Medium-Cost App Subscriptions May Be the Way to Go

August 16, 2017 - 3 minutes read

One of the most nagging questions that faces mobile app developers is how much to charge for a subscription for an app. Set the subscription fees too low and you may go into the red; set them too high and you run the risk of scaring away potential users. Obviously mobile app developers have to find a “golden middle,” but getting the temperature of the porridge just right is hard work. Fortunately, the good people at Liftoff, a Silicon Valley firm that focuses on app marketing and retargeting, have recently released a report analyzing the relationship between the cost of a subscription and the number of subscribers.

Liftoff’s report is a godsend for mobile app developers who need help setting subscription fees. Based on data gathered in between June 2016 and June 2017, the report took into account the cost of an app subscription (divided into three categories: under $7, $7 to $20, and $20 to $50) and what it costs the app developer to attract the customer. What Liftoff determined is that medium cost subscriptions (the ones in the $7 to $20 range) tend to have the most success, with the highest average conversion rate of the three categories (7.16%) and the lowest cost to acquire the user ($106.35). By contrast, the low-cost subscriptions had a low engagement rate of 1.37% and the relatively high average cost of $234.14 to win over the subscriber. On average, high-cost subscriptions spend more than $300 on acquiring customers and have conversion rates below 1%.

So why do mid-range subscription costs seem to work best? As New York City mobile app developers know, in the age of streaming services like Netflix and Spotify, users are willing to shell out a reasonable amount of money for an app that will actually give them their money’s worth. As long as the subscription costs aren’t prohibitively high (the issue that the $20 to $50 range of subscriptions runs into), people will pay for a good service. Liftoff also believes that the so-called Sunken Cost Fallacy is at play. This is the principle that says that people will see even an unsatisfactory experience all the way through if they have invested a sizable enough sum in it. (So for the lazy mobile app developers out there: you don’t have to make a great app, just put together a mediocre one and charge somewhere in between $7 and $20 a month for it.)

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