams push firmly for annual plans because they cannot track their app economy correctly, so they think they’d be better off with a safe and easily trackable option, sacrificing profit.
The trend to prefer annual plans started to emerge with the iOS 13 release. Back in 2019, Apple took an enormous step to prevent accidental subscription renewals, beginning to warn users when they delete an app that still has an active subscription. While this change must have resulted in a decrease in trial conversions on iOS 13, it also had some externalities.
With Adapty, you don’t have to choose the lesser of two evils. With detailed real-time metrics, including MRR, subscriptions, and churn, measuring your subscription’s performance would become a matter of minutes.
As a fresh trend for in-app subscription pricing, lifetime plans are starting to come up more often in paywalls around the App Store. Used the right way, they could prove quite beneficial.
If priced correctly, lifetime plans allow generating revenues that are superior to users’ lifetime value. Simply put, some users may be dedicated to paying for ‘endless subscription’ but still may stop using your app at some point, and the cost difference might be on your side.
Also, an app paywall with a lifetime plan looks more mature and even confident than a paywall without one. Even the mere presence of such an option makes you think that the developer team is more than self-assured in their product’s enormous lifetime value, so maybe you should consider getting it as well.
Lastly, remember that technically App Store considers all lifetime subscriptions as simple in-app purchases, which usually significantly complicates the metric analysis. Should we mention that with Adapty, you wouldn’t even think about such subtleties?
Onboarding (activation) flow refers to a sequence of screens where a subscription is pitched to a user, usually at the end of which the paywall is shown. We could distinguish between super-early onboarding, early onboarding, and late onboarding flows.
Super-early onboarding flow means that subscription is the first thing pushed to the user right after the download. This usually indicates that you educated the user before downloading the app, and this model becomes less and less popular. Early onboarding flow is pushed to the user during the onboarding, usually after clarifying the value proposition and/or putting personal data into the application.
Late onboarding flow: subscription won’t be pushed before the user completes the core set of actions inside the app. This model is usually used by freemium (pay to upgrade) apps in which you are still able to access most of the app for free, and you are paying only for a set of extra features. Late activation flow is more flexible and could use different in-app scenarios to make sure the user is hooked.
We suggest that you tailor your onboarding flow with your app category in mind. According to a study by Liftoff, users of finance, travel, gaming, and e-commerce segments take a lot more time to purchase compared to other categories. Developers inside these industries might consider using late, more sophisticated activation flows.
Paywall remains to be the critical component during the process of onboarding. 80% of purchases are made via the first paywall, and users usually make up their mind within 5 minutes. One should also remember that Apple deeply regulates paywalls, and often intuitively right versions don’t make it past the App Store review.
Offer at least two pricing options, monthly and annual. You could push your user to pick the yearly plan with a specific design, a discount between 35% and 50%, or a special badge like ‘most popular.’ Offer a free trial, from 3 days to a month.
Step up is making options comparable to each other, like showing the monthly price for every subscription. You can even add a clarification with a daily number, e.g., 30 USD a year is less than 10 cents a day. You can also stimulate action by offering special deals valid only during the onboarding process.
While these recommendations should help you design a decent pricing strategy, there is still no ultimate playbook on evaluating your product right. Experiment: this is still an open-ended exploration, and no measures will give you guaranteed results.
While helping to tackle the mess of weekly, monthly, and lifetime subscriptions, Adapty also allows you to run A/B tests to find the best prices and offers for your users. You can compare paywalls, change price tags, manage payment screens without app releases, and analyze your business’s health deceivingly effortless.
With 14 days trial and five strings of code to get you going, Adapty is worth checking out. Implement in-app subscriptions, purchases restore, receipt validation in your app using our mobile SDK.
Our SDK is available on any platform. Here are the five strings for iOS.