GUIDE
Mastering subscription app models and monetization
In today’s subscription culture, nearly everything we consume—whether it’s media, meals, or healthcare—can be provided on a subscription basis. Subscription models are becoming increasingly prevalent because they create a steady revenue stream for businesses, while for consumers, they offer convenience, personalization, and better deals on products and services.
As consumer preferences shift from ownership toward access, many apps, across all verticals, have adopted subscription-based monetization strategies. However, subscription models aren’t the only way apps generate revenue. Many adopt mixed monetization strategies, combining subscription services with in-app purchases in the form of consumables (i.e. in-app currencies, credits, storage upgrades, power-ups/lives, etc.) or non-consumables (i.e. lifetime premium version, removal of in-app ads, etc.).
Others combine subscriptions with revenue from in-app advertising, either using more traditional formats like interstitial or banner ads, or in the form of rewarded video, which lets viewers access prizes, benefits, and bonuses in exchange for viewing a short ad. Mixed models are especially valuable for apps with varied user bases, as they cater to individual preferences, driving both loyalty and revenue growth. Each app’s unique monetization ‘recipe’ will cater to its audience’s needs. A mixed approach has come to define gaming’s hybrid-casual, for example.
This guide explores the growing subscription economy, its challenges (like combating subscription fatigue), and how apps in all categories can leverage subscriptions to create user-centric, sustainable revenue streams.
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Definition
What is a subscription-based app monetization model?
A subscription business model allows apps to earn recurring revenue by charging users a regular fee—usually monthly or yearly—in exchange for ongoing access to a product or service. Unlike traditional sales models that rely on one-time purchases, the subscription-based model focuses on creating a stable revenue stream while fostering long-term customer relationships.
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At the core of any subscription model is the customer’s commitment to recurring payments in exchange for the business’ commitment to recurring value. This setup allows apps to prioritize user retention over constant re-engagement, enhancing lifetime value (LTV). This emphasis on sustained relationships also provides businesses with a more reliable income, which can be especially valuable during economic fluctuations.
As mentioned above, the subscription model can also be used in conjunction with other app monetization models.
Benefits of a mixed monetization model include:
- Diversified revenue generation.
- Greater user engagement through flexibility.
- Higher overall lifetime value per user.
- Better alignment with varied user preferences.
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Types
Types of subscription services
Several subscription types facilitate recurring business. Let’s explore some of the most popular subscription-based business models and see how each one operates.
1. Membership subscription model
A membership subscription provides access to exclusive content, services, or products for a regular fee. This model is popular in gyms, online clubs, and community-based platforms, where subscribers gain access to perks unavailable to non-members. It’s a great example of a recurring revenue business model focused on creating ongoing value and a sense of belonging for subscribers. Amazon and Apple (Apple One) are common examples of large players using this model.
2. Software as a service (SaaS) subscription model
Subscription revenue models have become popular in the tech sector, especially with software as a service offerings, which allow users to pay for regular access to software that is continuously updated. Adobe and Slack are common examples of large players using this model.
3. Subscription box service model
Box subscriptions send curated packages of goods—such as food, beauty products, pet food, books, etc.—to customers on a regular schedule. The subscription box business model is especially appealing for its surprise element and personalized experience, often making customers feel like they’re receiving something special with each delivery. HelloFresh and Dollar Shave Club are common examples of large players using this model.
4. Content subscription model
Content subscriptions are popular among digital media and streaming platforms. These subscriptions provide ongoing access to a library of content, such as movies, news, or music, in exchange for a regular fee. Streaming services like Netflix are among the most popular subscription services, allowing users to enjoy unlimited access to content without having to buy individual items. This subscription icon is a great example of a company that introduced a diversified monetization model with the addition of its ad-supported tier. Spotify is another common example of a large player using this model.
Subscription pricing models
Within each of these recurring revenue business models, an app may choose from subscription pricing models such as:
1. Freemium pricing: The freemium subscription model offers a basic service for free, with advanced features available in a premium, paid subscription service. This model allows free users to upgrade for an ad-free experience or to access more robust features. Freemium subscription pricing models are effective for customer acquisition, as users can try out the service before committing to a paid version.
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2. Flat rate pricing: In a flat rate subscription model, customers pay a single, consistent price for full access to a product or service. Regardless of usage or features, everyone is charged the same amount. This simple pricing approach works well for services with a clear, all-in-one offering that meets the needs of a broad customer base. Flat rate pricing is straightforward and predictable, making it easy for customers to understand and commit to.
3. Tiered pricing: The tiered subscription model offers multiple pricing levels, each with different features or access levels. Customers can choose a tier that best matches their needs and budget, with higher tiers providing more benefits or premium features.
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4. Usage-based pricing: In a usage-based subscription model, app users are charged based on how much they utilize a specific feature or service. Common in apps like cloud storage or utility apps, this model lets users pay only for what they consume, such as storage space, API calls, or streaming hours. It’s a flexible option that appeals to users with variable needs, ensuring costs align with actual usage.
5. Per-user pricing: Per-user subscription models charge by the number of users accessing the app, making it ideal for team collaboration, productivity, or SaaS apps. For example, project management apps often charge per user, allowing businesses to scale their subscriptions as their teams grow while keeping pricing transparent and predictable.
6. Per-added pricing: In a per-added subscription model, users start with a base subscription and can pay extra for additional features or services. This approach allows customers to customize their subscriptions, paying only for what they value most. It’s a popular option for apps offering modular functionality, such as analytics tools or software with optional premium integrations.
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Examples
Subscription model examples
Each app will have a unique approach to subscriptions–from which type of subscription is used, to the pricing strategy, and the kinds of benefits offered to subscribers. Let's look at a few examples across various verticals.
Examples of the e-commerce subscription model
Traditionally, shopping apps relied on users’ in-app purchases of products for monetization. These days, many are adopting a freemium approach, allowing users to shop as normal with added benefits if they subscribe. Free and/or fast shipping, for example, is a very common benefit of shopping subscriptions.
Apps like ASOS highlight the value of this benefit by doing the calculations for the user–showing how much they’ll save depending on the number of orders they place over a year’s subscription. PrettyLittleThing, similarly, makes a concise statement: “Make only 3 purchases and your Royalty investment is already paid off.” Other apps, like H&M and boohoo, offer subscribers early and/or exclusive access to sales.
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Companies like Birchbox, Stitch Fix, and Book of the Month take a more subscription-focused approach. These subscription-based e-commerce apps follow the box subscription service approach. Birchbox offers a monthly box of curated beauty and skincare samples tailored to user preferences. Stitch Fix provides personalized clothing selections sent to customers, while Book of the Month allows readers to choose one new release each month from a curated selection.
Examples of financial subscription services
Introducing subscriptions to financial services can feel a bit tricky, as users have money front of mind in these scenarios. However, some finance apps are starting to introduce the model.
Revolut, a bank app, offers users the ability to upgrade to one of four subscription levels. Benefits across Revolut’s tiers include:
- Free access to over 1,000 airport lounges worldwide
- WeWork desk passes
- Subscriptions to other apps like Tinder and Sleep Cycle
- Global mobile data eSim
- Priority customer service
- Exclusive debit and credit card styles
- Points to redeem for air miles and shopping discounts
- Savings on international transfers
Money planner app Buddy, on the other hand, offers subscribers the ability to connect their bank, collaborate with other app users, and customize the in-app experience. Monefy, a personal finance app, takes the functionality approach to subscription, allowing users who subscribe to create custom categories, sync multiple devices, and add recurring records. Similarly, WalletApp offers unlimited accounts, finance analysis reports, and automation of labels and categories available through its subscriptions.
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Examples of content subscriptions
Content subscriptions are widespread, encompassing a range of audio and visual content formats. Some apps are fully subscription-based, with no free access–like Audible’s audiobooks and podcasts, and Crunchyroll’s anime series and movies. Other content apps, like Spotify, allow users to access content with ads or limitations. Bloomberg, similar to many other news apps, takes a quite limited freemium approach where users can read one article for free before needing to subscribe to access additional content.
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Examples of subscription-based software
Once upon a time, users would buy a single version of the software—often on a physical medium like a CD-ROM or DVD—and install it directly onto their computer. Once installed, they would have lifetime access to that specific version of the software, with no recurring costs.
To access new features or updates, users would have to purchase a new version when it was released, which might be every few years. This model differed significantly from today’s subscription-based approach, where software is frequently updated, and users pay recurring fees to access the latest features and improvements.
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Zoom, for example, lets users conduct calls under 40 minutes for free. Subscribers get 30-hour calls, cloud recording, and other benefits. Similarly, Dropbox offers a storage size and device cut-off for free users, while subscribers can log in on as many devices as they wish and use up to 2 TB of storage.
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Pros/Cons
Pros and cons of the subscription model
The subscription revenue model is appealing to many app verticals, but there are also challenges to consider. Here’s a look at the advantages and potential drawbacks.
Benefits of a subscription model
- Predictable revenue: One of the main advantages of a subscription model is its ability to generate a steady, predictable revenue stream. Since customers pay on a recurring basis, businesses can somewhat anticipate monthly or annual income, which helps with financial planning and stability.
- Enhanced user retention: A subscription model fosters ongoing relationships with customers, focusing on retention rather than one-time sales. By consistently delivering value, businesses build loyalty, making it more likely that customers will stay subscribed.
- Higher lifetime value (LTV): Since customers pay regularly over time, the lifetime value of each customer increases. Rather than a single payment, the subscription model enables multiple transactions across a customer’s journey, boosting revenue and growth potential.
- Upselling opportunities: When offering different plans and tiers, businesses can tap into upselling. For example, companies can encourage subscribers to move to higher-tier plans by providing premium features, creating opportunities to expand revenue per customer.
- Scalability: Once the infrastructure is in place, it’s often easier to expand the customer base without significantly increasing costs, particularly for digital services and SaaS.
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Drawbacks of a subscription model
- Over-saturation: While customer retention is a key benefit of subscription models, a growing challenge is the increasing prevalence of subscription-based services. With so many products and apps adopting this model, consumers are becoming more selective about which subscriptions they keep. Subscription fatigue can lead to higher churn rates as users reassess the value of each subscription and cut down on non-essential ones. Consequently, retention strategies that emphasize unique value and continuous engagement are more critical than ever to counteract this trend and maintain stability.
- Initial setup: Setting up a subscription business requires investment in an automatic billing infrastructure and customer support for billing issues.
- Need for continuous value: One reason why subscription models work is that they promise ongoing value. However, this can also be a challenge, as businesses must regularly update, improve, or expand their offerings to justify the subscription. Failing to deliver fresh value can lead to customer dissatisfaction and cancellations.
- Customer acquisition costs: Subscription models often rely on introductory offers, free trials, or lower-cost plans to attract subscribers, which can increase acquisition costs. To justify the initial expense, it is essential to ensure that these customers convert to paid, long-term subscribers.
Balancing these factors with your business needs is key. Subscriptions can be highly effective as a recurring revenue model but may work best when integrated alongside other monetization methods. By evaluating how subscriptions complement your overall strategy, you can create a model that maximizes growth while addressing potential challenges.
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Getting started
How to set up a subscription service: 3 key components
If you’ve evaluated the pros and cons and decided that a subscription model aligns with your business goals, the next step is setting up a successful strategy.
1. Identify a subscription business idea and model
The first step is to determine how a subscription can add value to your existing app, aligning with your users’ needs and preferences. Consider which aspects of your app could benefit from recurring access or continuous engagement.
Here are some examples of value-adding features:
- Exclusive access to new features
- Ad-free experience
- Monthly or seasonal rewards
- Personalized recommendations
- Early access to content, events, or other features
- Progress tracking and insights
- Access to premium content
- Priority or dedicated customer support
- In-app currency or points
- Special discounts and offers
- Access to beta testing of new features
Understanding your audience’s needs within your app’s context will help shape a subscription that feels like a natural extension of your core offering, driving both recurring value and user loyalty. From there, you can select the type of subscription that fits your needs and a corresponding pricing model.
2. Create the subscription UX design
A smooth, intuitive user experience (UX) design is essential for acquiring and retaining customers. Focus on creating a user experience that makes signing up, managing, and renewing subscriptions easy. Elements of effective subscription UX include:
- Simple onboarding: Ensure that the sign-up process is straightforward, with clear steps and minimal friction.
- Easy subscription management: Users should be able to easily upgrade, downgrade, pause, or cancel their subscriptions from their accounts, giving them control over their subscriptions.
- Personalized experience: Use data to personalize content or product recommendations within the subscription, enhancing user engagement and value.
- Clear value proposition: Clearly communicate the benefits of subscribing versus one-time purchases, emphasizing convenience, cost savings, or exclusive access.
- Visible upgrade path: For freemium models in particular, make it easy for free users to find the option to subscribe or upgrade. Place “Subscribe” or “Unlock premium” CTAs strategically throughout the app while highlighting the added value of the subscription.
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3. Find an appropriate billing platform for your chosen pricing model
Choosing the right billing platform is key to automating payments and handling renewals seamlessly. Popular billing platforms like Stripe, Recurly, and Chargebee offer tools for managing recurring billing, handling multiple payment options, and tracking revenue.
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Marketing
How to sell subscriptions with subscription marketing
To attract and retain subscribers, it’s best to employ a variety of strategies that showcase the value of the offerings and incentivize commitment. One of the most effective tactics (and thus quite common) is the free trial. However, there are other powerful strategies that can complement or even enhance the appeal of trial periods. Here’s a look at some of the most effective subscription promotion strategies.
Free trials
Subscriptions with free trials give potential subscribers the opportunity to explore the product’s features and benefits without the risk of an immediate financial commitment. Free trials can significantly increase conversion rates by letting users experience the value of the subscription firsthand.
Effective free trials often:
- Provide full or limited access to premium features
- Last for a specific duration (e.g., 7, 14, or 30 days)
- Include reminders to encourage conversion before the trial ends
However, to maximize success, clear communication during and after the trial period is important, helping users see the ongoing benefits of subscribing. Consider offering a brief cancellation survey for users who choose not to convert, as this can provide valuable insights into potential barriers, such as pricing.
If price sensitivity is a common reason, offering monthly and annual pricing options—with a discounted annual rate—can make subscriptions more accessible. Health app Down Dog, for example, actively communicates with users about budget constraints, adjusting pricing to better meet their needs.
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Discounted welcome offers
Discounted introductory offers give new subscribers a reduced rate for their first billing period, such as the first month or even the first year. This strategy is particularly effective for users who may be hesitant to commit to the full price right away. By lowering the initial cost, companies can encourage more users to try the service, and if they find it valuable, they’re more likely to stay on at the standard rate.
Loyalty rewards and referral programs
Loyalty rewards or referral programs can add value and increase engagement. Loyalty rewards can include discounts on future billing periods, free items, or access to additional features.
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Referral programs, on the other hand, incentivize current subscribers to recommend the service to friends or colleagues by offering perks such as free months, discounts, or bonuses for successful referrals. This helps expand an app’s subscriber base.
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Multi-user subscription discounts
Offering multi-user or family subscription discounts can significantly boost the perceived value of a subscription by allowing multiple users to share access at a lower per-person cost. For instance, Duolingo offers a Family Plan that lets subscribers share all the benefits of Super Duolingo with up to five family members or friends. A multi-user plan can be a more valuable and engaging solution while increasing acquisition and retention.
Price calculations and comparisons
Demonstrating the value of a subscription through price comparisons and breakdowns can be a highly effective way to attract subscribers. For example, showing the cost per week for an annual subscription can make the price feel more manageable and highlight its affordability. Additionally, displaying the total savings between an annual and a monthly plan—such as “Save 30% with an annual subscription”—can reinforce the value of a longer commitment.
Comparing the cost of a subscription to a familiar household expense, like a daily coffee or a monthly phone plan, also helps contextualize the price. For instance, “Enjoy full access for less than the cost of your daily coffee” makes the subscription seem like an affordable and justifiable choice.
Use marketing psychology
Integrating strategies like scarcity and social proof can be powerful tools in subscription marketing. Scarcity creates a sense of urgency by highlighting limited availability or time-sensitive offers, prompting users to act before they "miss out." For example, displaying a message like “Only 3 days left to subscribe at this rate” or “Limited spots available” can encourage quicker decision-making, especially if users believe the opportunity is fleeting.
Social proof, on the other hand, leverages the influence of others to increase credibility and perceived value. Showing subscriber counts, testimonials, or user ratings on your subscription page can make potential subscribers feel confident in their choice. For instance, a message like “Join over 100,000 satisfied users” or featuring real testimonials from current subscribers helps build trust and makes the subscription feel like a smart choice.
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The most effective subscription growth strategy combines several of these approaches, tailored to your audience and industry. For instance, pairing a free trial with a discounted introductory offer can attract a broader audience, while loyalty rewards and referral incentives keep current subscribers engaged and encourage them to advocate for your service.
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Anayltics
Measuring success with subscription analytics
Effectively measuring a subscription model's success is essential for understanding user behavior, optimizing campaigns, and ensuring sustainable growth. However, collecting and unifying subscription data across multiple platforms and touchpoints can be difficult. Adjust’s Subscriptions solution addresses these challenges, providing comprehensive insights and centralized data to help developers and marketers measure, analyze, and improve their subscription models.
The complexity of a subscription model—differing user actions, payment methods, and platform lifecycles—makes centralized measurement critical. Subscriptions by Adjust unifies subscription data across platforms, providing a seamless way to monitor in-app events, payment statuses, and lifecycle milestones. Real-time event measurement captures and reports on events including trials, renewals, pauses, and other stages in the subscription lifecycle.
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Adjust’s 17 predefined events cover crucial activities, from activations and cancellations to revenue validations, providing accurate and comprehensive data to make informed decisions. By leveraging these insights, app marketers and developers can focus on strategy rather than data processing, optimizing their time and resources.
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Key subscription business model metrics
To drive growth, it’s essential to focus on relevant subscription metrics that measure performance across acquisition, retention, and revenue:
Customer lifetime value (LTV): Understand a subscriber's full revenue potential to gauge the success of acquisition and retention strategies.
Retention rate: Data across subscription stages—trial, conversion, renewal—offers insights into how well your app retains subscribers over time.
Churn rate: Identify patterns and reveal areas to improve engagement or address price sensitivity.
Average revenue per user (ARPU): Reveal user value and app profitability to understand how effectively the app is monetizing its user base.
Trial conversion rate: Understand how effectively free trials convert to paid subscriptions to optimize acquisition strategies.
ROI and ROAS: Assess campaign profitability with return on investment (ROI) and return on ad spend (ROAS) insights to help.
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Adjust also offers the following subscription metrics for subscription events in the Datascape dashboard:
We also provide the following subscription revenue metrics:
Learn about additional insights Adust provides, such advanced cumulative and non-cumulative subscription cohort metrics.
As subscription models and subscription-based app monetization continue to shape the mobile landscape, they offer a promising path to steady revenue and stronger customer relationships for apps across industries. By selecting the right type of model, pricing strategy, and value offerings, apps can foster ongoing engagement and loyalty among users. However, with the growing prevalence of subscriptions, it's crucial to balance convenience with clear value to avoid subscription fatigue. Leveraging data-driven insights allows app marketers to continually refine their strategies to optimize revenue and retention, creating sustainable growth in today’s subscription-driven economy.
Ready to start measuring your subscription revenue? Request a demo to see how Adjust can scale your growth.
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