Lesson 7

Monetizing Your Users

Knowing your users and what will convince them to engage with your app, has been one of our main themes all along. So it’s no surprise that knowing your users’ spending habits, tolerance for ads and other behaviors is just as essential when creating a monetization strategy as it is during any other phase of app development.

While you might be able to convince people with only a passing interest in your app to download it, it’s far more difficult to convince those who aren’t truly interested to hand over their money. That’s the challenge we’ll explore in this section.

The first step is to go back to your audience profile (which you developed in the Strategize, Acquire and Engage phases) and fill in the economic drivers. Take all of the information you’ve gathered about your users so far and add the following data:

  • Income range: Your monetization strategy needs to align with your ideal user’s income bracket, and any inferences you can make from this data.
  • Spending habits in your space: How much does your user typically spend on streaming services, retail products, games, etc.? How much flexibility do you see in their spending habits?
  • Region: As we’ve touched on, a user’s location can greatly influence spending abilities and habits. For example, in certain countries, secure credit card purchases are not yet mainstream or even possible.
  • Preferences: Certain user demographics are more (or less) willing to take in advertising, for example, or they could have have more (or less) money to spend on digital goods.
  • Power users: One monetization strategy depends on identifying “whales” who generate larger-than-average revenue for your app. How can you make the app even more enticing to them and attract more users like them?

Once you’ve developed a clear picture of your user’s economic situation, it’s time to look at how other apps are monetizing.

Competitive Analysis and Research

In other phases of the app development process, you’ve used competitive research to help fill in gaps in your knowledge. Choosing a monetization model and optimizing it to accelerate revenue will also require competitive analysis.

Questions to Answer with Competitive Insights

Looking at your competitors’ data can help you understand what’s working for other apps in your industry — and will be especially valuable if you’re moving into a new market or launching an untested product. Be sure to consider these factors in your research:

  • Are you pricing appropriately? There often isn’t much leeway in the prices you can charge for certain goods and services. If you plan to charge more than average, be sure to have a clear value proposition in place to justify the cost. You’ll need to communicate the added value to your users.
  • How are your competitors monetizing? If users in your space are conditioned to expect certain kinds of in-app ads, for example, you can likely monetize the same way. This could also lead you to develop an alternative value proposition by offering something no one else in the space is doing. Less intrusive advertising, for example, or more storage space.
  • What prompts monetization changes in other apps? Use the history of your competitors’ monetization decisions to inform your own. There are many examples of subtle changes producing a huge affect on user numbers, and by extension revenue. Did a paid app switch to a freemium model? How did that affect its revenue?

Music streaming services have been in a highly competitive and highly public war. SoundCloud recently launched a premium subscription tier in addition to its free service, matching category leaders Spotify and Pandora. Meanwhile, Apple Music and TIDAL have tried to differentiate themselves by eschewing any free tier (beyond a limited time free trial) and offering more exclusive content under a subscription-only model.

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