100+ consumer sub apps listed and analyzed
Together with Nicolas and Alexandre from Idinvest we’ve benchmarked the pricing structure of the major consumer subscription mobile apps. We’ve summed up our findings in a series of videos and in the post below.
Table of content:
- Video 1: The benchmark
- Video 2: Pricing structure of consumer sub apps
- Video 3: Subscription plans’ price points
- Video 4: Pricing and upselling tactics
- Video 5: Pricing and acquisition/retention
- Benchmarking the pricing of 100+ consumer sub apps
- Pricing Structure
- Price Point
- Acquisition and retention
Pricing Benchmark Videos
Pricing structure of consumer sub apps
Subscription plans’ price points
Pricing and upselling tactics
Pricing and acquisition / retention
Benchmarking the pricing of 100+ consumer sub apps
In the rest of the post, I’m going to share what we’ve learned analyzing the pricing strategy of more than one hundred consumer subscription mobile applications.
The rise of consumer sub mobile apps
If you’re reading this article, you probably know that the past couple of years has seen the rise of subscription-based mobile apps for consumers. We were used to this model in the B2B world with SaaS companies, but this trend has since crossed over to the consumer world mainly driven by a mature infrastructure layer with great mobile SDKs and the possibility for consumers to subscribe to mobile app services directly from the app stores. But also because people got used to “renting” services and apps instead of buying them. Market education is playing a huge role imo.
This is why we’re seeing an explosion of consumer sub apps at the moment, with well known products such as Spotify, or Headspace, but you can find literally hundreds of them on the mobile appstores right now.
Benchmarking the pricing strategy of more than 100 applications
Since one of the major innovations of these startups is its business model, renting versus owning a.k,a subscription versus one-time payment for consumers, Alexandre listed and analyzed the pricing strategy of more than 100 consumer sub mobile apps. He collected various information ranging from the subscription plans available, their price range, the categories they belong to, and other relevant data points. If you want to access the spreadsheet, just go on ask him on Twitter.
Based on this benchmark, we’ve analyzed the different pricing strategies used and in the rest of the post we’ll be covering first the pricing structure we saw, in a second part the price points they adopted, third the different upselling tactics available when you deal with consumers and finally customer acquisition and retention tactics based on pricing
As I said in the intro, one of the major innovations of consumer subscription apps, is its business model and the fact that people pay monthly or yearly to access an app instead of buying and owning. It might sound obvious today, but just a couple of years ago it seemed crazy for many people not to own the music they bought. Now a Spotify account is a totally normal thing.
Anyway, in terms of pricing structure when we say subscription, we also mean subscription plans with different lengths.
From monthly and yearly plan to weekly and quarterly plans
What’s interesting to see here is that 81% of the companies on our list offer a monthly plan, and 90% a yearly plan. So the pricing structure of a vast majority of these mobile apps is built around monthly and yearly plans. This is the basic pricing structure. The monthly plan is used as an introduction for many customers as they can unsubscribe any month so they don’t feel locked in, whereas the yearly plan might require a bigger investment upfront for them, but they pay less on a monthly pro-rata. For the service providers, knowing that customer churn is generally high, the yearly plan is the one they push the most because it’s not only a great way to get more revenue upfront but also to mitigate monthly churn.
However, it’s also interesting to notice that several companies don’t offer a monthly plan at all. It’s the case for example of the fitness app Freelitics for which the shortest plan is three months. It’s kind of similar to what brick and mortar gyms do as they know that people churn fast on sports activities.
The opposite is true too, several apps such as Luni offer even shorter options, with one-week subscription plans. So there’s a lot of different options available depending on what you want to achieve with your pricing, each having its benefits and drawbacks. However monthly together with yearly plans are the backbone of the pricing structure.
The rise of the lifetime plan
Another interesting trend is the rise of the lifetime plan. An increasing number of consumer mobile apps offer lifetime plans that the customers pay one time to access the service forever. I think it’s a super smart option first because it gives the feeling of ownership to the consumers, even if it’s not true, it’s still a license, and second because from the service provider perspective, they design these plans to cover more than the average lifetime value of a customer, so on average it’s a win for the editors.
Freemium and free trials
We couldn’t finish this part without speaking about free trials and freemium. From our dataset, 100% of the apps offer either a free trial or a freemium model. Which is not surprising knowing that free trials and freemium are critical for many consumer businesses. They apply the classic drug dealer business model where the first dose is for free and they make you pay once you are addicted.
That being said, if you look at the apps offering a freemium the number decreases a lot and really depends on the category of the app. For example, no app in the meditation category of our list offers a freemium whereas all the apps in the video and photo category do offer a freemium option, which is obviously for virality reason as the videos and photos shared have the company’s watermark on it.
In the previous part, we talked about pricing structure and in this one, we’ll cover another aspect which is pricing point a.ka how much each plan is priced.
The “Netflix” anchor price point
From the companies in our list which offer a monthly subscription plan, 72% are priced between 5 and 15 dollars per month, while 17% are above that price range and 11% below.
As you can see, a vast majority of these consumer mobile apps are in this 5 to 15 dollars per month sweet spot, and when you discuss with the developers of these apps, a comment that comes back regularly is that people will very often compare the price of a subscription to the price of a Netflix or Spotify account. Even if the app is in a totally different category. They will tell you that they are reluctant to pay much more because for that price they get unlimited music or movies/series.
So yes, one of the major differences between consumer sub apps and SaaS pricing, is that there is a real anchor price in the consumer space whereas B2B SaaS pricing can vary from 5 dollars per month to literally hundreds of thousands of dollars per month for a big enterprise customer.
Not all margins are equal
Another factor to take into account in our price discussion is margin. For instance, Spotify must pay various licensing fees for each stream, and Netflix has huge production costs to offer their in-house content plus licensing fees for the content they use from other studios. Their gross margin might be different than a meditation or task management app. So even if a lot of products are in the same price range, their margins can differ quite a bit.
What about lifetime plans?
We already talked about the rise of lifetime plans without speaking about their price point, let’s do that now.
- The average price of a lifetime plan is around 90 dollars and the median value is 60 dollars
- More interesting perhaps is the fact that on average a lifetime plan is priced at 19 times its monthly price, basically, a consumer needs 19 months to cover the price of its lifetime plan, the median value being around 14 months.
That being said, these numbers should be taken with a grain of salt as we have only 13 companies that offer a lifetime plan in our list of more than one hundred companies.
Upselling and going upmarket
The concept of upsells is a very important one in the B2B SaaS world and it’s kind of a holy grail because you basically increase the revenue generated by your average customer over time. For example, you have a customer who starts paying 10$ per month for your service, but he likes it so much that he pays more and more to get better features, and he ends up paying 20$ per month a year later.
However as we’ve seen in the previous video, a major difference between the consumer and B2B subscriptions models is that in the consumer world people are often reluctant to pay more than 15 dollars per month for their app, so are upsells possible here too?
The short answer is yes, and developers mainly do it through two approaches:
- The prosumer model
- The friends and family model
The prosumer model
The prosumer model consists of offering a business version of the app. This version contains features that a consumer might not be interested in, but that businesses are ready to pay for. For example, Photoroom is a cool editing photo app that has a free mobile version but also a pro offer that removes their watermark on the pictures, gives access to more templates, enables higher quality pictures, etc… which is very useful for Shop owners for example.
Even meditation apps offer pro versions of their product, like calm for businesses that enables companies to roll out the calm app for their employees.
It’s a classic bottom-up strategy, you build an app that people love, and once you have a good adoption, you try to make the company they work for pay for the pro version.
The friends and family model
The second common upselling tactics is very similar to what exists in the SaaS world with seats based pricing. Basically, the price of the product will increase if more users of the same company use it. But In the consumer world the pricing unit is not the number of employees, but your friends and family.
A well-known example is the Spotify family account. A standard Spotify account costs around 10 dollars per month, but if you pay a little bit more, 15 dollars, you can have 5 other family members using it. Which is attractive as you pay only 15 dollars for 6 users instead of 60 dollars. Right 🙂
Obviously, the strategy is to push the user to pay more because he feels like he gets a great deal.
Acquisition and Retention
A big challenge for many consumer sub app is a high customer churn. The majority of these startups have less than 50% of annual retention rate, meaning that from 100 customers acquired during a given date, one year later less than 50% are still paying for the product.
So retention, and more importantly acquisition are key in the consumer world.
As a founder once told me, the best retention tactic for consumer sub products is the auto renewal feature. On many platforms, whether the mobile app stores or payment platforms such as Paypal, once a customer subscribes to an app, the subscription will be automatically renewed, and for many developers, it’s their best retention tool.
When it comes to the use of pricing for acquisition purposes, bundles are a good example of that. It’s not necessarily a widely used acquisition tactic, but you can find several consumer startups that bundle their apps together to increase their reach.
For example Spotify and Headspace offer a bundle which costs around 10 dollars per month to access both apps, and after three months the price increase to 15 dollars per month. Obviously the bundle strategy also heavily relies on the autorenewal option and the fact that many people will probably forget to cancel their subscription.
The last “pricing based” acquisition tactic that I will cover is Gift cards. In the B2B world it’s very rare that a customer decides to offer his friend a subscription to his favorite SaaS. But on plenty of mobile apps you do have a gift option where you can pay a subscription and offer it to a friend.
To be honest I don’t really know to which extent this works. I spoke with a few developers about that, and the gift card was not a feature that contributed significantly to their user acquisition or their revenue growth. So I’m not sure how efficient this tactic is for the industry as a whole, but it’s worth listing it in our video.