Every mobile strategy centers on one question: how can apps provide value to the users and the company, and how can it generate revenue? Generally, there are three ways to monetize apps:
1. Directly – selling content through paid apps, in-app purchases, paywalls
2. Indirectly – marketing, services, branding, etc., that influence buying behavior
3. Laterally – paid advertising from third parties or acquiring user data
After having talked about direct app and app content purchases in our last blog article of the series “Monetization of Apps”, we now want to provide a detailed overview of indirect financing measures.
Many businesses go for indirect app monetization strategies. Often their apps serve as an additional channel of communication, allowing businesses to distribute digital marketing activities. Companies should keep in mind when and how smartphones and tablets are primarily used – anywhere and everywhere. This means digital content should be easy to understand and to access.
Indirect marketing activities allow you to pursue different goals, which generated returns that cover and exceed app development costs. These include:
– Customer retention
– Cost reduction
– Customer acquisition
– Store advertising and incentives
– Connection to the offline world
– Market research
Customer retention and cost reduction
Satisfied customers can be tied more strongly to a brand or a business by using suitable marketing communications. It’s still approximately ten times more expensive to recruit a new customer than to retain a customer. Good customer retention through apps can be achieved, for instance, with a digital customer magazine. Next to product presentations such a magazine allows businesses to practice brand storytelling by employing useful tips and small anecdotes.
Service with the help of sensors
Depending on the industry, a company might benefit from a service app or service functionality. In the long run, this can also reduce costs. It is a good idea to make use of the special sensors and features of smart devices. The “MB Service” app, which connects to the personal calendar, thus enables customers to arrange test drives. Thanks to the localization features of mobile devices, the app can display the nearest garages on a map and offer to contact or navigate to respective ones. Further possibilities could include live chats using Facetime to send requests to the support. The camera can also pass on damage reports and a barcode scanner could be used to recognize the model and initiate the download of a handbook.
Reward loyal customers
When talking about customer retention, also consider discount campaigns and bonus programs. They include, amongst others, exclusive apps for VIP customers, similar to apps like “Esprit Friends”; these are very useful in retaining customers. Often, these apps complement existing customer retention programs. Likewise, bonus programs can be part of apps – the app “shopnow” rewards people for using it with vouchers and gives away bonus stars for visiting retail shops or scanning selected products. Solving quizzes in a digital customer magazine or participating in weekly activities can also be encouraged in this way. Let your users see the current status of their bonus accounts and point out how many points they need for their next voucher and what they can expect to get.
The chain store dm-Drogeriemarkt has more than one app on offer that implements many of these elements successfully. One of the more creative ones is the “dm Designer” app, which allows customers to design labels for dm’s own product line; they can then directly buy these creatively labelled products. Smaller and larger games make for a very entertaining customer retention strategy. Mobile games such as “The Crabs and Penguins” from Coca-Cola aim at spreading joy and simultaneously implement the slogan of the brand (share happiness). The app from Skittles (“Fruit Ninja vs Skittles”), issued in cooperation with the colorful game “Fruit Ninja”, similarly increases the attention for the brand. The player’s goal is to create a rainbow with psychedelic fish and giant skittles – also being in line with the brand claim “experience the rainbow, taste the rainbow”.
Acquiring new customers is the most difficult task an app has to do, but not an impossible one. The Tate Gallery of Modern Art employs a smart strategy here. Users receive more features for their “Magic Tate Ball” app by visiting the gallery and checking in with the app. Referral marketing is another promising method to attract new customers, a strategy that works both in classical and in digital marketing. Tell-a-friend features with implemented social media channels can reach users beyond the app. The app “Draw Something” effectively offered playful incentives for sharing results and experiences, thus becoming a viral hit – also partly due to the ability to compete with other players and friends.
The referral marketing tool “clients referring clients” qualifies for implementation in apps if you choose the right incentives. Wish lists are great covert tell-a-friend marketing tools. Users can add products they would like to have and share these lists with friends and family.
Contests are also often used to generate new users. The awareness of the app “Schnäppchenfuchs”, a platform for vouchers and shopping deals, rose rapidly with the help of a contest, resulting in 50.000 installations so far.
House advertising and incentives
House advertising and incentives frequently already result from the strategies mentioned. In addition, brand storytelling allows for various use cases which are not intrusive or blatant. House advertising can thus be placed in specific customer magazines, and apps are also perfect for presenting a new product each month. A sneak preview lets you push products exclusively through the app.
Connection to the offline world
At the beginning of this blog we concluded that smartphones are brought along anywhere. A perfect opportunity to connect your local business to the advantages of mobile devices! An increasing amount of apps is specializing in location-based services (LBS), one of them being “shopnow”. These services include: indoor navigation using the iBeacon technology; mobile payment services or bonus systems which reward store check-ins or scanning receipts. Apple itself installed the iBeacon technology in 250 stores and provides the “Apple store” app, with which users can navigate through store departments.
Apps provide another advantage: they give insights into local stores – from home. The customer can find out about product lines of stationary businesses as well as where the next shop is located and whether a specific product is available. Many people like to look at products before making purchase decisions and also want to have their choices confirmed in a personal consultation. We have dealt with the opportunities of location-based services in these previous blog articles:
1. Indoor navigation
2. Mobile marketing
3. Mobile payment
A whole different approach is the use of augmented reality. Among other things, it enables users to project furniture into their own homes, e. g. the “Ikea” app, making decorating much easier.
Smartphones and tablets provide the unique possibility to track the behavior and interests of users. Analyst tools, advertising IDs and A/B tests, being different in content, help to measure interests. These data can be used to improve offers and approach target groups through dedicated channels. Furthermore, users can be integrated through surveys and product reviews or even receive the option to mark products as favorites.
Challenges for your app business
Let us briefly recall which advantages a free app has before looking at the challenges. The inhibition threshold during app installation is lower with free apps. By offering free services, the customer commits to your company and your offering. Various channels allow you to skillfully send advertising to customers. Location-based services open up connections to local stores, generating revenue through targeted incentives.
The biggest challenge is to keep apps up-to-date and use elements that will downright encourage the user to use the app. Some of these elements are “Tip of the Day”, push notifications and of course the discount promotions we looked into. Here again: Be creative. A very good example of advertising that is updated daily is the campaign by Sixt, which uses breaking news for their advertising motifs, often also including black humor. Your ideas don’t have to be as provocative, but a wink surely won’t hurt.
The next part of this series will deal with lateral monetization of the app business: Part 3 – “Lateral Monetization of Apps” will be published on October 1st, 2014.
- Go ahead and download the whole: “Whitepaper on App Monetization Strategies”