Subscription Apps have changed dramatically in the past few years — the way that the apps interact with the platforms, payment approaches, and the mindset of the app developers — we’re in a new world.
Team Glassfy: Subscriptions have always been a source of recurring revenue. That’s the prime reason companies start considering subscription and tactics, or at least the ones initially considering it.
We see a lot of adoption from the consumer side nowadays. People are getting more used to subscriptions. How do you think that landscape has changed? For example, if someone who runs a mobile app business is making the transition to a subscription model, have the underlying factors changed anything at all from a mobile app development perspective?
RKB: Here’s what I’ve seen change, if you go all the way back to when I started writing my book, by which point, I’d already been working with subscription businesses for 10 years, and people said subscriptions weren’t for them. People didn’t see SaaS and Consumer Tech as having anything in common. But B2B and B2C subscriptions both require investing in building ongoing relationships. Those kinds of similarities both probably require an onboarding phase, an engagement phase and thinking about the product in a different way.
I felt like there was a big gap in learning. Some of the things that SaaS was learning weren’t necessarily being adopted by consumer businesses and vice versaTh. People did not see the patterns. That was why I wrote my first book.
The second thing is that there are so many different types of apps. They had so many different ways of being monetized. For some organizations, the app supported delivery of an existing subscription, such as Netflix. Netflix wasn’t an app. I mean, it was. It was 3 DVDs out at a time. Then it was streaming. After that, there was an app to support the streaming. You didn’t subscribe to the app. You subscribed to the service that happened to be delivered via the app.
Some of the biggest subscription app leaders came through a side door, such as Amazon Prime, which is also an app. However, it was a retailer that developed an app to support their subscription, which was Prime.
In addition, there was this sort of a rise of the one-off apps. You bought the app for $3, and use it as a scanner, or to keep notes. You can use it to do other little ongoing features. You could start by just creating the landing page, and showing it to people, or even just the concept. You could just describe it to somebody.
When you’re marketing a subscription app, you need to test the offer itself for product market-fit. Do you understand what it is? Do you want it? If I have a half an hour to sit next to you on an airplane and explain it in graphic details, at the end of the flight, are you going to buy it?
If you see the offers in writing, or in a much more simplified forms, is that enough to make you trust and see the relevance, and buy it? On the other side, once you’ve bought it, there’s a whole bunch of usability stuff which is completely separate, would you use it? Could you use it? Do you want to keep using it? Do you establish habits? So the first part is pretty cheap to test.
Team Glassfy: Everybody should be testing that. I don’t understand why people don’t do more testing of the message, the promise, or the offer before they start building anything.
There are a lot of these established apps. We used to monetize in different ways but there are so many choices now. Do you still see any of these apps make basic mistakes? It’s insane that you wrote this book in 2014 because apps have this exact problem now. They are saying that they don’t understand how to help users create value at each of their stages. Are there any common pitfalls that you feel like established apps moving to a subscription still making?
RKB: I think one problem that they made is obviously the product market-fit. They should think about it through the members’ journey. If you’re assuming that someone’s going to use it forever, do you have features and benefits to take them through that journey? Have you walked through that journey? For example, a lot of organizations have some kind of an app that helps you learn how to do something such as getting that next job, or become a good parent.
Maybe it’s really optimized around the first few weeks, or it’s optimized with a little bit all the way along. However, it’s not completely taking people on the full journey. In other words, there are lots of gaps.
I would say you should think about the benefits that drive acquisition before someone signs up. There’s usually some kind of vision that they hope will happen with this app. There’s often something they need immediately. For example, the NBA app, who I’ve done a fair amount of work with. They know that most of the time, when someone signs up for the NBA app, which is called League Pass, is because they’re in the middle of a game happening at the moment while they’re walking out of their houses, walking out of the bar, or they’re getting on a plane. They want to continue watching. They have to get you there as fast as possible.
They are really good at that. They used to require all of this information: ‘What’s your favorite team? Where do you live? How do you access your games at the moment?’ All these stuffs mean: ‘You got to get them to the game because it’s the same as with Spotify’. You usually sign up for Spotify because you’re having a party, and there’s no music. You don’t want them to ask you a thousand questions about what you like to listen to when you’re sad, or happy. They might have said: ‘It’s July Fourth. It’s 20'clock. People are walking in, and I need a nice mix. Finally, I’m going to sign up for Spotify because of that acquisition benefits’. However, you also need engagement benefits, which onboard them to establish habits in the first place. Whatever those habits are, you have to choreograph that experience with steady drumbeat to ensure that they’re continuing to get the value they came for.
RKB: I think there are a ton of mistakes that developers make in all of these things as they over-index on one, or the other. If you over-index on those immediate benefits, people use it are done, and they are going to cancel because they don’t see all the other benefits. I think of that as sort of the Hamilton problem. You sign up for Disney Plus to watch Hamilton. You watched Hamilton, and then cancel. You don’t even realize that they have so many other contents. You don’t realize that they have all these benefits. There are more ways to integrate these benefits with your TV-watching experience. That’s one problem that developers have.
On the other side, the benefits are so down the road, or they’re so choppy-like. Let’s say that I’m making this up now but you have an app for parenting, and you have some really good content for the day. You bring the baby home from the hospital and have the content for choosing a preschool 2 years later. People might say: ‘Well, I don’t really need it because nothing is going on’, or whereas you really prefer: ‘Bring them home. There’s nursing, getting the other kids acclimated, eating solids, sleeping through the night, and dealing with your grandparents, with your in-laws, and then you could get them to preschool.’
Recently I’m working with a company, and they’re quite far along. They also have this sort of interest. They have different apps that they’ve historically sold separately. You buy them outright with content for different use cases. They want to bundle them together and offer them as a subscription. Instead of buying each one of these, you get all of them as a subscription.
However, when you look at them, they don’t have to sync the target audience, or similar use cases. They aren’t really sequential. They’re just in the same category. I thought: ‘Who would want this odd assortment? Who would have these benefits of content?’ They might have said: ‘Well, it really comes down to a unique person who would want those things.’ It’s just like the tail wagging the dog. It works fine when you’re celebrating and selling different products.
You might say: ‘Oh, they all are made by the same people.’ I’ll just use Microsoft as an example but think about it like this: ‘Imagine that there was a product that integrated Microsoft Word and Teams together as a bundle with a photo editing tool.’ You might think: ‘Wow! Those are all products that a person might use but Teams might be used at work. Word might be used at work. They also might use the bundle as a student. They also might use them at home to make lists and other stuff.’
However, the photo editing tool, you wouldn’t really use that at work and might ask: ‘Who is that for?’ It’s not a complete set of all the productivity apps that you need. It’s like 3 random ones.You should either build out the full set or a smaller set for a very specific person, like a student, a small business, or whatever. I think a lot of companies just have some products that are in the same category. They bundle them together and call it a subscription app.
Team Glassfy: Yeah, I think you mentioned another example in one of your podcasts. I thought about a party training app that had an annual subscription, and I wondered why people were canceling.
RKB: Exactly, I think I met so many app developers who do that just because they want to have this annual subscription in there.
Team Glassfy: So what you’re saying is that you need to understand your users and use cases to such an extent where all these questions such as dial lens, packages, length, or whatever it might be, become quite clear. You need to answer to this essential question: ‘Why are you finding out about your users?’
RKB: Yeah, I think there is a difference when you have a subscription versus when you have a transactional app. An app that you just own outright, which you need to be confident about the person who is going to use it on an ongoing basis. You need to understand how they’re going to use it. What’s going to bring them back because if they’re not coming back, they’re going to cancel.
It’s just a different way of prioritizing features in terms of product market-fit because a lot of times when you would ask the final question: ‘Would they buy it?’, end of the story. It’s really about what they buy and would they keep using it? Would they keep recognizing the value, which is different with a subscription.
Team Glassfy: This is very interesting. We need to look this up. I’m not sure, Robbie. Maybe it’s really about: ‘Do you still have product-market-fit?’ What I mean is that you thought you might have had it. However, either your technology has been commoditized, or somebody bundled it somewhere else, it’s free now. Finally, it turns out you have a ton of hidden churns. That’s coming because 70% of your users haven’t used a premium feature in X period of time.
RKB: If people stop using the premium features of the product, they’re probably going to cancel. A lot of companies wait too long to have an intervention. Whether that’s an intervention that’s as simple as a phone call to say: ’Why aren’t you using the product anymore?’ Sometimes in a small business, you might just do that.
We’re having something much more elegant than building either a texting message or something that’s actually integrated into the product itself in some ways to figure out what’s going on earlier and offer them surface features. They wait until the customer cancels and then show them all the features, and try to win them back. They often lower the price, which is also really bad for your long-term business model.
But early on, you want to establish habits. You want to observe them and make sure those habits are continuing. Engagement is a leading indicator of retention. If they’re using the product a lot, they’re unlikely to cancel, although, I think the asterisk for that is that they’re binging.
If I wait and then subscribe to your scanning app, I use it for 6 hours a day for 3 weeks because I’m scanning every single picture and every single document I have, then there’s a decent chance that I might cancel because that’s normal behavior. What you want to see is people in this case scanning a couple of times a week because they are using it for contracts in a real way.’ That’s one thing.
The other thing I think that you have brought up Alex, which is important to notice what else happening in the world is when you can tell that you have a problem. If retention is really good but acquisition is getting worse that means there’s a better alternative out there. However, your loyal customers have inertia, or they don’t, you might think so.
Let’s use the example of a newspaper. For example, I’ve been subscribing to the same newspapers since I graduated from college, which is at the time, most people think about subscribing to their first newspapers when they graduate from school and move out on their own.
You subscribed, and then we found the ones that we like, my husband and I, we’ve been subscribing to those forever. But my kids, they would never subscribe to those same publications for a bunch of reasons.
Number one, they have other ways of getting news, and they are on social media. They’re savvier saying: ‘Oh, you can get 3 free articles here and 2 free articles there, and you can kind of copy something together.’ Maybe they use the Apple news app. I mean they have other ways.
Second of all, there’s an issue with newspapers, such as the Wall Street Journal or the New York Times. Another thing that is super interesting that I’ve learned from the news industry is the role of pictures in these papers. For example, if you open up a paper and you’re looking at pictures, and they’re of old people, white people, and men, if you’re a young woman of color, you’re going to look at it and think: ‘This isn’t for me, or they’re signaling to me that this isn’t for me.’
So that paper might come to the conclusion that young people don’t care about the world around them. But maybe the issue isn’t the promise–it’s how well the product delivers on that problem for this audience vs other options available today. That’s another challenge for a developer, especially when it’s been around for a long time.
If you notice that retention is good and acquisition dropping, it usually means that your product is lagging it’s competitors in terms of how well it delivers on the forever promise and no longer has been product market-fit with the new market.
The great thing about subscriptions is that when we become loyal, we don’t look for alternatives as consumers. Many longtime subscription leaders say when they come to me: ‘People love us and our products’. However, they don’t really know that. They just know that subscribers use it every day, and haven’t complained, which might be different from love.
Maybe if my kid sat me down and said: ‘Mom, this is the Information. It costs the same as your paper, but it’s way more focused on the things that you care about taxes, Silicon Valley companies, and Investigative Journalism,’ I might think: ‘Oh, I didn’t know that was out there’. If they showed me that they do CrossFit, whereas I go to a traditional gym, I might say: ‘Wow! CrossFit is more fun.’ There’s more community but it costs just about the same. I just didn’t know it was out there because I haven’t looked in a really long time. Because I’m loyal, because i have habits, I might not have checked out whether there are new subscription offerings that better solve my problems or help me achieve my goals.
I don’t know if this is the case with apps yet but one of the things that newspapers have realized is that once somebody decides how they’re going to get their news, they are pretty loyal. It’s going to take a lot for someone to cancel. Therefore, newspapers keep raising the price on loyal subscribers. But a new subscriber might get a sweet deal, like 5 bucks for 6 months. Then they would ease that new subscriber over a 3-to-5-year period to the rate of the most loyal folks.
You and I might live next to each other. We might have the same job. You might actually make more money than me because you’re at some hot tech startup. And yet, you’re paying a fraction of what I’m paying because I’m so dumb and loyal, and you’re still in consumer mode trying to choose your alternatives.
We’ve been talking mostly about ‘Getting Started’. Once you get your loyal customers, it’s good practice to say, for example, if that person were signing up today, and that person was looking at all the alternatives (which we know because we understand our competitive landscape) — Is this really a good option for that person, or it is just that person doesn’t know any better? For instance, AOL, for a long time, there were a lot of people still subscribing to AOL just because they didn’t know better. They didn’t know that they could just directly get Internet access, choose one of any number of free portals, and have basically the same experience as an app as they did.
Team Glassfy: Well, do you believe that the pricing, packaging thing, or the timing-when to present them the content are important? Is it the right time to give them the paywall or not? Is it you who should cohort them and give different pricing, packaging offers, as well as timing and ask yourself: ‘How far do I get into this cohort of maturity of a user?’ Because I couldn’t agree more. There are endless debates on this. Do we present the Paywall during onboarding? Do we present the Paywall 6 weeks later?
RKB: Yeah, I think so. Let’s talk about cohorts by time. It is super important to track your cohorts by maturity such as: ‘How many months have they been with you?’ It is also important to understand your cohorts by sign-up date and by channels.
All of those things are going to tell you a lot about who your ideal members are because it’s not just about anybody who signs up is good. The ones that sign up and stay, and ideally go deeper are good. The ones who sign up and leave are less good. Last but not least, the ones who sign up and leave and never come back are worse.
You do have to track them over time, and sort of bring it back to the basic question: ‘What was the message? What was the offer? What was the channel? What was the time of year to sign up? How long ago? Was it great?’ Because 3 years ago, maybe there was no competition, and now there is, that’s one thing.
With the example of Intuit, Quickbooks is a seasonal product. They want to be a year-round product that they have. They do budget management for you all year-round but I have to say, TurboTax is what I was thinking of TurboTax. It is a seasonal product but they want you to use it to manage your budget all year-round.
People who sign up for a budgeting and tax tracking software in late March or early April might be more likely to engage if they see an offer but they’re less likely to stay for long-term because those are people who are saying: ‘Oh, man, I got to get my taxes done now’. They’re not people who are considering: ‘Now is a time in my life where I want to be more thoughtful about my investing, budgeting, and managing my cash flow.’
It is interesting if you’re the developer creating a tax and budgeting product. This product is really a budgeting product, but people might be more inclined to sign up at tax time and then leave. It’s really expensive to use a term like “pay taxes” in March and April because everybody wants those terms but there are people who are also likely to cancel.
You might be better off having fewer people sign up in January for New Year’s resolutions because they are more likely to stay. However, the ones most likely to stay may be the ones that sign up at random times around September, or October: ‘I just got a new job, and I’m going to manage my things better now.’
I think that’s really important, and you should consider cohorts by how mature they are. You want to understand the journey that people are on. You want to align your onboarding to that journey.
If there are certain super features that are going to drive engagement and retention, you want to get people engaged with them early on before you put the paywall up. Because if you put the paywall up before they’ve created a habit, they have to have a very strong desire to get behind that paywall in a time where people don’t care about the cost, either because they know what’s behind the paywall, or they’re familiar with your product.
Netflix recently has pulled away from a two-week free trial. I found it fascinating after 20 years because we all know what it tastes like. Nobody needs a free trial of Netflix anymore pretty much in the whole world because we’ve all tasted it. We know how it works. We know what it does. We know what kind of content they have.
Netflix really considered: “Look, it’s month to month whether you want it, or don’t want it but you certainly don’t need a free taste anymore.” When I joined Netflix in whatever year that was, around 2000, I had a really hard time explaining it to my parents because it was complex. I said, “Let me get you a free trial. I’ll set you up, and you can experience it for 2 weeks, and then you can decide if you want to subscribe or not.”
With a paywall, you want to make sure they know what it tastes like. You want to make sure that they’ve started to establish the habit. Sometimes you have a free trial for credibility because there are people who said: ‘I don’t believe it really works. I don’t believe it’s as good as they say.’ Therefore, a two-week free trial, or a free taste of the most delicious thing you have can be really effective in these cases.
On the other hand, freemium, which goes on forever and provides value without paying ever. There are times when you might need to invest in that, for virality, or a network effect.
Sometimes but not always, if there is some kind of habit formation that needs to happen where the prospect doesn’t believe they’ll ever form a habit but finally they will, that’s when you say: “What I’m gonna give to you is free forever, and you’re going to see that it’s a habit. You’re going to get the good stuff behind the paywall because you’re going to use it more than you think you will.” Anyway, there are lots of ways to test and see which one really works for both free-trial and freemium.
I think another mistake that companies make is the saying: ‘We need a free trial because everybody has a free trial, or we need freemium because that is the industry standard.” But there are a lot of products where you don’t need a free trial or a premium.
Team Glassfy: How has the evolving tech stack supported or made it easy for developers to design subscription apps? Has it been a bridge that you see now folks cross easily? Is it potential to do more with what’s out there in the market? Do you see companies still not adopting the tech stack, and sort of lagging behind? In terms of how to execute these things, do you think it’s a technological problem? Why app developers or companies, in general, not able to do this at scale? Do you think it’s a problem where it’s just about the fundamental understanding of how subscriptions should work?
RKB: Yeah, it’s both. First of all, there’s a whole bunch of developers that developed their products about 5, 10, or 15 years ago. So it’s on their own proprietary technology, it’s just too hard for them, or they don’t have enough reason to lift up their head and start over.
Like Babbel, I just did an interview with them. They’ve been around 16 years. They’ve had their app. They’ve had their business, and they’ve moved into an app. But now they’re in the process of professionalizing their tech stack. They are trying to figure out what they want to keep doing with themselves: ‘What can we do? What can we buy off the shelf, customize or configure?’
I think there are companies that just have a history. They had to build it themselves.
I think when my clients come to the market and looking for the tech stack, I’m just speaking candidly, I think a lot of the vendors overpromise and under-deliver, no big surprise. They say things such as: ‘We will be your subscription billing engine. We can do everything.’
I think people who’ve used different products know what the products good at. Products are usually good at some things but not everything, and it often is, because either that we really understand your industry like we do with software, news, or media in general.
Well, I found that a lot of my clients do end up being frustrated because they have been sold a bill of goods that is not quite ready.
And they all have to deal with the question of: ‘Do we cobble something together like everybody says best of breed, or do we really have it all in one? Do we get that as highly specialized, or do we get something that is more general to the pro? Do we get something that’s really great for retention, or something that’s really great for media? Do we get something that’s great for billing flexibility, or something that’s really great for understanding the unique challenges of commerce?’
But big picture is: ‘Yes, Technology’ is much better for subscriptions today.’. I’ve written about this a lot. The technology is all there now. It’s so much easier for just a one-off developer to pull something together without having to build it all themselves. But I think it’s not as easy as vendors make it out to be.
Team Glassfy: Absolutely! I just have one last big question. Do we have time for it? Maybe a quick 1-minute question on final thoughts on team structures and team organizations. I know it’s a big topic but this is something that we’ve also written and tried to explore a bit.
Regarding when apps are getting into this space, they often struggle irrespectively of which stage they are at, either that they’re new, or in a step-to-step process, what we typically see is that they are still sort of figuring out: ‘Who owns a subscription as a tactic?’ Who owns optimization topics?’ Whatever your experiences and thoughts on this, what do companies really think about this topic?
RKB: Yeah, it’s very different if they’re just starting out de novo versus if they’re large companies that are trying to incorporate subscriptions.
In large companies, I think their challenges are around innovation a lot of times. They just don’t have that innovation muscle, and the person who is leading the team really needs to have an innovation muscle and a lot of credibility in that organization to understand subscriptions. It’s a lot to ask from somebody.
In a startup, it’s kind of the same. I think the biggest issue is that the founder often does everything. They think: ‘Well, I’m a developer but I’m really entrepreneurial. I’m figuring everything else out and thinking about how I build out the right team.” Then it’s hard when the CEO needs to hand it off to a product person.
It is a really hard handoff to figure out in operations, such as what makes a lot of subscriptions successful is consistency, and technology that always works: ‘Is it easy for people to sign up? Is it easy for them to cancel the user experience of that piece?’
And, if they have a community, they need somebody to nurture that community, especially in the early days. We haven’t really talked about that, but a lot of companies think the community is an easy thing: ‘Oh, this administrative layer of the community will just develop it.’
When you’re thinking about your team, you want to think about how entrepreneurial you are. Are you in the entrepreneurial phase or the operational phase? Are you still innovating? What kind of people do you need? What about the roles and structure? Speaking of what is really important, of course, every department wants to be important to the leadership. Everybody wants to be the chief of something but I’ve seen a lot of places where retention becomes a very junior function.
It is probably the most important thing because retention is how your company makes profit.
But your team might think it’s a boring assignment — figuring out why people are leaving and fixing each one of those holes — when they’d rather be creating a cool, fun, new feature.
Team Glassfy: Absolutely! Especially with the acquisition getting more expensive, and I think the cost of retention is so low when you compare it to traditional means. It’s totally a ‘no-brainer’.
RKB: Yes investing big in retention should absolutely be a no brainer!