It explores how apps with a subscription model can potentially increase user engagement, generate app revenue, and create a loyal customer base. Additionally, the paper sheds light on the challenges and opportunities of developing a successful subscription app within the mobile app market.
The main challenges faced by subscription app owners in 2023:
1. User Acquisition and Retention: Subscription app owners will continue to face the challenge of acquiring and retaining users in a crowded and competitive market. Keeping users engaged and finding ways to monetize the app by offering incentives and discounts will be key to success.
2. Data Privacy and Security: As data privacy and security become increasingly important, subscription app owners will need to stay up to date with the latest laws and regulations while protecting user data. iOS and Android privacy updates continue to change app measurement frameworks.
3. Increasing competition: There will be an increasing number of subscription apps in the market, making it difficult to develop innovative features and differentiate your product to compete with existing and new competitors. Catching the product-market fit is getting harder and harder.
It’s impossible to ignore the market changes, the better way is to adapt and improve your strategy. At Apphud, we prepared 5 practical cases, from User Acquisition to Win Back, to use in the new market and stay on top.
User Acquisition
Apple and Google's privacy changes have a significant impact on mobile app marketing. Apple’s iOS 14 and Google’s Android 13 updates include new privacy features that limit access to user data, making it more difficult to track and measure user activity across apps and websites. This affects targeted app advertising and personalized content, as well as the ability to measure user engagement, conversions, and ROI. Additionally, Apple’s App Tracking Transparency framework requires users to ‘opt-in’ in order to allow tracking for app advertising purposes, making it much harder for marketers to reach the right audience. As a result, marketers must focus on developing more personalized content and creating strategies that are more effective at engaging users.
Our aggregated data displays that the ARPAS metric analysis holds the potential for your mobile app growth strategy. It's evident that paying users generate more revenue, however, don’t ignore the ARPAS metric that includes trial users. Analyzing LTV for paying and trialing users, comparing different cohorts, and understanding the longest lifetime allow you to calculate the optimal bid range for user acquisition techniques and optimize ad campaigns more effectively.
ARPU, ARPPU, ARPAS aggregated data, ApphudConversion from Install to Trial
The problem for subscription app owners is that there is no single paywall that works for all apps. Every app has a different user demographic and different usage patterns, so a paywall that works for one app may not be the best-performing paywall for another. As a result, it can be difficult to determine which paywall will work best for a particular subscription app.
If you don’t identify the best-performing paywall for your app, it can lead to a loss of users, which equals revenue at this step.
To ensure the highest revenue potential for your app, subscription app owners should launch A/B tests to determine which paywall will maximize their revenue. These tests should include a variety of paywall options, such as a free trial, different subscription plans, and different pricing models. The tests should also track user engagement and conversion rates to determine which paywall is most effective. By running A/B tests, subscription app owners can make an informed decision about which paywall will be best suited to their app and its users.
The benchmark for the conversion rate from install to trial for subscription apps typically ranges from 5-15%. This metric may significantly vary depending on the audience of your app. Segment your user base by country, age, device, etc. to identify bottlenecks and fix them.
Conversion from Trial to Subscription
So, you already have trial users, but what’s next? That’s a good step because you have more touchpoints with the user. If you utilize mechanics wisely it could improve the conversion rate for your app.
The benchmark for the conversion rate from trial to subscriptions for subscription apps varies significantly based on the type of app, the structure of the trial, and many other factors. Generally, conversion rates of 10-20% are considered good. First of all, you need to capture the conversion rate standard for your app and start working with it.
A low conversion rate from trial to subscription indicates that app owners are having difficulty persuading interested users to commit to a paid plan. This is an issue because it signals that users are not finding enough value in the product to justify the cost. Additionally, it could be a sign that the app is not user-friendly, or that the pricing structure is not appealing enough to customers.
Retention
The low retention rate is a major problem for subscription businesses, as it costs companies many times more to acquire a new customer than to keep existing ones. Additionally, existing customers are more likely to generate higher customer lifetime value than new clients, making customer retention a key factor in the success of an app. This includes offering incentives such as discounts, loyalty programs, and personalized user experiences to reward customers for their continued loyalty and engagement. It is an indicator of how successful the app is at providing value to customers and keeping them engaged over time. By understanding customer retention, app owners can identify areas for improvement and develop strategies to retain existing customers and attract new ones. It also provides insights into customer lifetime value and the overall health of the app.
The benchmark for the year retention rate for subscription apps in general is typically around 15-20%. Diving into this data and dividing all types of subscriptions by periods, aggregated Apphud’s statistics show that:
- From purchase to the first renewal, subscription apps lose about 40% of users
- To 6th renewal - about 70-75%
- To the 12th renewal - about 80-85%
- To the 48th renewal - about 95%
It’s quite a big churn for the first step but analyzing long-term renewals could be key for better understanding your audience, and improving your product.
Retention aggregated data, ApphudIf you don’t pay enough attention to the retention metrics, you may end up losing money. Let us explain where you can find bottlenecks to fix them, and increase app revenue.
Win Back
When it comes to subscription apps, it is important to keep subscription cancellation rates in mind. The benchmark for churn rate for subscription apps can vary greatly depending on the sector. Generally, a churn rate of 5-10% is considered to be healthy for most subscription-based apps. By understanding the churn rate, app developers can identify potential issues that may be causing users to abandon the app and take appropriate measures to address them.
You should, of course, work on a churn prevention strategy, however, that’s too thoughtless to let your customers go.
Bonus: Billing Issue LTV
On average, only about 16% of renewals are successful after the billing issue. That’s a huge percentage of involuntary churn! Ignoring this step is a big omission. Don’t let users go because of a mistake.
It's important to proactively reach out to customers who experienced a billing issue, and offer assistance to help them renew successfully. This can include sending reminders or offering alternative payment options to ensure the customer can complete their renewal without issue.
Conclusion
These 5 cases demonstrate that subscription apps have a wide range of opportunities for successful user acquisition and engagement. Every stage of the customer life cycle, from user acquisition to win back, can be optimized to drive app revenue growth. By focusing on customer segmentation, customizing the user experience, and utilizing retention campaigns, subscription apps can keep the momentum going and drive sustainable growth. With the right strategies and tools, subscription apps can be successful in any market.
Apphud provides an easy way to transform data into actionable customer insights. We help mobile app teams at any product lifecycle stage. Implement our SDK to track in-app purchases easily, check advanced dashboards to make informed decisions, launch A/B/C tests to grow even faster, and set push notifications to win back lapsed customers. Sign up now and let’s grow your app revenue together!
