For subscription-based apps looking to increase their subscription conversion rates and maximize the value of non-paying users, reaching users in the right context is critical. That’s where segmentation comes in. In its essence, segmentation enables app developers to make the app experience more relevant to the user and to provide them with a better way to engage and be loyal. If you use segmentation wisely, there’s more chance that users will appreciate what’s in front of them and subscribe to the app. So, how do you get started?
What to do before you start segmenting
Segmentation requires understanding your app’s LTV as well as user engagement with your app’s core events across different groups of users. Your goal is to find the sequence of in-app events that leads to your desired result (such as a subscription) for each group of users.
To get started, you need a reliable tool to gather information on engagement with your in-app events, which will help you determine which touchpoints matter the most for hitting your KPIs - typically LTV. Ultimately, without reliable information, you could be looking at events that have little effect on your LTV, which makes differentiated messaging based on segments a waste of resources. It’s worth noting however that while high LTV is the top goal, you can also build segments with specific events that improve other KPIs, such as growing D30 retention or engagement.
Careful analysis is even more relevant when taking into account that there are infinite combinations of app events, making imitation nearly impossible. For example, some apps keep track of the install event, free trial event, first month subscription, second month subscription, and churn. Other apps track first usage, engagement with an ad, subscription, and churn. Within the events, you can determine which features matter more by looking at engagement. For example, for a photo editing app, social sharing could be more critical than editing a photo, which you probably wouldn’t have guessed without analyzing.
Equipped with this information, you can determine where your app may be falling short and where additional customization is necessary. By analyzing each event and feature in your app and how they impact your LTV, you’ll be able to make informed decisions about where to focus your segmenting efforts. For example, a photo editing app may analyze and identify a correlation between type of photo filters used and frequency of subscription - eventually finding the sequence of events for each photo filter that leads to the highest probability of subscription.
With a deep understanding of where you could be doing more to monetize users and improve your LTV, you can work on tailoring the in-app experience to different segments, maximizing your performance. Let’s look at some ways you can segment your app.
3 ways to segment your app
There are many ways to segment your app in order to increase overall revenue and subscriptions. Below, we dive into three to get you started.
1. Acquisition source
You should treat a user acquired organically and a user acquired through an ad differently in your app. Think about it this way - do your expectations for a restaurant differ if you found it through a TV commercial as opposed to just wandering in? Assuming the answer is yes, the same is true for users entering your app - they’re going to have preconceived notions about your app if they downloaded it from an ad, meaning their experience should be different.
If your goal is to convert more users to subscribers during onboarding, for example, segmenting by acquisition source should be one of your top priorities. If the user was acquired through a playable ad, you can assume they’re already informed of your app’s core functionalities and value. This means you don’t need to, and it may actually hurt the user experience, to onboard these users heavily. On the other hand, users acquired organically are going to know very little about your app and may need a more comprehensive run through. By creating unique onboarding experiences based on acquisition source, you’re setting yourself up to see more conversions to subscriptions and long term revenue from non-premium users. Read our blog about how to perfect your onboarding experience.
You can also offer different subscription pricing to users depending on acquisition source. While there are no universal best practices for how to adjust pricing for paid vs. organic users, you are “leaving money on the table by not changing subscription offers and upsells based on acquisition source,” according to Andy Carvell, CEO and partner at Phiture. Ultimately, you can see immense revenue growth customizing pricing early in the user journey, and you can master it through A/B testing.
Once the user is acquired and if they don’t convert to a subscriber early on, it’s important to look at early-stage predictors of conversion and segment users based on their probability to convert.
2. Probability to convert
Trying to find out the sequence of events that often lead to subscriptions, as discussed above, is valuable to determining probability to convert. Looking at user engagement with your post-install events, you can get a better idea of the interactions that often result in a subscription event. With this information, you can segment users by probability to convert and tailor the app journey to keep high probability users on a path to subscription.
For example, let’s say that you know that 30% of your users will convert after using a specific photo filter 3 times in a 7 day period. This means that a user who uses the filter once is already on a path to becoming a subscriber and you want to keep them on that path. First, with A/B testing, you can determine the sweet spot between showing too many or too few ads for this segment. Second, you should encourage use of the high converting feature by ensuring it’s highly visible on the home screen or giving it a spotlight appearance. Last, when a user has already tried the filter 3 times, you can place it behind the subscription wall, encouraging users to convert to continue reaping the benefits of their favorite feature.
The goal here is to understand the sequence of post-install events that often lead to subscriptions, which allows you to segment users based on their probability to convert. With this information, you can ensure you’re doing everything you can to keep users on the path to subscribing without pushing away those low probability users that still bring value to your app through ad monetization. For the non-paying users in your app, you can segment by ad engagement.
3. Ad engagement
Finally, you can segment users based on their level of engagement with your ads. Ad engagement is a critical event in the app flow that can either drive conversions or churns, which means it’s incredibly important to choose the right ad journey for each segment of your app.
Based on the users’ probability to convert, you can determine ad frequency for each segment. For users who are not on a path to convert to subscribers, it’s safe to say you can show them more ads, especially rewarded ads that will give them access to content that is locked behind the subscription wall. Once these users are exposed to premium features, they’re also more likely to convert to subscribers. Learn how to maximize user value with rewarded video. For users on a path to convert, it may be better to show ads that won’t drastically interrupt the user experience like banners or MRECs. You don’t want to drive high probability to convert users out of your app.
You can also analyze whether there’s a correlation or causation between ad engagement with rewarded ads, such as rewarded video and offerwall, and probability to convert. A/B testing is the best way to ensure you have found the right balance for each of your segments.
Segmentation is crucial to ensuring you’re squeezing the most value out of each of your users. That said, you don’t want to segment to segment. Analyze your events closely to find your problem areas and begin segmenting by acquisition source, probability to convert, and ad engagement to start boosting your revenue.