Brief:

• Mobile applications that charge a subscription fee are more likely to convert first-time subscribers at a lower price point, but people show more commitment to medium-cost apps, according to a study released today from app marketing company Liftoff. The company studied data from 45 subscription apps in the past year and more than 1 billion ad impressions.

• Apps at the low end of the pricing scale, between $0.99 to $7 a month, had the shortest conversion time from installation to subscription with users taking 15 minutes to decide whether to pay a monthly fee. The most expensive apps, which charge $20 to $50 a month, took 22 hours on average for a subscription commitment.

• Women are more likely than men to install and subscribe to an app, but this increased engagement is more expensive. Publishers pay $4.43 on average to acquire a female user who installs an app, 14.3% more than the cost for a male. The cost to acquire female users who then subscribe is an additional 14.4% more than gaining male subscribers.

Insight:

The primary monetization strategy for apps is the freemium model, which entices users with a free download and then provides multiple opportunities to pay to access additional content. However, developers continue to explore ways to make subscription apps work. Because subscription apps account for such as small portion of the market, there hasn't been a lot of research on them, which is what makes the Liftoff research interesting. 

Pricing strategy for mobile apps takes some trial and error to find the right formula to hook new subscribers and keep them engaged. Medium-priced apps take longer to sign up new subscribers, but those users tend to remain committed — as long as the price isn’t too high. Apps in the highest cost range see a drop-off in conversion rates, averaging at just 0.73%, Liftoff found.

Apps in the medium price range, $7-$20 a month, had conversion times that were 25-minutes long. But the midrange apps had the highest install-to-subscription rate at 7.2%, and the lowest cost to acquire a subscriber at $106. Because medium-cost apps require a greater financial commitment, “it’s possible that people simply don’t like to give up on things into which they’ve already sunk time and money,” according to a statement from Liftoff.

Liftoff’s data suggest that mobile publishers should make a greater effort to target male subscribers. Men are less expensive to acquire, while their conversion rates are similar to women’s, according to the company.