Auto-renewable subscriptions has already become a “silver bullet” in iOS apps business. Why not? Users get your service without any interruptions, you can predict your cash flow. And let’s be honest: in majority cases using subscriptions-based business model can help you earn more.
This is a first article about subscriptions. Here I tried to tell about the most important things about subscriptions.
1. Auto-renewable subscription. What is this?
That’s easy. You offer users access to your content or app’s functions on regular basis. User pays for this access regularly (e.g. every week or month): at the end of subscription period Apple withdraws money from a user’s credit card.
Apple tries to withdraw money 24 hours before subscription ends. If it fails then Apple will try to do this during next 60 days.
The duration of auto-renewable subscription can be different: 1 week, 1 month, 2 months, 3 months, 6 months, 1 year. You can freely choose this duration.
But you never should forget about free trial period. During this time a user can try paid features for free. At the end of trial, if a user didn’t cancel it, Apple will try to withdraw full amount of money for the next subscription period.
In general, trial period is a case of Introductory offers. There are 3 types of Introductory offers: Free trial, Pay as you go, Pay up front. We will talk about introductory offers below.
2. Products, levels and products groups
Every subscription is a separate product which you create on App Store Connect. Let’s imagine the app called DropCloud. DropCloud is a cloud-based storage for your photos. There are 2 different options user can choose between: Silver and Gold. Silver offers 50 GB of cloud storage, Gold offers 100 GB. Additionally, user can subscribe to the paid weekly newsletter with a tips and recommendations from the world’s famous photographers called Inspiration. In this case every subscription is considered as a separate product:
- Gold subscription: $19.99 / month
- Gold subscription: $9.99 / week
- Silver subscription: $14.99 / month
- Silver subscription: $4.99 / week
- Inspiration subscription: $1.99 / week
Products are grouped into products groups. Every product belongs to one group only. We have 2 groups in our example. Let’s call the first “Cloud”, the second – “News”. The structure of products will be the following then:
A user can have only one active subscription per a group at any moment. In our case a user may subscribe to Gold and Inspiration plans at the same time, but can not have active Gold and Silver subscriptions simultaneously.
Create two or more subscriptions groups if only it’s really necessary.
All products within one group are being grouped into levels. Depending on a level a user will be offered a different list of available functions or (in our case) a different volume of cloud storage. You should sort levels in descending order, starting from products with the highest level of service.
Why do we need levels? That’s not a super-easy question. Apple uses levels to upgrade, downgrade and crossgrade subscriptions. This happens when user switches from one active subscription to another within one group (e.g. from Gold plan to Silver plan). Apple uses levels to calculate final price and duration of a new subscription. We will tell about this in one of our next articles.
3. Introductory offers
You can offer a special one-time offer to new users. Such offers are called Introductory offers. There are 3 types of them: free trial, Pay as you go, Pay up from. We already talk about trials so let’s look through others.
Pay as you go
Using this model you offer one-time discount for one or several subscription periods. Apple will withdraw regular subscription’s price at the end of these periods. For example, a user can subscribe to your service worth $3.99 per month. This price is valid for 2 weeks, after which a user can continue using your service at a regular price $9.99 per month.
The price of Pay as you go offer must be less than a regular price. For example, you can not offer a user to pay $19.99/month during the first 2 months and $9.99/month after. This issue is partially solved by using of Pay up front model.
Pay up front
Here you offer users to pay immediately for several months (1, 2, 3, 6 or 12) in advance. At the end of this period user will pay for subscription at a regular price. For example, you can offer 3 months of cloud storage with a one-time payment of $14.99. And after these 3 months a user will pay $9.99 per month. There are 2 main differences from Pay as you go offer:
- The price of Pay up front offer does not have to be less than the cost of the regular subscription.
- The number of periods where the offer is valid is always 1. In other words, the offer is valid for only one period of 1, 2, 3, 6 or 12 months.
- Every subscription can only have one introductory offer per territory (country). Thus you can create a separate offer for each territory. But only one per territory. It’s enough to create one introductory offer for all territories in most cases.
- A user can use only one introductory offer per products group.
- Introductory offers are available for iOS 10, macOS 10.12.6, tvOS 10 and later.
4. Promotional offers
Promotional offers are a great way to win back your customers which were active subscribers in the past. They are like an introductory are a special offers which are valid for limited period of time.
The main differences between promotional offers and introductory offers are:
- Introductory offers are designed to attract new customers, promotional offers – to retain current and win back previous customers offering them discounts for a subscription.
- Only users which have active subscription or had active subscription in the past are eligible to use promotional offer.
- Unlike a introductory offers user can redeem several promotional offers.
- You can create up to 10 active promotional offers per subscription.
- Promotional offers, unlike a introductory offers, are not visible on the app’s App Store page.
- They are available for iOS 12.2, macOS 10.14.4, tvOS 12.2 and later.
Promotional offers configuring is not a straight-forward process and requires own server setup. We will deep into this question in one of our future articles.
5. Subscriptions cancellation
A user can cancel subscription at any time. He can cancel it using following ways:
- through iOS settings or App Store app.
- through Apple customers support. User may return money for the last subscription period in this case.
A subscription will be cancelled automatically in the following cases:
- there is no enough funds on a user’s credit card to complete purchase during subscription renewal.
- a user didn’t agree with subscription price increase. We will talk about this below.
- product was unavailable during subscription renewal.
It is a good practice to try to return lost customer. For example, you can offer him a discount using promotional offer or at least ask why did he cancel subscription.
6. You will receive 85% net revenue after one year…
… minus applicable taxes, if you manage to keep a user during this year. The regular Apple commission is 30%. But if some user had an active subscription during one year, you will receive 85% net revenue after this year for this user.
There is a one indulgence in this rule: the subscription can be cancelled during this year (e.g. user can cancel it or some billing issue may occur) for a duration less than 60 days. This period is called grace period. Grace period starts when subscription stops. If during next 60 days it becomes active again, then the countdown of the year to the 15% commission is not reset.
Grace period doesn’t also reset in cases of upgrades, downgrades and crossgrades within one products group.
7. Subscription price change
You can raise or lower prices at any time. But you should take into account several important things.
That’s easy: reduced price will be applied to all customers: both current and future. Current customers will pay reduced price on the next billing cycle.
You can choose between 2 options when increasing prices:
- Keep the old price for current subscribers.
- Increase price both for current and new customers.
If you select second option, keep in mind that all current customers will receive push and email-notifications with a question if they agree with price increase or not. If a user agrees, new price will be applied in the next billing cycle. Otherwise subscription will be cancelled.
Think several times before raising prices for current subscribers. It may possibly lead to loosing many active subscribers, who disagree with new terms. Apple recommends to increase prices step-by-step and by users cohorts: you should increase prices for users who already pay price close to new one first. Then you can apply increased price for the next cohort of users and so on.
As we can see auto-renewable subscriptions subject is vast. There are many nuances which worth taking into account while designing, analyzing and making decisions regarding subscriptions.
The problem of subscriptions tracking
Subscriptions tracking and sending subscriptions-based events (like subscriptions renewals, cancellations or refunds) to third-party analytics (Firebase, Amplitude, Mixpanel) is one of the important and nontrivial tasks. Why do you need it? Without it is impossible, for example:
- calculate how much money one paying user brings to you,
- detect the most effective advertisement channels,
- know which users cancel subscriptions more often: know their gender, age, location, etc.
- find out which users face with the billing issues mostly.
You can collect and analyse this data. Then you may offer some users a discount, ask them why did they cancel subscription or ask to update billing info.
Unfortunately, Apple doesn’t provide any convenient instrument for this (App Store Connect analytics is not considered: it does not allow to analyze subscriptions by specific user).
We encountered this problem long time ago and decided to develop service which solves these problems.