What’s the Deal with In-App Purchases?

Business owners are quickly realizing that apps are hot stuff right now. While websites were once enough to see you through, mobile apps now ensure customers can take you with them wherever they go. In an age where users spend 3+ hours on their mobiles and just 2 hours on desktop browsing, you could say that getting this right is crucial.

Apps are especially fundamental when they offer in-app purchases that can help your business achieve higher profits from this new platform. But, what exactly is the deal with in-app purchases?

What are in-app purchases?

You’ll probably be pleased to hear that in-app purchases are exactly how they sound, and provide users with a chance to buy extensions and premium benefits during mobile app use. This form of upselling allows companies to focus conversion efforts directly towards already-interest consumers, thus reducing the need to spend large amounts on less targeted marketing efforts. As well as covering the costs of app production, ongoing profits from initiatives like these can cover the developments that are now vital for keeping up in a competitive business market. 

How in-app purchases support freemium business models

Offering things for free is always an excellent way to appeal to a broader customer base and create loyalty. The problem is that giving away too much can cost your bottom line. That’s where the freemium business model comes in. With the ideal mixture of free and premium options, this guarantees that you’re offering the benefits of a free product, while still pulling a profit. And, in-app purchases can help a great deal with this. 

Providing free apps on the outset is now a business prerequisite, but continual development is both expensive and vital. As such, offering premium access or features at a cost could be the ideal compromise for providing an app without leaving yourself out of pocket. This guarantees you can prove value before asking anything from customers, making future purchases much more likely. 

The different types of in-app purchases

In-app purchases come in all manner of shapes and sizes. Understanding the options available is your best chance at getting this right for your profit margins and your customer base. 

Research will reveal that there are three critical areas of focus here, and each provides entirely different benefits and experiences. They are – 

  • Consumables 

These are in-app purchases that a consumer will have to make whenever a user wants to enjoy a specific paid benefit. They’re also purchases users will lose if they uninstall or your app for any reason. Popular consumable purchases include things like game currency, extra points, or even the ability to skip levels. Due to their ongoing nature, these can be high earners, but they’re also the least valuable in-app purchases when it comes to loyalty.

  • Non-consumables

These are one-time items that transfer across devices and attach to a user rather than their given app. Even in cases of non-transferable non-consumables, most mobile apps allow users to redownload these without repurchasing. Non-consumable options can include things like extra accessories, premium editions, and bonus levels. 

  • Subscriptions

Subscriptions involve buying certain services or features for a subscription term which sometimes carries from one month to the next. These are what The App Match uses to create lasting profits for business owners, and can include things like newspaper subscriptions, limited access to all in-app features, and season passes to certain benefits. 

How do users actually pay?

Even once you understand in-app purchases, it’s vital to consider how users pay for those vital in-app products. Mobile is all about speed, after all, and long-winded card processes are never going to cut it here. 

Instead, the majority of mobile apps rely on lightning-speed alternatives like Apple or Google pay. By pulling card information from an account users have already set up, this makes in-app purchases as simple as pressing a button. As well as suiting the convenience of a mobile audience, these fast options guarantee purchase doubts and abandonment become a thing of the past. 

Royalties

Depending on where you host your app, in-app purchases aren’t without royalty payments. In fact, Apple, Google, and Amazon all take a 30% royalty payment on your in-app purchases. However with subscriptions these are reduced to 15% in the second year, a nice carrot to ensure you run a great app that keeps people subscribing.

This can seem like a large sum of money, but in-app purchases are still very much worth your while. What’s more, platforms like these do work for their money. By taking care of everything from billing to taxation, and even chasing missed payments, they make sure that you can focus on developing the best mobile app possible. That alone can increase your income a great deal. What’s more, you’ll be able to reduce upfront app expenses without these responsibilities on your shoulders.

Do I have to use In-App Purchases?

In App Purchases are required when you charge for something that is used natively within the app. An example of this could be a game upgrade, premium member’s only content or digital download like a movie. If you are selling physical goods like t-shirts, then you don’t need to use In App Purchases.

The most common scenario we face at The App Match relates to people who are running a membership site that has might have free and paid levels. In this situation you MUST use in app purchases for the app. You cannot allow people to purchase on your website via the app and then access premium content in the app.

As a result of this many of the App Match apps become delivery tools to ensure that users are not presented with any sales related messaging that leads to an external website for purchase while using the app. This means that the app becomes like Netflix, where authenticated users who have already bought outside of the app can login and access their content.

ConnectedPE App Subscriptions

A fantastic example of the benefits offered by in-app purchases comes from the ConnectedPE app subscriptions tailored by The App Match team. ConnectedPE aims to provide high-level professional opportunities to PE educators, and their in-app mobile subscription service is going a long way towards making it happen. 

Its thanks to this in-app subscription model that ConnectedPE can offer their app for free, using it as a prime lead generation tool. Once already on board, users can then opt into subscription services for premium content, providing the loyalty and profit that we’ve spoken about throughout this article. 

Conclusion

You already know that a mobile app is a key component to modern business but, as you can see from this article, in-app purchases are another vital function.

By getting this right with the help of a subscription service or more, you can provide a free try-before-you-buy service that converts leads for you. What’s more, in-app options can ensure a much freer-flowing and more regular income for your company than an outright app cost would.

This can go a considerable way towards reducing buyer regret, thus increasing satisfaction and loyalty for a stronger audience moving forward. And, all it takes to succeed is enhancing the app you’ve already worked hard to develop!

Leave a Comment

Your email address will not be published. Required fields are marked *