Freemium Subscription Fixed Price

Freemium vs. Subscription vs. Fixed Price Revenue Models for Apps

If you’re struggling to effectively monetize your app and can’t decide how to do it, we’ve got you covered. This blog explores three pricing models that will assist you in finding the best fit for your app. This information will help you make an educated decision about which pricing model to choose for your app, ultimately contributing to its success.

When it comes to monetization of modern-day mobile apps, the three most popular revenue models for apps are freemium, subscription, and fixed price. Each of these approaches can offer unique benefits to every user with diverse preferences or objectives.

Before we delve into the differences, let’s quickly define what these models are.

 

Freemium Model

As the name suggests, it is a combination of free and premium. The core functionality of the app is free. You can use the application for free but there might be some premium offerings you may have to pay for. In a lot of cases, apps use an internal currency such as points, units, or coins that can be used to unlock various features.

These internal currencies can be earned by frequent use of the app but takes a lot of time to achieve a value that will give satisfactory returns. The freemium model works on patience and gives you access to content immediately if you choose to pay for it.

To unlock the full experience or gain advantages, you can always use In-App Purchases (IAPs), which is when you spend real money to purchase things in an app. These purchases basically come in two main types. One is consumables, like extra lives or temporary power-ups in games, that help you to enhance gameplay by providing temporary boosts. The other is the non-consumables, such as ad removal or unlocking premium content, which offer permanent upgrades to the app’s functionality.

Here the primary target of the developers is to attract a broader audience, allowing users to try before they buy. Surely, they do want to generate revenue to sustain app development and updates. This approach is beneficial for both developers and users.

A prime example of significant user expenditure is evident in battle royale-style games. Although the gaming platform is technically free to play, it employs a freemium model with in-app purchases (IAPs) to generate revenue. While skill-based gameplay remains the core, these battle royale-style games predominantly monetize through optional IAPs.

 

Subscription Model

Subscription elements are on the rise. In most cases, these apps or services can be used in a limited quantity or for a limited time on a trial basis. Some apps may offer limited functionality use in the free versions, but in most cases, a subscription is required to utilize the full potential of an app or service. Subscriptions are usually monthly, with a considerable discount for annual commitments.

Now, tiered subscriptions allow users to pay different amounts for varying levels of features, ad-free experiences, or exclusive content. A perfect example of this is Disney Plus, which offers multiple subscription plans including a ‘Basic’ monthly plan with ads, a ‘Premium’ monthly plan without ads, and additional plans based on the number of devices you want to use it on.

This caters to a wider range of audience needs, enabling users to select a subscription plan that better suits their requirements and also making it available for users who can’t spend a large amount on subscriptions.

 

Fixed Price Model

This is the oldest trick in the book. If you like something, you pay full price for it and you own it. This is true for a lot of current apps where there is a lot of advertising and bloatware on free versions. Premium versions with a one-time fixed price are ad-free. Of course, some apps use a hybrid approach, but that is a topic for another blog post.

While freemium and subscriptions are clearly the more popular ones in many app categories, the fixed-price model can still work great for specific apps. For niche apps that target a well-defined set of audience, a one-time purchase price is much more approachable due to its clear value proposition and can attract users who prefer a simple upfront cost.

That being said, consider offering a premium fixed-price version alongside your freemium model. This caters to those who prefer a single purchase and avoid recurring subscriptions. Think of it like a choose-your-own-adventure for app pricing – free trial, monthly membership, or buy it outright – the choice is yours!

Now that you know what the three most popular pricing models are, you may wonder which model is best for the app you are currently building. The answer is never easy. There isn’t a fixed formula for success when it comes to defining your pricing model. But we can do something about that!

Contact us today at +1 267-546-4123 for a consultation, or write to us at hello@dignitas.digital to discover the most sustainable pricing strategy for your app!

 

A Comparison Between the Three Revenue Models

Let’s explore the differences between the three revenue models. This may help you make a decision about which approach you might want to go with.

Freemium Subscription Fixed Price

Base Price

The base price for freemium apps is free. The subscription model may offer a free limited-time trial or limit the number of users. The fixed price model may offer a free trial as well, but in a lot of cases, it comes with a licensing price.

If you have a new product and want people to try it out, you may want to have minimal barriers to entry. Offering the product for free or on a free trial is a good choice.

If you are an established business owner and customers see value in your product or are used to it, lead with a base price.

Cash Flow

Fixed-price apps offer a one-and-done deal. A customer buys your app and they’re done. The freemium model offers cash flow in increments and users see value in your app. The cash flow is not consistent and may vary on seasonality, new features, and how you keep up the interest of users in the app.

The Subscription model offers ongoing cash flow and can help determine calculated risk for your future investments in your product. An annual commitment ensures that a customer stays with your service for an extended period of time.

Customer Loyalty

The subscription model is the easiest to determine ongoing customer loyalty. A higher subscriber base means a more loyal customer base. The freemium model is a close second in this category, as regular freemium purchases are indicators of a loyal customer base. It is hard to determine ongoing loyalty with the fixed pricing model.

Determine Feature Popularity

Tracking features in apps can determine the popularity of various features within an app, but a freemium pricing model is a clear indicator of which features one should focus on while enhancing an app.

If users are willing to pay for certain features more than others, it helps in deciding which features the developers should focus on enhancing. In the fixed-price and subscription models, one must rely solely on internal tracking and analytics.

Ongoing Maintenance & Updates

If regular updates to your product or app are a must, freemium or subscription pricing models are better because ongoing cash flow will allow you to focus on updates that matter to the users.

Fixed-priced apps often offer bug fixes and limited feature updates in most cases. For any major update, users must buy the new version of the product at the full price.

Most apps in the market today offer freemium or subscription offerings. Freemium offerings are a little tricky. One has to define a strategy to determine and roll out the freemium offerings. By comparison, subscriptions are easier.

Users get full access based on the subscription tier they choose. The fixed pricing model is popular for apps that have a core functionality but do not require frequent, ongoing updates.

If you’re building a new product, chances are that you’re building a brand too. Here are 10 easy steps to build a strong brand and turn users into customers.

 

How to Choose the Right Pricing Model

Selecting the right pricing model for your app is a critical decision that impacts user acquisition, engagement, and ultimately, your app’s success. Let us discuss a few factors that can help determine it.

  • Understand your target audience: Determine their preferences and willingness to pay.
  • Evaluate your app’s value proposition: Consider the features, benefits, and unique selling points that set your app apart.
  • Analyze competitors: Research their pricing strategies and assess how your app compares in terms of features and pricing.
  • Consider market trends: Stay informed about industry trends and consumer expectations regarding pricing models.
  • Test different models: Experiment with various pricing structures, such as freemium, subscription, or fixed price, to gauge user response and revenue potential.
  • Seek user feedback: Gather insights from user surveys or reviews to understand their preferences and willingness to pay for different pricing models.

 

Final Thoughts

In a nutshell, choosing the right revenue model is a decision that can have a huge impact on your app’s overall success. Whether you opt for a freemium, subscription, or fixed-price model, each approach comes with its own set of advantages and limitations. By considering the factors mentioned and leveraging insights from the comparison, you can drive your app towards sustainable revenue generation.

We hope this article helps shed some light on your business plans. If you’re still unsure, we would love to get in touch and explore if we can help you in defining the revenue stream for your apps. Write to us at hello@dignitas.digital — we’ll be happy to help!

 

Dhawal Sehgal