In App Purchase: 7 Tactics To Make More Money From Users

In app purchase as part of the freemium model has become the defacto means to monetize for a majority of the mobile apps. It’s easier to convey value and hook users when you offer a free version of the app up-front and then charge for value added features or content through an in app purchase.

In such cases, conversion tracking and optimization becomes extremely important to maximize revenues through in app purchases.

Candy Crush Saga is a good example of successfully implementing the in app purchase model. The app became so addictive that players spent £865m on in-app purchases of the game in 2014 alone.

The average conversion rate for in app purchases in a mobile app with a great value proposition ranges anywhere between 2-5%. Some apps such as Spotify have been outliers (at 30%) with a mix of many factors and a very strong value proposition and brand perception.

We put together 7 tactics that will ensure your in app purchase conversion rates see a continuous upward trend in the months to come.

#1 Get your users hooked to the app

In terms of getting a user’s attention, in app purchase works the same way like in app rating or review requests.

Both the techniques are effective only if the app users are hooked to the app. The conversion rate of in app purchases depends on how engaged your users are.

Offer your core value proposition up-front in the app and communicate clearly to the target audience as to what the app is intended for. The more engaged your users are and the better user experiene you can offer, the more likely they are to convert to paid users.

Hooking a user is directly dependent on how compelling is a problem that you’re solving and a factor of how efficiently or quickly are you solving the problem for the user.

#2 Build a ‘Predictably Irrational’ pricing strategy to bait users

One of the best known examples of this strategy is an old subscription model of The Economist magazine. They offered 3 different types of subscriptions:

  • Web Subscription – $59
  • Print Subscription – $125
  • Web and Print Subscription – $125

The first offer of $59 seemed reasonable. The second option (only print) seemed expensive. But the third option of both web and print for the same price as the print-only subscription seems to be like a super deal.

Dan Ariely, author of “Predictably Irrational” tested this phenomenon on a group of students. The results were:

  • Web Subscription – $59 (16 students)
  • Print Subscription – $125 (0 students)
  • Web and Print Subscription – $125 (84 students)

Total revenue: $11,444

In the next test the third option was removed, and the results were:

  • Web Subscription – $59 (68 students)
  • Web and Print Subscription – $125 (32 students)

Total revenue: $8,012, i.e. a decline of 30% in sales.

This is called the decoy effect, whereby consumers tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated – not often explored as an in app purchase model.

#3 Offer a free trial extension if your in app purchase is a subscription model

A free trial extension works best on the segment of users that are pretty much active throughout their trial, but churn as soon as the trial is over.

Trakio, a cloud-based platform for Software As A Service (SaaS) companies to track their customer data, used the free trial extensions and increased their paid conversions by 33%.

According to their blog post, despite great feedback and love for the product, their conversion rate sucked. After segmenting their users into six categories, they decided to offer a free trial extension in exchange for a feedback.

They added one simple extension in the subscription plan screen which reads:

Please tell us the reason you aren’t ready to start a subscription yet, and we’ll be happy to extend your free trial by 3 days.”

Based on the feedback, they resolved the issues faced by these users. By the end of this process, they received 27% more feedback and increased conversion rate by 33%!

#4 Make your free plan good, but not too good

Hootsuite has a nice way of doing it. The free plan has plenty of features, a set number of social profiles and some basic analytics – all the normal user would need. But, as the number of profiles grows or if you start using it for your business, you will need more accounts linked, the ability to collaborate, and better analytics, and thus an upgrade.

Onboarding becomes easier with this model and so does customer engagement. Once the user is engaged and using the product to satisfy their basic needs, bring your in app purchase at that moment where the needs increase as their usage grows.

#5 Create an urgency and give discounts

Everyone appreciates a good deal. The words Free, Sale, Discount, Guaranteed, and Offer are powerful words.

Run promotions from time to time to offer one or a combination of in app purchase elements for free or at a discount. The promotions can be limited-time offers and get your users to experience premium content or features for free or at a reduced price.

Build a viral loop within this system wherein you incentivize your existing users with discounts if one or more of their friends signed up for the app and unlocked one of the in app purchases – a model similar to Uber’s.

#6 Incentivize users to end their trial early

Enjoying our app? Do more by upgrading now.”

Want access to all the features? Upgrade 1 and get the other free by upgrading today!”

Such push notifications can attract an active user to end their trial version early to get early-bird discount. Users who actively use your app for 3 days, are four times more likely to convert. Use app analytics to identify true accelerators of conversion.

Segment users on the basis of engagement levels and convert them quicker with an incentive.

#7 Spread the word about your premium services

To get users to see the core benefit of your app you need to make some noise.

Telling them the benefits of using the paid services is the only way to sell your items. You have 3 options for doing this:

  • Drip Campaigns: This is an automated Email marketing campaign where the Emails will be sent out automatically on a schedule. For a drip campaign to be effective, it needs to be well-timed and relevant. These campaigns can be used to announce new updates, features, or price drops for an app. MailChimpAweber and Benchmark Email are some of the tools for scheduling drip campaigns.
  • Text Messages: Compared to Emails, text messages have high engagement because approximately 90% of SMS are read within the first three minutes of delivery. SMS limits the information to 160 characters, so it should only contain information which is absolutely critical and requires user to take some action.

Conclusion

If in app purchase is your only revenue model, then by all means, try one or a combination of these strategies to increase conversions. These are only guidelines and all of them may not suit every type of apps or every kind of in app purchase model. However, take inspiration and create your own bait and hook. And if you’ve tried something that works, please share it in the comments below.

Nidhi Shah
 

Nidhi is the head of content marketing at Arkenea, a mobile app consultancy building experience rich apps for startups and businesses.