Last Updated on June 13, 2022

How many times have you thought to click the “Unlock Features” option in a gaming app? 

Are you willing to try super membership at your favorite grocery store?

All these instances are examples of purchases from inside the applications. It may be subscription fees, payments for some bought items, or simply buying a package. In-app purchasing is considered an engaging strategy for mobile apps

It’s a gateway through which businesses can attract users and increase their revenues. In 2020, the number of annual mobile app downloads was 218 billion. This market has become the most profitable, allowing companies and businesses to take full advantage. 

One will be stoked to hear that the global mobile app purchases have amounted to $143 billion in 2020. With such demographics, it’s no wonder that the in-app purchase model will shape the future of mobile app monetization. 

Statistic: Average consumer spend on mobile apps per smartphone as of 3rd quarter 2021 (in U.S. dollars) | Statista
Source: Statista

But the question is, do we all know about in-app purchases? 

And if we know, to what extent our knowledge is right? 

Well, that’s what this article is going to assess. Then, moving forward, we will shed light on some of the important aspects concerning mobile in-app purchases. 

In-App Purchase: The Real-World Definition

Over time, there have been many versions of in-app purchases. For example, Apple defines it as “extra content or subscriptions that you buy inside an app.” On the other hand, Google Play has modernized this definition a bit. According to them, “With some apps, you can buy additional content or services within the app.” 

Going by the textbook, we can frame the real-world definition as-

In-app purchases are contents, services, and products that can be bought from within a mobile application. 

Be it a subscription fee or grocery items, and you are paying an amount. It won’t include the downloading fee of the application. Once you have the app, any transaction made thereafter will be considered an in-app purchase. 

For more information, you can also check out the most popular apps in 2021.

Types Of In-App Purchases

From the gaming industry to retail, music, entertainment, and more, in-app purchases are common nowadays. There are three major categories- subscriptions, consumables, and non-consumables. 

1. Subscriptions

In-App Purchases Subscriptions

Subscriptions are the only type of in-app purchases that can bring steady income flow for a business. From a user’s point of view, let’s assume you have taken a three-month subscription to Netflix. After the time is over, you will get renewal notifications. 

Since Netflix is one of the most popular entertainment apps, you will renew your subscription. And the cycle will continue. Similarly, another user can renew the Spotify subscription every month to have access to all media. Thus, the businesses are receiving a periodic but steady cash inflow.

2. Consumable

in app purchase monetization model

Another type of in-app purchase is consumables. You buy the content or service one time and use it. Then, after that, you again pay a certain amount to access the feature or content. In other words, you pay only for what you will consume. 

For example, once your VOIP subscription ends, you may or may not renew it. But if you do, your primary intention will be to use the VOIP service till the maximum limit. These are what we know as consumable in-app purchases. 

3. Non-Consumable 

Non-Consumable in app purchases

Non-consumable in-app purchases are one-time subscriptions. As a user, you pay a lumpsum amount. And in return, you get lifetime access to all the app features. This type of in-app purchase is common in the gaming, retail, and healthcare industries. 

Even though the business won’t receive a steady revenue flow, a huge fee is charged. Moreover, 90% of targeted users purchase a one-time subscription. So, going by the figures, it is profitable for both consumers and businesses. 

You can also read about the app monetization strategies & revenue models.

Working On An In-App Purchase System

Working On An In-App Purchase System

The ultimate goal of the in-app purchase feature is to buy something on the app. Three ways are there for payments- app wallets, cards, and third-party wallets. 

  • There is a built-in wallet in some apps, like Amazon, Prime, Uber, and so on. The app’s officials maintain the wallets and their securities. 
  • You can make the purchase using debit or credit cards. Debit card payments will be instantaneous. However, if you pay using a credit card, you have to repay the debt to your bank.
  • Paypal is an example of a third-party wallet. These connect the business app with your bank. Thus, they act as a mediator. 

Once you choose the option of subscription or any other package, you need to make the payment. You can choose any of the three methods described above. After the transaction is complete, you will get a notification. It can be a message, an email, or a pop-up based on your preference. 

Read More: How Much Does It Cost To Make An App?

Advantages Of Having In-App Purchases In The Digital World

Paying money to enjoy a feature or content sounds extravagant. But it doesn’t mean that in-app purchases aren’t profitable. Statistics show that most businesses having mobile applications rely on this feature. 

The question is why! 

To have more clarification, we have explained the benefits of in-app purchases below.

1. Freemium Model Accessibility

The hype for the “Freemium” model is skyrocketing with each day. Most businesses have adopted this feature for their apps. It’s a combination of free and premium services. Let’s take the example of Grammarly. 

You can use its free version for correcting mistakes easily. But, in this version, you won’t have access to advanced features. If you want a full-access, you need to pay the subscription fee. This is what a freemium model is. 

It allows businesses to attract users and provide them with the basic features. They also keep a premium version side-by-side. Thus, anyone can purchase the premium version as per convenience. 

2. More Content Exposure 

With in-app purchases, a user can have more exposure to advanced features. For example, let’s assume you want to shop groceries online. Normally, the free app will offer you a 10% discount on every product. But if you avail of the in-app purchase, you can get a 15% discount. 

Thus, with a purchase of a few bucks, you can save more money on groceries. In addition, from a business point of view, integrating in-app purchases will provide more exposure to the users. 

Hence, user satisfaction and experience will skyrocket. However, this particular feature should be at par with the market standards. If not, your business will lose prospective customers. 

3. Improved Brand Loyalty

Your business isn’t the only one in the market. If you see the statistics, there will be hundreds of competitors. Yes, some brands will be amateurs while others will be pro. But that doesn’t mean you don’t have to face the competition. 

One best solution to combat this competitive market is to incorporate in-app purchases. You can offer the basic free version of your mobile app. If the user wants to upgrade to new features, he/she should have independence. 

Hence, they won’t go running for other alternatives. Instead, they will be loyal to your business which in turn will increase the app revenue

4. Easier Payments 

Users want fast services, be it making quick payments or having the fastest deliveries. With in-app purchases, you can satisfy them properly. As we have already discussed, a user can make payments in three ways. 

All these payment methods for in-app purchases are easy. All you need is the card details or the UPI. Sometimes, the third-party wallets will ask for biometrics as a security protocol. But none of these methods will take more than five minutes. 

So, quicker payments mean happier customers! 

5. Greater Revenues 

One of the main benefits of in-app purchases is the increment in revenues. As a business or brand, you will look for ways to improve the cash inflows. That’s why incorporating this feature is a wise decision.

Users will pay a certain amount to have access to the premium content. Out of every 10 customers, at least 7 of them will do so. Thus, your business revenue will increase without any hassle.

Moreover, if you offer discounts and promo codes for in-app purchases, you can increase user engagement. They will stick to your app ideas for a long time. Therefore, your business revenues aren’t going to decline anytime sooner. 

How Can A Business Implement In-App Purchases?

For implementing in-app purchases, you need to follow a few tricks. First, you cannot opt for traditional methods to promote this feature. The consumer market is changing drastically. And to live up to their expectations, you need to go beyond the norms. 

In the below section, we have discussed a few such tricks. These will definitely give you an idea about implementing in-app purchases. 

1. Do Not Clickbait

Clickbait is not helpful. When you want to persuade your users for opting in-app purchases, do not offer anything fake. The digital platform is the best area for scammers. But if you want to build trust, you need to provide realistic offers.

Hence, implement the feature in such a way that the purchase sounds real. This will improve both user engagement and brand awareness. 

2. Start With Promotional Offers.

For convincing users to avail in-app purchases, nothing will be as good as promos. For example, let’s say you will give a 20% discount on the subscription fee for your app. This will immediately catch the attention of many users. 

Looking at the insights, you will understand how rapidly the number of subscription requests has increased. So, promo offers and discounts will help you incorporate in-app purchases effortlessly.  

3. Push Notifications Act As Reminders.

How many times have you forgotten to check your cart items on Amazon? 

The answer is “countless.” It is natural to forget the items we have added to the cart over time. This can hamper the business a lot. If you don’t want the same thing to happen, use push notifications. 

These small notifications will remind your users about the existing cart items. Thus, they will return back to your app to make the purchase. 

Get Started With In-App Purchases

Initially, in-app purchases might sound difficult. But with proper strategies, your business can achieve its goals. All you need is an appropriate plan for incorporating this feature. Also, you must the market because if your offers are irrational, it will be detrimental for your business. 

If you want to create a mobile app with in-app purchases, you should connect with the best app development company that has experienced app developers who can turn your unique money-making app ideas into reality.

Author

I am an eCommerce consultant, a member of the Forbes technology council with a decade of experience in the ecommerce development segment. My expertise can make your business overcome any obstacles while you are dealing with the Magento ecommerce platform!