2022 Subscription App Trends
During the last several years, the subscription business has become a gold rush. Global subscription revenue is expected to hit nearly $243 billion in 2022, while subscriptions will make up 86% of all digital content revenue by that same time.
This ongoing subscription app boom is the mass-market successor to the early 2010s SaaS explosion. Mirroring our current consumer subscription movement toward, B2B software subscriptions saw nearly 40% year-over-year growth during the first half of the past decade.
Through a subscription model, SaaS companies refocused their performance metrics on retention. By maintaining consistent consumer satisfaction, they accessed longer-term revenue flows that could allow them to scale growth more sustainably.
Consumer-facing businesses quickly followed suit. For example, Apple Music recently replaced the iTunes Store’s individual purchases with a subscription model that gives users access to the entirety of the music catalog at once, for a regular monthly fee. They retain those listeners with exclusive content, releases, and access to premium services.
Most people will have five to 10 different CSS business subscriptions.
Today, on any given smartphone, a person could have up to a dozen apps for everything from music, TV, news, books, and every special interest in between. As Eric Crowley, executive director at GP Bullhound said, “Most people will have five to 10 different CSS business subscriptions. Entrepreneurs are continuing to build better products, and consumers are seeing value in these services because they truly make life better.” As the marketplace becomes increasingly competitive, subscription services will vie for that limited “five to 10” real estate even more aggressively.
The landscape demands every subscription business continue to push the envelope in its retention and growth strategy. To plan for the upcoming year, you’ll need every advantage possible to maintain ground as the playing field widens. Utilizing the below insights, you’ll have a substantial edge in expanding your customer base and sticking with them for the long term.
Center your business plan on long-term retention and continued interest
Subscription models are appealing because they allow businesses to forgo higher-priced individual sales in exchange for regular payments that drive more repeatable earnings over time. This format is far more reliable and cost effective for businesses, allowing them to predict growth and scale accordingly. However, this expansion lives and dies on customer retention.
As a CSS, the ability to keep subscribers engaged is essential to the longevity of your success. Your business and marketing strategies should reflect a commitment to keeping users coming back for more. With the influx of competition in the space, a disinterested customer can easily drop their subscription and find a comparable service elsewhere.
The most effective kinds of subscription businesses find ways to insert themselves into their users’ daily functions and habits. Take the meditation app Ten Percent Happier, for example. Rather than just offering wellness and meditation services for users to access at their leisure, the app tailors the experience to fit their schedule, encouraging regular use at specific times of the day and for digestible lengths of time to secure a routine relationship with the subscriber. While the idea of fitting into consumers’ daily routines isn’t specific to subscription apps, the ability to offer services, instead of products, is a unique opportunity for a CSS.
While optimizing creatives and UA strategies can definitely yield better returns, they pale in comparison to the benefits found from optimizing first use funnels and creating user behavior loops.
Creative advertising can deploy catchy, demographic-specific slogans or placement, but it can’t replace the tangible feeling a customer gets from a habitual, personal experience with a service. As Marcus Ferrario, co-founder and CTO of RepresentLY, put excellently, “Focus less on LTV and more on user retention. While optimizing creatives and UA strategies can definitely yield better returns, they pale in comparison to the benefits found from optimizing first use funnels and creating user behavior loops.”
Provide curated experience
Personalization is not so much a trend as it is a paradigm shift in consumption. Programmatic buyers personalize ad placements tailored to each person, while complex algorithms help curate content to satisfy specific preferences — whether it’s TikTok’s “For You” page or Spotify’s Discover Weekly playlist.
Subscribers now expect services to curate a personalized experience. In fact, if you’re more accurately able to anticipate their tastes, this could give you the advantage over the next competitor. Customers want to know the CSS they’re spending time and money on is putting those resources toward making the service more in line with their own individual needs.
From the business’s perspective, personalization is the key to any retention initiative. The more you foster a real relationship with your cohorts, the stronger your long-term KPIs will look as a result.
We consistently refresh our content so that our users find something new every week.
Curation can refer to the individual experience, but also a niche community’s experience, as well. Faye Keegan, CTO and co-founder of Dipsea, explains in GP Bullhound’s Consumer Subscription Software Report, “We consistently refresh our content so that our users find something new every week — resulting in continuous entertainment deserving of a subscription. Finally, our users crave a premium experience and have become comfortable with a subscription offering.” For the brand’s growing sexual wellness content service, this notion has allowed Dipsea to acutely nurture its relationship with the community it serves.
Expand digital payment capabilities
Actively developing your product is paramount to your user retention, but it’s just as important to ensure your service’s mundanities are frictionless and bug-free. Chief among those responsibilities is maintaining and even expanding your digital payment structure for optimal ease of use.
It’s imperative to understand your payment service’s full capabilities. The SaaS and now CSS booms happened in succession with the expansion of digital payment platforms like Stripe and Paytm. These services made the regular collection of subscription payments remarkably easy for customers to use and businesses to manage.
Depending on the digital payment platform you’re using now, there might be even greater untapped potential within their capabilities, especially for additional international payment methods. As your reach grows outside of the U.S., take a look at what companies like Stripe can provide so that your expansion isn’t limited by your selected service.
It’s also important to understand the regulatory landscape of the app stores themselves. As subscription businesses have continued to expand their reach to in-app purchasing, it has created friction between the two entities.
Famously, the Epic v. Apple lawsuit became a microcosm of the conflict between app stores and app developers. The resulting legal decision allowed apps to include CTAs that lead out of the apps themselves, which created more possibilities for the customer. This exemplifies the necessity of staying on top of what’s possible within these platforms by taking advantage of each opportunity to engage your users.
Create a sustainable customer acquisition plan that leans on organic
User acquisition is a key building block toward long-term retention for a subscription business. However, in the interest of accelerating your path toward profitability, you should keep your customer acquisition cost (CAC) as low as possible through organic means. A low CAC delivery model precludes a sustainable and growth-minded company, generating users and keeping your financials at an investor-friendly level.
To create an ecosystem of both acquisition and retention, develop appropriate and well-crafted social, inbound content. Explore engagement platforms — TikTok, Twitch, Instagram, etc. — to broaden your audience and reach those users who are already comfortable using digital and app-based services.
This focus on organic growth also encourages the other most effective, low-CAC form of marketing — word of mouth. Demonstrating personality and thought leadership on social platforms is the perfect way to attract first-time users, while also encouraging them to act as additional vessels of customer outreach. A strategy that encourages virality can spread the word about your subscription service far more successfully than some well-placed ad buys ever could.
Develop a pricing/monetization structure built around consumer preference
Customers have to find value in a product or service to consider putting their money down. For subscription services specifically, it’s important to create a pricing structure that directly correlates with consumer preferences. For your own subscription app, consider the various ways you can monetize your service and how you can create fair price points that entice users to further engage in the experience.
As a precursor to modern subscription models, the “freemium” structure was the standard for attracting users to a service at no cost before hooking them into signing up for a full subscription. As time went on, this tool became untenable for both ends of the transaction — businesses were putting too many resources into a product yielding non- or low-revenue, and consumers found these options to be lacking too many capabilities to even warrant a freemium tryout.
Since then, revisited versions of the freemium model have been evolving. For instance, the land and expand sales tactic for B2B companies has helped services like Slack significantly grow their businesses using a free element to initially attract users. In this method, the platform offers a fully fledged but singular pillar service — like coworker messaging in Slack — at such high quality that the user feels confident upgrading for a fee to access additional features, like Slack’s larger suite of business communication products. Though it’s currently more prevalent in B2B, “land and expand” can be just as effective and practical for a CSS through the right, creative application.
Another option is the usage-based pricing model, which allows users to pay for the service to the degree they actually plan on using the platform. Though more complex to implement, as it requires actively tracking and managing individual use, it’s popular in certain industries. For example, car insurance follows essentially the same structure — users pay premiums based on how often they drive and the number of drivers in their plan. Phone service companies are another example, charging customers based on the number of lines, data usage, and so on.
A company that’s successfully employing both strategies is Mailchimp. The newsletter campaign service offers a solid free version of its software for emailing clients, while enticing “landed” customers with the expanded offerings of website building, creative services, and other special features outside of the base product. For its paid model, users can subscribe to different specific pricing tiers for the number of email blasts sent monthly, blocks of transactional emails, and other quantifiable features. Although Mailchimp is a B2B example, the structure can apply to a consumer subscription business. Successful SaaS marketing strategies with innovative pricing options are ripe and relatively untapped for consumer use.
Explore scalable funding solutions that build enterprise value
As retention becomes the KPI that shows a business’s value and growth capability, subscription app founders should find investment plans that operate similarly to these long-term, sustainable methods of growth. To that end, raising capital through models like cohort-based funding (CBF) can build enterprise value without diluting equity.
With CBF, founders tap into an investment structure that rewards apps for showcasing healthy long-term retention numbers. This model gives subscription app companies access to larger, immediate cash infusions on less compromising equity terms. The expediency allows you to bolster your bottom line and maintain profitability, giving your company the resources to sharpen your competitive edge by investing in essential product development and marketing.
At Braavo, we’ve pioneered the CBF model to give subscription businesses the catalyst they need to stay ahead. We start by analyzing cohort retention and projecting future cash flows from existing subscriber cohorts. From this analysis, we work with these companies to decide how much revenue they’d like upfront, then purchase that revenue at a small discount and deposit the funds into their account. This model is built on and further encourages retention, thereby influencing a sustainable CSS marketplace.
With the visible, emphatic trend toward the consumer subscription model, now is the time to build a subscription app business. This long-term, consumer-business relationship provides consistent, scalable revenue streams for companies while uplifting the consumer through a focus on retention that relies on engagement and constant service improvement. The ecosystem this model creates for businesses is healthier economically and sustainable for the future.
Contending with competitors during the subscription business boom will not be easy, but with these insights, you’ll be ahead-of-the-curve in understanding the marketplace as it exists today, while forecasting the innovative ways it will expand. Use these tips to elbow your subscription app to the top.