We’ll delve into a subscription pricing model, the different types, and how you can choose the right subscription model for your app.
What is a subscription pricing model?
A subscription model for apps is when your users pay a recurring fee in exchange for continued access to the app's features, content, or services. Most commonly, these payments are invoiced as monthly or annual charges to users.
While a subscription pricing model is usually used by SaaS apps, they’re also growing to be the norm for other types of apps such as entertainment apps, fitness apps, and so many more.
But what makes subscription models so popular? It’s the fact that there are many subtypes within this model that you can pick from!
Types of subscription models
Subscription pricing models for apps can rake in a lot of revenue and a dedicated fan base for app developers. However, before you can get to that stage, you’ll have to understand the different types of subscription models.
Today, there are 4 lucrative and unique subscription models that we’ll discuss in detail. From what they essentially are and famous examples to the pros and cons each model carries, here are the 4 types of subscription models for apps.
Traditional subscription model
First things first, a traditional subscription model is one of the easiest models to implement on a subscription app. In this model, users will pay a fixed amount of money on a monthly or yearly basis to access your app’s features.
A famous example of this is Netflix which became the world’s most successful subscription company. They even implemented tiers to offer different services and features for different budgets, amassing approximately $33.72 billion in revenue every year!
Freemium model
One of the main problems with the traditional subscription model is that it doesn’t allow users to experience the product before committing to a purchase. That means users who aren’t 100% sure of the app’s capabilities are driven away instantly.
If that sounds like a problem your app might have, a freemium model is just what you need. In this model, users can enjoy a basic version of a product or service for free, while premium features or content are available for a subscription fee or through in-app purchases.
Not only does this attract a larger audience that can drive in positive ratings and reviews for your app in the App Store, but it also entices users to make a purchase strategically.
For example, Spotify lets you listen to the largest digital music catalog for free, but they also throw in personalized ads after a few songs and lock up features such as offline playing for paid users.
Pay-as-you-go model
Sometimes, your app is designed for sporadic users rather than those who stay committed month after month. And that’s perfectly okay because you can monetize with a pay-as-you-go subscription model!
This model charges customers based on their actual usage of the product or service. This could be based on metrics such as:
- Usage time
- Data consumption
- Transactions.
Hybrid model
Last but not least, a hybrid model is the best of both worlds. This subscription model for apps combines elements of multiple subscription models to offer customers different options for accessing the product or service.
For example, a hybrid model could include a combination of free, subscription-based, and pay-as-you-go tiers. Tinder is one of the biggest examples of a hybrid model where they offer a free version, multiple tiers of subscription as well as a few pay-as-you-go features here and there for an extra boost!
How to choose the right subscription model
Now that you know there are four main subscription models to choose from, it’s time to figure out which one fits you the best. Luckily, there is no one-size-fits-all when it comes to picking subscription models because the choice depends on various important factors.
Let’s talk about the 3 main factors you should consider when choosing your app’s subscription model.
Audience demographics and preferences
Understanding the demographics of your target audience, such as age, gender, location, income level, and interests, is crucial for determining the right subscription model for your app. When you tailor your subscription model to align with the preferences of your target audience, it can help improve user acquisition, retention, and overall satisfaction with your app.
Different demographic groups may have varying preferences when it comes to payment methods, pricing structures, and willingness to pay for certain features. For example, younger users might prefer a freemium model with in-app purchases, while professionals might value a flat-rate subscription model for productivity apps.
Nature of the app content
Now the type of app you construct is also highly important when considering the subscription model you opt for. Confused what I mean by that?
Here’s a breakdown to explain how the nature of your app’s content impacts your choice of subscription models:
- Premium Content: If your app offers exclusive or premium content, such as ad-free streaming, advanced tools, or access to specialized resources, a tiered subscription model or a freemium model with premium upgrades may be appropriate.
- Utility Apps: For apps that provide essential utility or productivity features, such as cloud storage, project management, or fitness tracking, a flat-rate subscription model or usage-based pricing might be more suitable.
Once you categorize your app, you can analyze your app’s value proposition and recognize the features that users are willing to pay for. That can further help you decide on an appropriate subscription model.
Competitor analysis and industry trends
Conducting a thorough analysis of competitors in your industry can provide valuable insights into which subscription models are successful and which are not. Evaluate the pricing strategies, subscription offerings, and user feedback of competing apps to identify gaps or opportunities in the market.
Additionally, staying up-to-date on industry trends and emerging best practices can help inform your decision-making process. We always recommend you keep an eye on changes in consumer behavior, new technologies, regulatory developments, and shifts in market dynamics.
Tips to implement your chosen subscription model
We can’t let you go without offering you our favorite tips when it comes to implementing subscription models for apps. Here are our top 2 pieces of advice on making the best of your subscription model.
Allow flexibility in payment options
Did you know that offering multiple and flexible payment methods boosts your sales figures and improves your overall profit margin? Not every customer has access to one or two payment methods that you might offer. And that would mean they’d have to quit because they can’t subscribe even when they want to.
Hence, you must offer as many mainstream payment methods as possible! This would help your app reach a wider audience and reduce your customer churn.
Use push notifications or in-app messages to entice users
Push notifications and in-app messages are your best friends when it comes to nudging your users into the sales funnel. So, use push notifications or in-app messages to deliver discounts, and special offers and notify users about new features or their subscription status at the right time!
Conclusion
And there you have it, the complete guide to subscription models for apps in 2024! Today, more than ever, the mobile app subscription business model is growing. The potential for this business model is seemingly limitless, with famous apps reaching billions of dollars in net worth.
After you choose the subscription model, it's crucial to think about the infrastructure and analytics platform you will use to monitor and manage your subscriptions. Apphud offers a comprehensive solution that can help streamline your subscription management process and provide valuable insights into your app's analytics. Sign up for Apphud today!
