In this 3rd installment of our mobile application pricing model blog, we will focus on the time-tested pricing model of using subscriptions as a means to offer mobile applications for sale to consumers.

 

Mobile application subscriptions have been around for a long time and are still used to monetize everything from games and ring tones to wallpaper, broadcast TV and now even GPS navigation applications.  Subscriptions help provide consumers with access to a wide variety of content and services while at the same time providing an ongoing revenue stream for developers.  Common uses for this model include offering a subscription option as an alternative to pay per download for multimedia content such as mobile games.  In this instance, the subscription price can be less than half that of the pay per download cost, and may even provide access to more than one game during the subscription period, but the key difference is that the user gets to keep the game when they pay for a full download but with subscriptions their access to that same game or games ends once the subscription period has ended.  In a hybrid form of the subscription model, some retailers may even offer full access to 2-3 downloads per month for a set fee and then get to keep those downloads even after their subscription to the service has ended.

 

Subscriptions have also become a popular means of offering mobile data and information services to consumers.  Users can now subscribe to turn-by-turn GPS navigation with up to the minute traffic reports, photo sharing services and broadcast mobile TV for their mobile device.  Offering these services via the subscription model is not without its challenges however.  Outside of Japan and South Korea, mobile TV subscription levels have generally fallen below expectations due to the high perceived cost and limited programming available to consumers.  The consolidation in software platforms and improved revenue sharing agreements for software developers have also led to a huge increase in the number of available applications for newer, more advanced smartphones.  The quality of many of these applications has improved dramatically as well, and has served to put increased price pressure on developers and application stores.  As a result, there is now also an abundance of free, ad-subsidized applications out there that many consumers favor instead of signing up for what they feel may be a long-term, costly commitment.

 

While there is still certainly a place for the subscription model for mobile applications, developers must take care to spend sufficient time reviewing the features and functionality of competitive offerings to make sure they do not end up pricing themselves out of the market.  Additionally, they must also make sure that their solution has a sustainable competitive advantage in terms of the monthly updates or new functionality they are providing consumers in exchange for the subscription fee.  Many consumers (myself included) are inclined to go with the lower cost or free applications instead of a choosing a costlier subscription, even though those cheaper alternatives may not be quite as good.  These alternatives include using applications from a completely different segment or manually accessing different websites to gather the same information that would automatically be provided in the subscription. 

 

One another common question from developers interested in using subscriptions (or any other pricing model) is where should I price my application to be successful?  Every developer and each of their applications are very different so there is no one price fits all guidance I can provide.  The important thing is to make sure you have done your competitive benchmarking up front, before you launch.  You should also carefully and frequently monitor your sales, and be prepared to make small adjustments if revenue numbers are declining.  I also like the idea of offering a free, ad-subsidized version of your application that will give consumers the chance to try before they commit to a subscription, which gives you the opportunity to showcase the value of your solution and to market the enhanced functionality and must have features that the full version of your application has to offer.

 

Stay tuned to the MOTODEV Blog for details on additional mobile application pricing models.  Also, if there are any other pricing models or application pricing topics that you would like us to cover, please comment on this blog post.

 

 -Chris