In the realm of subscription apps, the freemium model promises continuous user insights, a competitive price structure, and scope for app optimization at pace.

A familiar question for mobile marketers is what features should be free, what should lie behind a paywall, and how to determine pricing. This article explores how user surveys and pricing models can help freemium apps identify mobile app value drivers and willingness-to-pay of their users in order  to optimize subscription plan packages and pricing. 

 

Listen along to the article with an AI-generated narrator. 

Challenges of the subscription model

With freemium apps, users have the opportunity to explore and experience a product by accessing features for free without financial commitment. However, to benefit from advanced functionalities, users need to pay for a subscription.

The freemium model serves as a powerful marketing and user acquisition strategy, providing potential subscribers with a sample of what the product offers. Users are subsequently encouraged to upgrade to a premium version to unlock additional features or enhanced benefits. When unlocking key features and functionalities within the app, users must feel that the paid experience delivers substantial added value that contributes to an enriched user experience overall. The price required to access the premium experience is the measurement of that added value. On the developer side, there are opportunities to foster user retention and drive continued revenue.

Despite its advantages, the freemium model also presents challenges, such as determining which app functionalities should be made available for free and which ones should be reserved for paid access. How then should freemium apps make this distinction, and how can they find a balance between staying competitive and without giving too much away? 

We witnessed this challenge when the New York Times switched to a $15 monthly subscription in 2011. The paper continued to offer free access to 20 articles, which ultimately diminished the attractiveness of the paid plan. Finding the right balance for a subscription-based app becomes crucial, as it entails creating a free experience that attracts new users while offering an attractive premium experience. 

Once you know how to package your subscription, it’s crucial that you set a competitive price for potential users. Finding the right price point requires sensitivity toward a variety of personas, but also an understanding of their willingness to pay for access to certain features. The subscription price must be reasonable as you risk either alienating potential subscribers or sabotaging future revenues.

When it comes to understanding how to package your subscription plan, which features to incorporate, and what pricing models to implement, there are tools that can inform your decision: market research and competitor analysis, A/B testing, analytics, and User Feedback and Surveys. A combination of these tools will provide you with accurate solutions. With all of this taken into consideration, the following section will focus on mapping value drivers and capturing willingness to pay through user surveys. 

 

Identifying your app value drivers using a MaxDiff questionnaire

The MaxDiff survey approach aims to identify the product features or benefits that are most valued by users, and to pinpoint the value proposition that best aligns with their specific use cases. These insights are essential for structuring your various subscription tiers and offering an appealing package.

From an analysis standpoint, this scale enables you to create a comprehensive report that considers each feature individually. It aggregates the relative preference magnitude on a scale ranging from -1 to 1. The aim is to create a scale of value for different features. 

 

Example of MaxDiff question

 

In the question above, users are asked: “Which features do you value the most and the least?” Other formulations are conceivable, as long as they allow a clear differentiation in terms of values. For each of the features #1, #2, and #3, users have the choice between two opposite options. 

 

To analyze the results, the calculation is quite simple. You calculate the number of times a feature was selected as ‘most important,’ minus the number of times the feature was set as ‘less important,’ divided by the number of times the same feature appeared in the responses.

Average Feature Value Perception graphic.

 

The closer the value is to -1, the less importance users attach to the feature. The closer the value is to +1, the more important the feature appears to be to users. 

Once this data is available, it becomes possible to determine the features that should constitute a premium plan. Exclude features that don’t add sufficient value, while not necessarily including all of the most valued features. The freemium plan must remain attractive to retain users. 

 

Identifying user willingness to pay with Van Westendorp’s model

The Van Westendorp pricing model is a survey technique that identifies the user’s sensitivity to price in order to understand their willingness to pay to access particular features. 

Using a set of four questions, this technique plots a graph that gives a price range that seems acceptable for paid access to the product. For a freemium app, the four questions can be as follows: 

  • Too Expensive: At what price would you consider the premium subscription to be too expensive and you wouldn’t buy it? 
  • Expensive/High Side: At what price would you consider the premium subscription to be getting expensive but you would still consider buying it?
  • Cheap/Good/Bargain Value: At what price would you consider the premium subscription to be a bargain and you would definitely buy it?
  • Too Cheap: At what price would you consider the premium subscription to be too cheap and you wouldn’t trust it?

 

Price information can be left to the discretion of users or a range of prices can be suggested. It may be also interesting for an app to ask which price sensitivities it should be evaluated against, and whether this is a potential monthly or yearly subscription price. Different parameters can be taken into account: LTV, popularity, acquisition, etc. 

This survey technique should only be used on free users. You can understand the willingness to pay or to renew subscribers by analyzing their behavior. 

Van Westendorp Price Sensitivity Report. Source: Survey King

 

Once the data has been collected, it’s possible to create a line graph representing the price on the x-axis and the number of respondents as a percentage for each of the prices on the y-axis. A line is drawn to represent the responses to each of the questions from  Van Westendorp’s model. 

Key points of intersection of these lines can then be identified, and are as follows:  

  • The Point of Marginal Cheapness (PMC) is the intersection of the number of people who think that the product is “too cheap” and “a bargain.” The price of your subscription shouldn’t go lower, otherwise you risk users questioning the quality of the product because the price is so cheap. 
  • The Point of Marginal Expensiveness (PME) is the intersection of the “too expensive” and “not expensive” lines. It’s the price point where users believe the subscription cost has become  unaffordable or unreasonable, compared to how much value they’ll get. 
  • The Indifference Price Point (IPP) is the intersection of the “too expensive” and “a bargain” lines – whereby users feel the subscription is neither cheap nor expensive. Their indifference to the price doesn’t influence their decision to purchase or not.
  • The Optimum Price Point (OPP) is the intersection of the “too cheap” and “too expensive” lines. It’s the sweet spot at which the maximum conversion will happen, where users will have less resistance. This is the most favorable price for maximizing revenues.

 

The range of acceptable prices that users might consider paying for subscriptions lies between Marginal Cheapness and Marginal Expensiveness. It’s here that you’ll get an indication of how a subscription could be priced. 

 

Consider which features should be behind a paywall

The Van Westendorp pricing model is valuable for understanding the overall willingness to pay for a product. However, to create the desired final matrix for subscription optimization, you need to delve into users’ willingness to pay for individual features.

To accomplish this, you can include a targeted question in the survey, such as: “How do you feel about paying for that specific feature?” The respondents would be presented with answers that require them to make choices, ranging from being entirely willing to pay to completely unwilling to pay for access to a particular feature. Unlike Van Westendorp’s sensitivity model, this type of question can be asked to both free and premium users.

This approach is optional. It could be enough to identify value drivers and then the overall product willingness to pay. But by having more granularity in the willingness to pay, you can construct a comprehensive feature value matrix, which will be instrumental in better optimizing subscription models.

General survey considerations

There are some important prerequisites for creating effective, unbiased surveys that all surveyors must take into account. Online resources such as Qualtrics, Survey King, or Reforge are valuable sources of information but below is a list of things we have considered:  

 

Determine the focus of your research 

Carefully identify the critical aspects of your product and consider which specific features you’ll inquire about. To ensure the surveys are intelligible and the responses focused, avoid designing lengthy surveys. If you’ve already questioned your users, you can get an idea of their past level of engagement and build your survey accordingly. Stay within the scope of the research and do not mix the value driver and willingness to pay questions with another questionnaire. 

 

Consider your audience and segmentation parameters 

This step is critical for several reasons. Depending on factors such as the demographics of your users, their specific use cases, their stage in the customer lifecycle, and their level of engagement, the insights obtained can vary significantly. By adopting a segmentation approach, you can understand how different user segments perceive the value of features. It’s important to avoid mixing too many different demographics together, as this can lead to counterproductive and potentially misleading insights. The minimum segmentation should be your paid and free users, as their level of engagement and commitment already differs and the survey structure will vary. 

 

Include screening questions

Including screening questions in your survey is advised. They can help ensure the accuracy and consistency of respondent samples by identifying any potential errors or false answers. They also serve as a preliminary filter to verify that respondents meet specific criteria, or have a certain level of understanding or experience related to the survey’s objectives. By incorporating such screening questions, you can mitigate the risk of collecting unreliable or irrelevant data. This ensures that the insights derived from the survey are more robust and meaningful. For example, you can start the survey with questions with basic demographic questions, but also how long they use the app, how frequently, etc. When it comes to the features, it’s better to screen between users who don’t know about the feature in question or use it very rarely versus users who use it on a regular basis, daily, or weekly.  

 

Other considerations

Of course, avoid formulating difficult or guided questions. Keep the survey free of bias (more here). Spend time testing and reviewing the survey. The survey flow may vary from one respondent to another, for example, if a respondent doesn’t know a feature exists, you might decide to skip the value questions about that feature and go directly to the next section. 

 

Conclusion

How to cultivate a proposition that feels relevant and impossible for potential customers to overlook?

It’s a fine balance between gathering user insights from your apps and products and encouraging engagement through subscription models that generate revenue and promotion for your brand(s) and product(s). As every app developer knows, subscription models present frequent but navigable challenges. 

The key takeaways from this blog post tell us to: 

Quantify app value drivers with a MaxDiff Questionnaire 

As a means of evaluating price differentials, this method leverages users’ most valued elements against value propositions of their needs. Use this survey to structure your subscription tiers. 

Determine pressure points for user payments with Van Westendorp’s model

 How much are users willing to pay for freemium-meet-subscription apps? This technique plots user sensitivity to price implementations and indicates the point at which your target audiences are willing to pay for a range of included services.

Evaluate paywall features

A simpler, classic survey technique that shouldn’t be overlooked – implement a deep-dive into paywalled features. Find out what features should sit firmly behind the paywall, and which features are out in front attracting target users.

 

Useful Resources 

Before you go 

  • The Reach Audit Framework is for Growth Marketers wanting to understand their reach to ensure they’re connecting with more users and generating a bigger impact. This resource will help you understand your opt-in rates and benchmark them against industry standards, in order to identify possible drop-offs and opportunities to win-back users.
  • Both surveys and interviews are great tools to understand what people perceive as important. It is important to make a distinction between a user’s perceptions and their actions. In this article we show how user research can inform on why people are – or aren’t – converting into installs.
  • Dynamic pricing is the practice of having multiple price points based on a few critical factors. In this article we run you through the do’s and don’ts of such pricing strategies, and show how to set one up using Braze