In-App Purchase (IAP)

in app purchases

Playing your favorite game, you must’ve noticed that after a certain level, your games ask you to buy new keys or special tools to unlock certain features, or you might have noticed your games allow you to buy hints or get help with small purchases. These small purchases, which allow you to run your game smoothly and more engagingly, are called In-app purchases. 

Today, we will take a comprehensive look at In-app purchases, what they are, and how they are beneficial for users and businesses/developers. 

 

What is In-App Purchasing?

In-app purchasing means buying goods and services from the application or mobile game. These easy purchases allow developers to introduce their applications for free. Developers can then advertise upgrades to the paid version. The paid version unlocks special items or even adds other applications or services to anyone who downloads the free version. In this way, developers can greatly benefit despite giving their applications for free.

But how are they important? 

In-app purchases can substantially amp your application’s revenue, especially if your app has a great user base. But for developers, it is more important to strike a perfect balance between giving value to users and forcing over-aggressive monetization. 

Some common examples of in-app purchases include the following.

 

Types of In-App Purchases

In-app purchases (IAPs) are classified into four sorts, each designed to cater to different user requirements and company aims. App publishers frequently use multiple types of IAP for optimal monetization and revenue generation.

 

1.  Auto-renewable subscriptions

This requires charging consumers on a recurrent basis for ongoing access to services, content, or extra app features. The charge will reoccur every pay period as long as the user cancels the subscription.

For instance, an automated monthly membership to a music streaming network provides ad-free access to a large collection of songs.

 

2. Non-auto renewal purchases

Unlike auto-renewable purchases, non-renewing purchases are not automatically renewed. This in-app purchase model offers content or services for a fixed or limited time. Customers must actively repurchase to maintain access after the introductory time expires.

Example: a six-month membership to an online magazine that must be renewed at the end of the term to continue access.

 

3. Consumable Purchases

Consumable in-app purchases are purchases that can only be used once before needing to be replenished. This idea is used in many gaming apps, where players can briefly purchase goods to improve their gameplay.

For example, in a game app, you can buy extra lives or power-ups to extend play or improve your powers.

 

4. Non-consumable Purchases

A non-consumable purchase made by a user remains permanently available to them. It has no expiration date or usage restrictions. The best part? Non-consumable purchases often provide premium features.

For instance, Extra editing filters in a photo program that are available indefinitely after purchase.

 

In-App Purchases in Android and iOS

Despite Android’s 72% operating system dominance in the market, iOS consumers are reported to spend far more per user.

This is mainly because Apple products are priced higher, making them popular among richer people in developed economies. Apple also profits from access to the massive Chinese market, where Google Play is prohibited.

Furthermore, Apple’s stricter privacy restrictions under ATT have made it more difficult to target mobile advertising, giving IAP a lucrative revenue stream for apps.

Across both platforms, gaming apps generate the most revenue, followed by social media and entertainment.

 

How do we increase In-App Purchases?

Increasing in-app purchases (IAPs) is a great way to boost your app’s revenue. To achieve this, however, you need a strategic approach. Let’s look at how to increase in-app purchases in no time. 

1. Consider your data

User data is the foundation of any successful marketing effort. Understanding your customers allows you to deliver what they want and tailor their user experience accordingly. Plus, with the help of data, you can create a targeted marketing effort. 

2. Personalize the user experience

Personalization is the key to success in all businesses, but specifically when marketing. When users feel more connected to the advertisements, it is only when they consider buying a service or product. 

MoEngage’s campaigns were known to lead to a 25% uplift in conversions through personalized cross-channel marketing.

3. Get the timing right

Timing your interactions with users is crucial. Mis-timed notifications can lead to opt-outs, while well-timed ones can drive conversions. 

Therefore, it is recommended that you adjust your push notifications to match user activity peaks. A study by App Annie and IDC found that the majority of in-app purchases occur before and after work, making these times ideal for sending promotional messages.

4. Build stronger relationships

A strong relationship with users can encourage loyalty and lead to frequent purchases. Plus, offering incentives like in-app perks or discounts can engage your users more. Smile.io found that loyal customers are five times more likely to repurchase, five times more likely to forgive, four times more likely to refer, and seven times more likely to try a new offering.

5. Get the first conversion

First conversion is the crucial yet the most challenging part. But once it’s done it paves the way for subsequent purchases. Start by differentiating users with higher engagement but no purchases. Plus you can leverage behavioral triggers to target users on the verge of making a purchase. For example, push notifications for abandoned carts can remind users to complete their purchases. Or offering limited-time discounts or special offers can incentivize users to make their first purchase.

6. Be innovative

The first-hand rule of stepping into the marketing industry is an adaptation to innovation. Moving along, innovation can keep your app engaging and relevant. You can start by integrating new hardware features that can enhance user experience. Take Vineyard Vines’ integration of Apple’s 3D Touch technology, for example. It provides a unique shopping experience, contributing to higher user engagement.

7. Tie everything together

A cohesive strategy across all channels ensures a seamless user experience. You can track customers across all channels providing a unified view.  After all, organizations with a strong omnichannel customer engagement strategy retain on average 89% of their customers, compared to 33% for those with weak omnichannel strategies.

 

IAP problems

In-app purchases may look like a win-win situation for users and developers. But if you look closely, you will understand the IAP also has some challenges you should be aware of:

  • It limits your base. In-app purchases are often made by a small percentage of users (some estimate as low as 5%). Furthermore, because low-value transactions are common, they can take some time to accumulate. 
  • It may require some trial and error to determine what benefits to provide, how much to charge, and how to approach them (too early in their journey and they may feel pressured; too late and they have lost interest).
  • Easy payments might also lead to unintentional or fraudulent purchases. Make sure your system is safe, that you monitor all payments, and that you have the tools to handle any issues quickly.

 

Conclusion

By now, you must’ve understood what In-app purchases are. With different techniques like auto-renewal subscriptions and consumable purchases, you can boost revenue and bring more leads in. However, remember, success relies on leveraging data, personalization, timing, building user relationships, encouraging first conversions, and embracing innovation.

By understanding and implementing these strategies, app developers can effectively increase in-app purchases, enhance user satisfaction, and drive long-term success for their apps. If you have not yet used In-app purchases to benefit your business, you’re missing out on big. Try them today, and you will feel a difference yourself.