Only about 5% of app users make any in-app purchase (IAP), but the average amount these users spend is about 20 times greater than the average spend of all paying users. In-app purchase is projected to be the primary source of app revenue, amounting to $37 billion by 2017. With these facts in mind, the optimization of in-app purchase design and implementation is vital in order to make the most of the huge revenue potential.
In-App Purchase Best Practices
Don’t Focus too much on In-App Purchases
IAPs should not take the attention away from the main function of the app. First and foremost, design an enjoyable and engaging app, and then design in-app items around it.
Keep In-App Purchases Simple and Practical
Don’t flood users with every thinkable item for purchase. Users should be able to use in-app items as commodities that can either aid in the gameplay or optimize the overall app experience. Apps with in-app purchases often alienate users as they see it as a “pay to win” scheme. Make in-app items a must-have but not necessarily the only means to proceed.
Trust is something app users are wary of giving, especially to apps with game mechanics that are geared towards maximum monetization. As much as possible, be transparent especially if there are locked levels or in-app currency that can only be accessed through a purchase.
- Decoy Effect. There is a pricing strategy that looks quite irrational, but it is actually grounded in behavioral economics. One key concept is the perception of value in the context of other options. For example, users would most likely select an item that costs $4.50 over an item that costs $10.25. But if you add a third item costing $13 with an additional booster included, they would jump on the offer thinking that it’s a better deal. The second, more expensive offer was just used as a decoy to emphasize the value of the third offer and convince users to spend more than they would normally do.
- Dynamic Pricing. This strategy basically entails that you offer flexible price points depending on your users’ spending propensity. There are three basic pricing points based on the main categories of app spenders: minnows, dolphins, and whales. Whales are the big spenders, accounting for 70% of revenue derived from in-app purchases but they only comprise 10% of paying users. Dolphins are considered as mid-level spenders while minnows are low-level spenders. Whales make on average 7.4 in-app purchases per month and opt for special and exclusive offers regardless of price. Dolphins and minnows, on the other hand, make only about 1.75 in-app purchases per month. These purchases also come in smaller amounts so you should offer them items with lower price points or currency bundles to extend the value of their purchase.
Create a Sense of Urgency
Free, sale and discount are powerful words in marketing especially if you add words like ‘limited time only’. You can use this to welcome new users and use as an incentive for engaged users. Offers like this can also increase app sessions since some users don’t want to miss out on offers that may suddenly appear.
Customize Common In-App Items.
You can get ideas for IAPs from your app users and even from your competitor’s users. App reviews, feature requests, and even social media comments can give you an idea on what users want but don’t fall into the mistake of just copying another app’s in-app purchases. Coins and gems are staples in games but make your offer in context to the app’s theme.
Give Purchase Suggestions during Key Moments
So, you’ve been upfront to your users and they know too well that there are virtual goods they can purchase. That means that you can’t just bug them at every move about making a purchase. The same approach when asking for reviews should be used. Prompts should appear during key moments in the user’s progress within the app. This can be during success/failure in passing a level or finishing a task.
Don’t Forget to Measure Monetization KPIs
Monitor and measure key KPIs for monetization. Use analytics to track user spending behavior and demographics. You can use data from these KPIs to then run A/B and price point tests.
Types of In-App Purchases to Consider
Aside from the regular power-ups, lives/turns, and gems/coins, there are also other popular in-app items that need some exploration. Some of these may not work for your app but can still give you some insightful ideas.
This is considered as the most-utilized in-app offer. This can also be considered as a lifetime purchase so implementation is important. Visibility is the key. The ad removal offer should appear on every session, level, and after ads are shown. It needs to be as unobtrusive as possible, though, and seamlessly integrated into the app’s UI.
As mentioned on the pricing strategies above, you can bundle in-app items together to create an enticing offer that’s difficult to refuse. One way to execute this is to offer bundled features for upgrades, mini-games, boosters, and in-app currency.
Single use or consumable items produce the most number of purchases but lifetime purchases are the money makers. You can offer subscriptions or upgrades and supplement it with secondary purchases like additional features throughout the app’s use.
One strategy that is commonly used in games is to include doublers. Doublers can be used for any booster or any other vital in-app item. The idea is that it will provide a lifetime value for your users.
This may include levels, mini-games, sequels, and character/item reveal. A common implementation of include users being able to bypass a locked advanced features of the game. This is perfect especially if users are required to wait for a certain amount of time to access said advanced features/levels.
A lot of users may not see the sense in collecting virtual goods that can’t aid in the gameplay. That’s where character customization comes in. You can provide accessories for in-app avatars or even entirely new characters they can use and collect. Most often, these collectible characters enable users to explore a new theme (seasonal or not), also somehow enabling them to customize their app experience.