Driving Buyer Behavior with Subscriptions
Part 4 of 4 of A KPIs Guide for Google Play Apps and Games
Posted by Alyssa Perez, Developer Growth Consultant — Google Play. Thanks also to Chetan Maddipatla and Zachary Noland who collaborated on this article.
For apps or games with monetization strategies built around a subscription business model, many of the KPIs discussed in previous articles are the same; however, a user’s motivation for paying — and thus their engagement behavior — can lead to prioritization differences in terms of content, timing, and incentives. This article will provide a foundation for performance analyses in this area, as well as tips for optimizing your revenue stream.
The below guide will help you answer questions like the following:
- “What tips for pricing strategy can help me convert new users?”
- “How does user behavior and perception of value over time affect my subscription business?”
- “How does engagement relate to churn (e.g. when a user stops paying or opts out)?”
Let’s start by revisiting our metrics tree, updated for apps and games with subscriptions.
The metrics tree, for subscriptions.
As introduced in our Introduction to metrics article at the beginning of this series, the below metrics tree is a framework you can use to visualize (and remember) which metrics are levers you can adjust and tune to impact others. For example, Daily Active Users (DAU) and Average Revenue Per Daily Active Users (ARPDAU) are multiplied to get Daily Revenue, which is their parent metric.
The differences between the version of this tree for In-App Purchases (IAP) in our previous post and the version above, which is slightly changed to reflect a subscription-based business model, are on the monetization branch on the right side (ARPDAU and below). Note that the engagement branch (DAU and below) remains unchanged; engagement is still critical to conversion and retention, as we’ll see below.
The child metrics for ARPDAU here are Subscriber Conversion and Average Revenue Per Subscriber. The former metric shows you how well you are converting subscribers out of your whole user base, and the latter metric reveals how much revenue you’re getting from those users who are paying.
Subscriber Conversion:
- This is the parent metric of New Subscriber Conversion and Repeat Subscriber Conversion.
- This reflects that you can execute two different strategies to maximize your overall conversion.
- (The dotted line is our indication that these child metrics are added rather than multiplied, as in the rest of the tree — just our signifier, for ease of use when putting this tree into practice.)
Average Revenue Per Subscriber:
- This is the parent metric of Price Per Pay Period and Pay Period Duration, which are multiplied to calculate it.
- Price Per Pay Period refers to the amount a user pays for access to your subscription for a set period of time.
- Pay Period Duration refers to the subscription length option a user selects (we see weekly, monthly, quarterly, and yearly as offerings available on Google Play). This is a recurring charge.
- Be sure and watch our webinar on Driving Buyer Behavior, where we walk through a few examples of how this calculation plays out depending on different types of pay periods and pricing strategies.
Conversion and revenue
If you look at your KPIs and decide that the priority one to focus on next is conversion rate, here are some tips for how to approach any strategies related to this ‘lever’:
- First, remember that subscriptions are all about access as opposed to ownership. Instead of a user purchasing something to enjoy at her or his leisure (or not), a user is instead purchasing the ability to unlock a specific experience within a set amount of time, after which point she or he will need to decide, again, whether that value is enough to justify purchasing continued access. Here are some tips:
- Users should always be able to perceive value at the point of conversion, meaning by the time they are asked to pay they should understand exactly what the full value proposition is. This also means that monthly subscription services need to show value more often and more consistently than annual purchases, since that perception of value may fluctuate — and with it, the willingness to pay for it.
- As an example, for apps or games with a portfolio of content or experiences, perceived value of access to the portfolio may go down after some of the content is consumed. At the beginning, a user has access to a full, new catalog, but over time the value they may get each month shrinks to include just the content they haven’t used already. New content adds perceived value, and the life of their subscription can continue healthily when that content is reliable.
- Put simply, In-App Purchases (IAP) are permanent, and content accessed via a subscription is not. From a user behavior standpoint, IAPs tend to be more impulse purchases: “I want that character upgrade now,” or “I need that pack of gems to continue, and I want to continue.” Subscriptions tend to be about perceiving that access will be worthwhile not just now but into the future. In order for this to happen, the gap between what a user gets and what a user doesn’t have needs to stay consistent, or at least consistent enough to drive the next payment while the content cadence or content strategy formalizes.
- Think of churn as the byproduct of two things: when a user’s needs change and when a user’s perception of value changes. Let’s say a user is looking for a date and therefore needs bountiful matches to potentially swipe and message. If this user then successfully partners up with one of those dates, their needs have changed and they no longer need to pay for this extra content or even the service in general. Another example would be if a user is a big fan of crime television and thus sees perceived value in a subscription to a portfolio of TV shows. After all the crime shows have been watched, if what’s left isn’t as inspiring to watch, that user has consumed what was desired and thus the value in subscribing has gone down.
- Lastly, always do your research and make sure your price is attractive when compared to alternative services, or whatever apps or games you consider to be your competition. It’s common for users to comparison shop between price and perceived value of all of their subscription services.
If you want to focus on Average Revenue Per Subscriber, remember that it’s common for pricing strategies to include discounts based on duration; the longer a subscriber commits to, the more money saved. For example, a twelve-month subscription commitment should potentially save a small percentage of money for the user than twelve individual monthly payments.
Sustained engagement
We’ve shown in related articles that the engagement level on day one of usage is absolutely critical to retention. While bugs or other issues may contribute partially to churn, the most common reason for churn is lack of usage. Users are, of course, likely to cancel a subscription if they do not use it.
The reason for a user’s initial conversion may in fact be different than the reason for a user to continue to subscribe; part of the nuance of adding real value to your app or game is identifying user needs and motivations, and mapping that to the behavior you’re seeing (particularly in the first week or month). Value should be forever growing, or at least evolving such that a user’s willingness to pay is refreshed with the content changes.
A good way to evaluate your content strategy is to look at where the line is between your ‘tentpole content’ and your ‘additional content.’ There’s no standard definition of tentpole content, but it is likely your strongest, your rarest, or your evergreen base. For example, entertainment streaming services often have exclusive shows or films that serve at their tentpole content, which forms the initial reason for a user to want that valuable access. Over time, additional content is needed to supplement that valuable access after the tentpole content is consumed.
One final note, especially for games: the positive impact of social and community on your revenue stream can be quite large, depending on the genre of experience. Certain users want or need multiplayer experiences in order to enjoy the full benefits of the game. The retention of a collective group, for example, can be optimized by evaluating what content would add perceived value specifically for a user in the context of her or his community. This means users with friends already playing will be more likely to join and also to stay engaged, so they can enjoy the social benefits of being where their friends are.
If you need some direction on increasing monetization opportunities for your app, consider a hybrid business model (with a mix of IAP, ads, and subscriptions) and how it may be a better fit for your product. Just remember that engagement is crucial, and the more you can get users to complete certain tasks or consume certain content, the more likely it is they will pay, return, or reactivate.
What next?
If you’re curious about seeing these metrics in practice, or if you want to ask our Google Play business growth experts questions related to this tree, be sure to sign up for one of our upcoming webinars dedidated to this topic. Happy analyzing!
What do you think?
What metrics are you most or least familiar with when analyzing app performance? Let us know in the comments below, or tweet using #AskPlayDev and we’ll reply from @GooglePlayDev, where we regularly share news and tips on how to be successful on Google Play.
