What are Subscription-based Apps and How Do They Work?

In the modern age of the internet, apps are ubiquitous.

Whereas in the past, the software would struggle to do much more than process words or aid the user in creating simple doodles.

Nowadays, there are apps that can do, well, pretty much anything.

Hungry? Order food through an app.

Want to find your nearest bus stop? There’s an app for that, too.

In fact, it’s becoming increasingly difficult for anyone to imagine a scenario that couldn’t be resolved (or at least helped) through the use of an app.

Short-hand for ‘applications’, the use of the term ‘app’ to describe software was popularized by the first generation of smartphone manufacturers — most notably, Apple. Since then, the way software is both used and distributed has changed massively.

Cumbersome installs and physical discs are relics of the past.

Now, as long as you’re connected to the internet, you’ve access to an entire universe of tools. Increasingly, both consumers and businesses are opting to use subscription-based apps, instead of purchasing the software outright.

Fancy learning more? Read on!

How Subscription-based Apps Work?

Subscription-based models are becoming an increasingly popular way for app developers to monetize their products.

In this model, users pay a regular monthly fee to access the app. It’s a strategy that’s proven wildly successful for many popular app-based brands, such as Netflix, Spotify, Tinder, and Disney+.

It’s little wonder why. The choice between spending thousands on CDs and DVDs or paying a small fee to access more media than you could ever dream of owning is an easy one to make.

Entertainment isn’t the only thing apps are good for, either — industry-grade tools that would normally command prohibitively-high retail prices are now made more accessible through the subscription revenue model.

This is particularly useful for startups and SMEs who may not, for example, have the capital (or knowledge) to build a website from scratch.

Instead, they can use a service such as Wix.

Accessing these apps is incredibly simple — this is a major part of their appeal — and it’s just a simple case of providing payment information.

Typically, this is done directly within the app or on the app's website.

Once the user has signed up and the payment has been processed, they can access the app and its features.

Some apps may offer a free trial period, allowing users to try the app before committing to a paid subscription.

This can be a useful way for users to get a feel for the app and its features before deciding whether they want to continue using it.

Depending on the ethics of the team behind the app, cancellation may be either a simple affair or a labyrinthine challenge.

It should go without saying that the former option is preferable from a consumer’s perspective!

Examples of Subscription-based Apps

So, we’ve explained how subscription-based apps work — let’s dive into a few great examples of this revenue model in action:

Consumer-level apps

Tinder — Free to download, the dating app Tinder complements its service with a subscription-based membership that unlocks additional features for users.

They include the ability to see who has liked them, the ability to swipe through profiles without any limitations, or the option of sending an instant ‘super like’ notification to a profile you’re particularly interested in. How romantic! Users are also able to top-up their super likes via in-app purchases.

Headspace — The Headspace app offers guided meditation and mindfulness exercises that can help users reduce stress, improve focus, and promote overall well-being.

The app is free to download, but users need to subscribe to gain access to the full library of instructional videos.

YouTube Premium — YouTube’s paid premium service offers several benefits over its standard offering.

They include ad-free playback, the ability to watch videos offline and play videos in the background while using other apps.

Business-level apps

Slack: Slack is a business-level messaging and collaboration app that allows teams to communicate and share files in real-time. Taking many cues from Discord, Slack allows users to set up their own ‘channels’ for group chats, along with the ability to message individual colleagues.

Many other popular business-level software solutions can also be integrated into the Slack platform, too, such as Google Drive, Zoom, and Zapier.

Slack is free, but also offers two premium tiers of service — pro, and business+. These tiers offer greater file storage, external collaboration options, and much more.

Trello: Trello is a project management app that allows teams to organize and manage their tasks and projects. It offers a visual, flexible interface that makes it easy to see what needs to be done and who is responsible for each task.

This can help teams stay organized and efficient, reducing the risk of missed deadlines or lost information.

Asana: Asana is a project management and task-tracking app that allows teams to plan, organize, and track their work.

It offers features like project templates, task dependencies, and real-time collaboration, making it easy for teams to stay on top of their work and make sure everything gets done.

The Pros And Cons of Subscription-based Apps

If you’re thinking of launching your own subscription-based app, it’s important to weigh up the benefits and potential drawbacks.

Check out our quickfire list of pros and cons below.

Pros

For Developers:

• The predictable revenue stream of subscription-based apps can help businesses improve their cash flow. Since the amount of revenue generated each month is relatively stable, businesses can plan their expenses and investments accordingly.
  
  This can provide a sense of security and allow businesses to focus on developing new features and marketing their app without worrying about sudden changes in revenue.

   

• The ability to offer customers ongoing value and support, which can lead to higher customer satisfaction and loyalty.
• The opportunity to upsell customers on additional features or services, which can increase revenue.
• Since users are paying a regular fee to use the app, they’re likely to be heavily invested in making sure they get their money’s worth, leading to an increase in overall engagement.
  
  Additionally, users who are considering using a paid subscription are likely to have done their research beforehand to ensure that the app meets their needs and expectations. Provided the service meets those expectations, this can help to reduce churn.

   

• The ability to gather valuable customer data and feedback, which can inform future product development and marketing efforts.

For Customers:

• The ability to access a wide range of features and services for a predictable monthly or annual fee, as opposed to a larger lump sum.
• Ongoing support and updates from the app developer, bringing new features and ensuring a future-proofed experience.
• The ability to try out the app for a limited time before committing to a subscription can provide peace of mind and help customers make an informed decision.
• The potential to save money with long-term subscriptions or bundle deals, which can offer better value compared to purchasing individual services or features.

Cons

For Developers:

• Managing in-app recurring payments on a mobile infrastructure can be challenging for smaller businesses, though there are now tools that can remedy this (visit the Chargebee mobile solutions page for further information).
• Many users will want to try out the app before committing to a subscription, so it's important to provide them with temporary access to the premium content.
  
  This can help convince them that the app is worth the investment and increase the chances of them becoming paying customers.

   

  However, if all of these premium features were previously available for free, you risk facing a backlash if you decide to lock them behind a paywall!

• Subscription-based apps require a more significant commitment from both the business and the customer. Since users are paying a recurring fee, they will expect more value from the app than they would for a one-time payment.
  
  As a business, you are obligated to provide ongoing support and updates in order to retain your customers and keep them satisfied. This means that you need to be prepared to continuously improve your app and add new features, even if it requires significant effort and resources.

For Customers:

• The potential for unexpected price hikes, which can make the app less affordable over time.
• The risk of losing access to the app if the customer fails to renew their subscription, or a payment error occurs.
• The inability to access certain features of the app unless connected to the internet.
• Customers may become frustrated if they’re constantly reminded to upgrade their subscription to a paid tier.

Conclusion

It’s easy to see why the subscription revenue model is so popular.

Subscription services empower consumers, allowing them to access powerful and convenient software without the need to pay large lump sums of money.

This is particularly useful for startups and SMEs (especially considering the ability to scale the service offerings with tiered pricing).

This said, if you’re looking to launch an app of your own, it’s worth weighing up all of the pros and cons first.

It’s an incredibly fierce market, and making and maintaining a successful subscription-based service can be demanding work — and this is without mentioning the potential app development costs!

If you’re keen to launch an app of your own, why not consult our experts?

Our dedicated mobile app development team can take care of all the development-side heavy lifting, so you’re free to focus on your customer base.