Working in the App development field for the past 6 years, we have found that many of our customers come to us with an idea but have no idea where to start. We work to help them understand the process for developing their business and their app. App development, as with most businesses, starts with a market and an idea. Taking that idea and turning it into an app can be a daunting task. If you follow some basic steps in the planning process, it can be greatly simplified and much more effective for your audience.
The planning process begins with the Business Model, moves through to establishing app requirements and a minimum viable product and finishes with a phased plan to managing the project.
We have many customers approach us with nothing more than an idea, most people don’t consider a business plan. You certainly do not need to have all the details (pricing, categories, options) sorted out, but when planning an app, you should consider how you intend to make money with it. You are more than welcome to create an app for philanthropic reasons, but we can’t all be Bill Gates so it’s imperative you think about how to make money from your app as one of the planning steps. Is your app going to be a paid for app, free, freemium, or a subscription service? There are multiple options to consider so let’s explore them below.
Apps Available for Purchase
The first and most basic model that was available on the various app stores was to provide apps for purchase. Users pay a one time fee (ranging from $0.99 to $999) to purchase the app with the bulk of apps being at the lower end of the spectrum. Now with that being said, Apple probably didn’t do anyone any favors by pushing the typical price of apps to be in the $0.99 range compared to the more typical $20 to $50 range that is very common for desktop apps. Now in some rare cases like Angry Birds, the $0.99 model worked like magic, but in general, selling apps for $0.99 can be very difficult considering that developing an app for a smartphone can be just as time consuming and costly as a desktop application. Moreover, with Apple and Google taking 30% of your proceeds, it makes getting a decent return on investment quite difficult. In order to make a $0.99 model work, your app idea must be earth shattering or you must be prepared to spend a huge amount of money on advertising to achieve global outreach and market wide penetration. Viral apps exist out there but those are few and far between and should not be counted on.
In App Purchases / Freemium
A variation of the straight purchase model is to offer the app for free (or even a small price) and offer additional features in the app as “In-App purchases”. Perhaps your app is restricted to a few records, a few basic features, and the more elaborate capabilities are offered for purchase. That model allows customers to pay for exactly the features they need and can maximize your revenues (if I recall my Microeconomics 101 course properly). The one factor to consider is that it can make testing the app a bit more involved as you have to test for all the different combinations of features. Once again, with In-App purchases, you are subject to the 30% store taxes.
This model is a very cost effective way to attract potential customers; however, be ready to expect somewhere in the 3% to 5% conversion rate for the paid features.
With most apps requiring some type of cloud service, one of the most effective revenue models is the membership or subscription model. In this model, users are asked to pay a monthly, yearly, and/or per consumption fee to use your app. With this model, you actually have two choices. You can rely on In-App purchases, allowing users to purchase items using the built in In-App purchase mechanisms provided by Apple or Google to pay for their subscription, but again at a cost of 30% to your bottom line. Another option to curb that “tax” is to create your own subscription service using one of the many payment providers (Stripe, Beanstream, Moneris). Now it does involve more work as you typically would need to include a website / user portal for users to manage their accounts and buy the service but that additional work/cost can quickly be recovered with the improved margins on your sales. One thing that you must be aware of is that in order for an app using your own subscription payment service to be approved by Apple, there must not be a single way for users to learn about and proceed with payment within your app. If there is a way, Apple will find it and your app will be rejected. They are quite good at protecting their revenue sources, which seems obvious given their staggering profits.
Basically, your customers will need to learn about your service outside of the app. The one exception to this rule is if the content they are subscribing to is consumed outside of your app. For example, maybe you are selling a gym membership within your app. The app acts as a point of sale but in the end, you are not using your app to consume your membership.
The last form of generating money from your app is advertising. Advertisers will pay to show their ads to your user base and there are a few ways to approach this scenario. One option that is quite popular with start up apps is to have a one or more ‘app sponsors’. When the app is being developed some of the costs can be offset by selling sponsorship opportunities. Often this will result in a banner type ad being placed in a prominent place within the app. These sponsors can be transitioned into long term advertisers once the app is live. A second approach to generating advertising revenue is to incorporate a third party advertising network into your app. These ad networks will automate the display of ads within your app, paying you for clicks or views of the ad depending on the arrangement. If your app is likely to generate lots of users and frequent use, this may be the optimal solution for you.
Some key factors when exploring Advertising Revenue Models are:
- App traffic – how many users and how often will they use your app
- Demographics – the more focused the demographics of your audience the more targeted the ads resulting in higher click through rates
Ad revenue can be a very effective method of generating money from your app, the rates for clicks or impressions are very low, all things considered, so the traffic needs to be there for it to make sense.
After putting together your thoughts on the business model, the next thing to consider when planning out the app itself is the apps functionality. Creating a list of these requirements will be very helpful in scoping the work involved in completing the app. Software development can be extremely complicated and what might appear to be small features could actually involve hours of R&D.
One simple example of this would be time based triggers on iOS. For example if you want your app to perform a task every 15 minutes this would logically seem like a simple task. In reality, this is quite challenging to complete.
Here are some questions to ask when putting together your requirements list:
- What platforms will be supported? (iOS, Android etc..)
- What devices types will be support? (Phone, Tablets, Phablets)
- Will the user need to login?
- Will the app need to know the user’s location?
- If so, how precise and how often
- Will push notifications be required?
- Will payments be accepted inside the app?
- Will the project require a website?
- Will the project require an admin panel?
If you are finding it difficult to write requirements, try sketching things out on paper, screen by screen or use a software tool like Balsalmiq to help you design this. This will help you visualize the pieces of the app from which the requirements will be derived.
Minimum Viable Product (MVP)
Once you have created the requirements list for all the possible features to complete your dream app, it is important to be pragmatic and break out the Minimum Requirements to take your app to market. Time and money are the key factors at play. First Mover Advantage can be a huge factor in app rollout and defining an MVP allows you to get to market quickly while managing your costs.
Most apps, once distilled, focus on a single concept surrounded by nice to have features that help manage and utilize the concept. Approaching app development using a phased approach has a slew of advantages.
Budget management is the obvious first advantage to a phased approach. If you develop the MVP and take the app to the market, you can often begin generating revenue which can then be reinvested to the features development.
Another advantage of a phased approach is the ability to build to your customers wishes. You can poll your user base, look at comments in the app store and build in the features your customers are asking for. Sometimes this will line up with your original concepts but often times the users will ask for things your team had not even thought of which is a fantastic way to connect with your customer base.
Adding features in a phased approach can also help with user engagement. Users can be notified of new features and that can bring them back into the app on a more steady basis. Many apps struggle to get users to come back to their apps on a regular basis so new features and updates can give users a reason to return.
Once you have worked your way through the planning process outlined above, you are ready to get started. Think about the business model, define your requirements, decide on an MVP and put a plan in place. Don’t forget to reach out to your targeted customer base and ask them what features and ideas they want to see implemented in an app. Most app users are tech savvy and would have some brilliant insight into your plan. If you follow this simple process you will be ready to sit down with your development team and get the project underway.
If you need help or have questions during your app planning process, contact 14 Oranges.