The Catch-22 of Freemium models: how to make real profit off your app

The Catch-22 of Freemium models: how to make real profit off your app

The Freemium app mannequin is an exceptionally common one, specializing in providing a free model of an app to actual customers in after which encouraging them to improve to entry further options. There may be, nonetheless, a vital catch-22 to Freemium fashions: it’s good to make the app partaking sufficient for customers to be completely happy to pay (incomes you a revenue), however you additionally want to make sure that the free model isn’t so good that customers received’t hassle upgrading.


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On this publish, we’re going to debate the catch-22 of Freemium fashions and what you are able to do to just remember to are placing that steadiness and incomes the revenue you want.

Why the Freemium app mannequin is so common

The Freemium monetization mannequin is one that you simply’ll typically see in numerous several types of apps.

The Freemium mannequin revolves round a free-to-download app that has in-app purchases or the choice to improve for extra options. This could occur with a one-time buy or a subscription mannequin.


It is a sensible play. The free-to-download side makes it simpler to be aggressive within the app retailer towards merchandise that require fee upfront, as a result of who wouldn’t like to save lots of a couple of {dollars}? This helps you entice and retain new customers, which is the first purpose of this mannequin.

After which, as soon as they’re already utilizing the app and engaged, you’ll be able to provide in-app purchases to supply extra options or worth. At that time, you simply have to persuade customers to degree up, however you’re in a roundabout way competing with all the opposite search leads to the app retailer; they’re already invested within the device. This could enhance the percentages of conversion considerably, even when the person was initially solely as a result of it was free.

It’s not with out its potential dangers, after all; if customers obtain however by no means improve, there generally is a failure to make a revenue.

And that’s what brings us to the Catch-22 of the Freemium app mannequin.

The Catch-22 of the Freemium app mannequin defined

The core goal of the free model of an app is to draw and retain new customers.

That’s totally different, nonetheless, from the principle goal of the app itself, which is to drive revenue.

App builders and entrepreneurs want to seek out the suitable steadiness between attracting new customers and monetization. This may be tough.

You need your app to be extremely invaluable to your viewers in order that they’ll keep, hold utilizing the app, and finally make a purchase order. However some instruments find yourself creating free variations which can be so invaluable that customers by no means convert.

Others hold the free model of the app so bare-bones that customers don’t see the worth in any respect, or don’t get a lot use or enjoyment out of it. Because of this, they bounce, even when they in the end would have been the proper demographic on your device. For those who attempt to monetize too aggressively, you’ll find yourself reducing the variety of customers who you’ll be able to entice and retain, particularly as soon as some damaging opinions begin coming in.

One in every of our consultants, Maxim Adamov – the Product Proprietor of Social Buying and selling and Portfolio Administration at Exness – has an attention-grabbing tackle learn how to discover that steadiness:

Aggressive monetization (by which you scale back the performance of the free model) will be proper for sure apps. It will probably, for instance, work with complicated enterprise merchandise the place you’ve bought to purchase an costly pilot challenge simply to provide it a strive.

Then again, many cellular video games use a delicate monetization mannequin which lets you play at no cost eternally. Different merchandise are someplace in between, the place the free model is purposeful however restricted (Slack, as an example).

Tremendous-tuning the Freemium mannequin and discovering the suitable steadiness between the worth of the free and paid variations must be achieved by break up testing and analysis.

Right here’s what you’ve got to remember although: by lowering the performance of the free model, additionally, you will slender down the potential audience. The much less apparent the worth, the less customers who already use your rivals’ merchandise will need to swap to your product.

Extending the free model of the app and lowering the variety of paying customers doesn’t essentially imply that your revenue will drop. You possibly can nonetheless work in the direction of growing the LTV of paying customers and growing revenue. The upper the LTV, the extra it is possible for you to to spend on attracting new customers.”

You need to discover the suitable steadiness to get customers drawn in with out them turning into complacent with the free model of the app, and there are some things that you are able to do to assist with this.

Methods to keep away from the Catch-22 of Freemium apps

Need to keep away from falling into that dreaded Catch-22 entice of the Freemium app monetization mannequin? There are 4 methods that our workforce recommends utilizing to strike that excellent steadiness.

Give customers a practical take a look at how the general device works

If you’re deciding what you need to embrace within the free model of the app, you do want to ensure there’s sufficient worth for the person to seek out it partaking.

Say, for instance, you’ve got an app that tracks what gadgets customers have of their freezer. The concept is that they don’t overlook what they’ve, or have meals that winds up freezer-burned.

You determine to permit customers to enter gadgets and expiration dates within the free model of the app, together with the flexibility to set notifications when gadgets are nearing an expiration date. This gives a base-level worth that may hold customers engaged. With out these core options, customers will in all probability flip to a competitor’s device.

That being stated, you arrange a paywall for options like the next:

  • Recipe recommendations for customers primarily based on components they’ve within the freezer
  • Syncing components from on-line ordering instruments like InstaCart
  • Including further details about an merchandise like allergy labels, cooking directions, or expiration dates primarily based on product sort

Some customers might find yourself sticking with the free model of the app, however some customers who benefit from the free app would possibly see that these options are value upgrading for.

That being stated, upgrading to a paid model of an app isn’t all the time nearly accessing new options. Cloud-based apps are an ideal instance.

“Remember to give customers a stable storage restrict in order that they will benefit from the free cloud storage to its fullest,” stated Kirill Ignatkov, CEO of Cloud “As an illustration, we offer 8GB of free storage, which is sufficient to take a look at the device however not sufficient to apply it to a relentless foundation. As soon as customers attain the restrict, they may extra seemingly be completely happy to increase it by paying a price slightly than switch all of the uploaded content material to a different cloud storage.

“With Freemium apps like Cloud storage, it’s vital to ensure that the free model of the app not solely exhibits the principle worth (importing content material), but additionally works rapidly with no technical points and gives sufficient area on the free model for the customers to change into loyal.”

MyTracker’s Enterprise Growth Supervisor Elizaveta Gutnik shared this instance:

“An excellent instance of how language apps monetize by advertisements and in-app purchases is LanguageDrops. They keep customers by giving them further makes an attempt to study new phrases, and the extra typically they use the app, the extra makes an attempt they get. That method, they generate extra curiosity in shopping for a vast paid model of the app. That is extensively utilized in instructional apps.”

Anastasia Grishina, Model Supervisor at MyGames, shares her expertise with how advertising and marketing experiments can influence retention charges considerably:

“If customers don’t perceive what the product is about, it might negatively have an effect on each the conversion and retention charges. For instance, advertising and marketing experiments if not achieved appropriately can scale back retention charge and different vital product metrics. Earlier than working such advertising and marketing experiments, it’s essential to make certain that your challenge metrics are steady sufficient to compensate if one thing goes improper.”

So, right here’s the underside line: Providing sufficient worth within the free model of the app goes hand-in-hand with driving engagement, constructing loyalty, and growing retention. This contains:

  • Making the app purposeful in its free model
  • Checking that there aren’t any technical points
  • Ensuring there isn’t any deceptive data round worth and that your advertising and marketing campaigns are constant

Monetize on the proper time

Think about for a second that you simply log into Sweet Crush for the primary time, and earlier than you’ll be able to even begin on the primary degree you see an advert pop up that asks you to purchase 5 lives. It might be a no, proper? And it is perhaps annoying sufficient to get you to delete the app.

That’s a really totally different expertise than being sucked into the hyper-addictive sport, simply barely dropping round, and never wanting to attend an hour to proceed enjoying. These 5 lives are a click on and some {dollars} away.

You’re more likely to click on to make that buy, proper?

Figuring out when to ask for purchases and upgrades is sort of as vital as realizing what upgrades to supply.

“Combine analytics into your app to see why customers don’t carry out a goal motion that you simply count on them to carry out,” shared Grishina. “For instance, you count on customers to pay after 20 minutes spent within the app, nevertheless it seems that almost all of them depart in 20 minutes and don’t even get to the purpose of seeing the fee window. Which means that one thing isn’t proper, possibly even on the onboarding stage. If, nonetheless, you discover that they do see the fee window however don’t make a purchase order, maybe it’s good to dig into the provide itself to see if it’s engaging sufficient for a primary fee.”

“The timing of the ‘flip the advertisements off’ pop-up additionally issues,” shared Gutnik. “For those who present it to the customers who’ve already performed by 30 ranges and present retention charge, they may likely be completely happy to pay to show the advertisements off eternally.

Watch out with how a lot you cost for that: calculate the income from advert views and the forecasted LTV. Figuring out these two figures will assist you to decide how a lot turning advertisements off will price.”

Suppose like a participant

Monetization isn’t nearly displaying the suitable advert on the proper time – you need to be strategic and perceive gamers’ habits on a deeper degree.

These are the very best suggestions that MyGames’ Head of Sport Design Ivan Klevakichev needed to share round monetization and engagement:

“Create a behavior – break a behavior. On the one hand, it’s essential to create a behavior amongst gamers to begin the sport. Then again, it’s essential to consistently push them out of their consolation zone every time they discover themselves in it – habits aren’t any good right here.”

“Create consolation – kill consolation. The early phases of sport improvement are about getting most retention charges after which changing them to revenue. Virtually all monetization reduces retention, however the retention charge of paying customers is a lot increased than that of non-paying ones.”

“Suppose like a paying person. For that, it’s good to change into one. Many free-to-play sport designers don’t pay in video games and are pleased with that.”

“Keep in mind that fee will imply a person misses some a part of the sport (even a really small half) for the sake of overcoming a sure problem. Customers leaving after making a fee as a result of the sport not excites them is a typical situation. It’s, due to this fact, essential to creating positive that the a part of the sport they’ll be skipping isn’t notably thrilling – allow them to skip the components the place they don’t have anything new to study and don’t see a lot progress for themselves.”

“Keep in mind that probably the most invaluable useful resource of a participant is their time. A participant enters the sport to spend time, however they nonetheless worth it. You need to promote the chance to save lots of real-time, however allow them to spend as a lot time as they need within the sport (in the event that they pay, after all).”

Take note of person suggestions

Direct person suggestions is among the finest methods to evaluate whether or not your present Freemium construction is working for you or towards you.

Ship out a survey to ask your customers which options are integral to the device. Generally the reply might shock you, and also you’ll all the time get a direct reply.

You additionally need to take a look at opinions. If opinions persistently point out “you’ll be able to’t even use the app with out paying” then that might be costing you, potential customers.

Think about, for instance, a Freemium graphic design device that wouldn’t allow you to obtain or save even a single picture you create. This turns into dysfunctional. Be sure you’re giving customers a minimum of a couple of free downloads, or hold a number of the coolest visible results for paid fashions and hold all downloads free as an alternative.

Elizaveta Gutnik recommends the next:

“Analyze your funnel and discover bottlenecks. For those who discover {that a} important variety of customers depart your app at a sure level, embrace a pop-up at that stage asking for his or her suggestions in alternate for a reward. You might get responses that may inform you what the issue is (‘cease displaying that horrible advert’ or one thing to do with the product) whereas additionally re-engaging them.”


Take into account different monetization choices

The Freemium app mannequin is a stable technique to entice numerous downloads after which monetize by in-app purchases, nevertheless it’s not all the time foolproof.

Even in case you do need to depend on a Freemium app, you too can reap the benefits of different monetization choices.

It’s frequent, for instance, for gaming apps to have in-app advertisements (together with video advertisements) that deliver revenue to the app developer. Some video games permit customers to improve to skip advertisements, guaranteeing that the app earnings in some way.