Age Is A Factor
The willingness to spend money on subscriptions per month ranges drastically between age groups. Among users in their 20s and 30s, subscriptions are more popular than ever, with most millennials paying for at least one app subscription in the last six months. As it turns out, millennials are more likely to pay for streaming media and entertainment services than any other type of app. This may be because they're more likely to value their digital experiences as being part of an experience that includes social elements. Millennials are also more likely to pay for apps that have a mobile-first experience. This can range from dating apps, social media, or any other app that allows them to connect with others.
In a recent study, users were asked how much they would pay per month to access all the apps they use. In most cases, users were willing to pay anywhere from $0-50+ per month for all their app subscriptions combined. This is significantly higher than the average subscription costs reported by Nielsen (less than $8/month).
This finding suggests significant room for growth in the subscription market for both consumer and business apps. Additionally, it seems that some types of apps may be more amenable to subscription models than others. For example, users showed a high willingness-to-pay rate for entertainment services and streaming video services but not productivity apps such as dating apps or music streaming services like Spotify.
This makes sense since younger generations tend to be early adopters; they're more likely to have tried a subscription model before and become comfortable with it. As time passes and people get used to paying a fixed fee upfront each month (or annually), they may be willing to pay even more than they currently do.
Finding That Sweet Spot
Aside from the fact that users are willing to pay different amounts based on their age range, they also consider the number they're presented. For example, a monthly subscription fee of $5 is going to be far less of a weighted decision than $25 and up would be. When users can liken the cost to their daily Starbucks or a gallon of gas, it's easier to hook them and keep them paying each month. For many apps, though, a $5 monthly subscription fee simply won't cut it as far as desired revenue is concerned.
Fortunately, there is a middle ground that seems to appeal to the majority of app users. A mid-range monthly app fee lies in the $7-$20 range. These numbers are still able to generate a substantial amount of revenue without intimidating users. Many subscription apps, like Netflix and Hulu, land right in this range and are visibly excelling at their craft. At this cost, the subscription becomes mindless to many. 42% of people actually forget about recurring subscription fees that they pay. This is a testament to how unbothered they are by these relatively low numbers.
The key to retaining customers each passing month seems to lie in the ability to opt for a price point that is equally profitable and reasonable. When users can easily rationalize their monthly subscription spending, they're far less likely to cancel it on a whim. Even if their goal is to cut spending and save money, a low enough price point will keep the subscription from being at the forefront of their mind.
