A Brief Introduction To In-App Purchases

28 Apr


One challenge that almost every entrepreneur faces with his application is turning the app into a truly profitable business.

While you can always offer your app & it’s content for, for-pay basis, not everyone is going to purchase the app, as almost every application out there has a free or cheaper equivalent available.

On the contrary, giving out the app for free might seem like a decent option — but trust us, it’s a quick way to a slow death. However, this is an alternative.

The good news is, with the help of In-App Purchases, you can still give your app for free and still turn it into a money making machine.

So what are the In-App purchases, you’ll ask? How can they help you?

Let’s find out!

The Meaning Of In-App Purchases

While the In-App Purchases or IAP as some call them, may sound like cakewalk at first, they may take different forms in an app & might get difficult to implement as well.

In layman terms, IAPs are a way for your users to make purchases of virtual elements within the application, thus, In-App Purchases.

These virtual elements could be anything — from extra lives in a game, to special features and even access to premium content.

In-App Purchases: Global Statics & Trends

Well, there are more than four million apps available in both the app stores, and just 10% of them are paid apps as of January. Thus, it would be safe to say that even though paid apps seem like a good revenue opportunity, it is indeed not the most popular one.

In contrast, the In-App Purchases model is something that is dominating the market, as it offers an array of benefits to both the users as well as the owners.

The combination of the Freemium Model along with IAP works wonders. In order to generate a decent revenue from your app, you need to have a decent user base first — and the freemium model allows you to have that.

According to a report by Sensor Tower, the consumer spending on in-app purchases reached a whopping $111 billion in 2020, showcasing a mammoth 30% increase to 2019. Thus, you should focus more on IAP and make strategies about how to implement them in your app.

Types Of In-App Purchases

IAPs can be broadly categorized into 4 major categories. They are:

1- Consumable Purchases

Digital goods that can be used up and are often repurchased are commonly dubbed as Consumable Purchases. They are ideal for the users who do not want to wait for things such as credit in games to replenish.

2- Non-consumable Purchases

They refer to the purchases which a user makes to unlock special, permanent features of any application. For example, Tinder normally offers 100 swipes/day, but purchasing the Tinder Gold feature unlocks unlimited swipes.

3- Self-Renewable Purchases

They are generally used to grant access to services or the regularly updated content on any platform such as Music, Video Content & News. This type of purchases renew automatically every month, until cancelled by the users. Spotify, Netflix, Apple Music are some common examples.

4- Non-Renewable Subscriptions

This kind of purchases offer a limited access to content & they must be renewed by the users manually. However, these purchases may be similar to the consumable purchases, only distinction being they can be used across devices.

The Pros & Cons Of In-App Purchases

IAP can be really beneficial for a business if used properly. Below are some of it’s key advantages.

Advantages Of In App Purchases
Enhances The Overall User Experience

In-App purchases play an essential role in bumping up the overall user experience of the application.

For example, in a game like PUBG, players need UC (an In-App Currency which they need to purchase) in order to speed up the game and purchase virtual elements such as clothes and skins.

Thus by making such purchases, not only they enjoy the game a lot more, but they get even more hooked to it.

Attracts More Customers, Since The App Is Free To Download

In order to earn a massive profit, it is important to have a large number of active downloads of your application — and a freely downloadable app lets you achieve that easily.

The ‘free’ tag keeps attracting more and more users, keeping the number of your app downloads always increasing.

Generated Massive Revenues

The profit margin is pretty high with this business model we must say. And the reason for this is the deeper app engagement which a user builds with your application.

Moreover, when making In-App purchases, the user does not have to fill any lengthy forms. It is a simple process which enhances the satisfaction of the user manifolds.

Disadvantages Of In App Purchases
Needs A Large User Base To Actually Deliver Profits

First & foremost, the biggest issue with In-App purchase is that they require a massive amount of pre-existing user base, to make it a success. Thus, rigorous user-acquisition efforts are needed by the company, which can be both — daunting and expensive at the same time.

Demands Extra Development Work

In-app purchases increase the workload of the developers and the implementation requires a bit of extra steps in the development process.

Here the developer would be required to write code for not just the storefront but for all the items, upgrades & all other other possible instances which could occur while purchasing the elements.

Strategies To Encourage In-App Purchases

Mentioned below are some of the best strategies that you can employ to encourage in-app purchases by your users.

Target The Right Audience By Analyzing Their Behaviour

The customer data is the foundation for every good marketing strategy.

The behavioural data of your audiences will help you target them on the basis of demographics, their choices, preferences and a lot more.

Thus, rather than bombarding your users with a number of discount offers, it would be a good idea to first check who all are actually interested in buying what you have to offer.

So, analyse how they use the app and only then offer your in-app purchase’s offers.

Use FOMO; It’s Effective

70% Off – Offer Ends Tomorrow! Limited Time Offer – 23 hours left! Just 3 Left at $200 – Buy Now!

If a user sees such a message on their phone’s screen — they’re surely intrigued. And it’s the FOMO (Fear of missing out) that would compel them to finally make the purchase.

FOMO could be an effective strategy to turn your app into a profit making machine. Some of the ways you can use FOMO is by:

Creating a limited time offer for your users Showing scarcity of stocks. Offering special in-app offers
Email & Push Notifications To Drive Sales

Targeting active users is easy.

But what about the in-active users?

In such cases, eMails & Push-Notifications work wonders when it comes to boosting your app’s sales.

As per AppAnnie, push notifications can bump up your sales by 9.6 times. Thus, you must not take this strategy for granted. And be sure not to overuse it as well.

Keep Your Prices Right

This one’s pretty self-explanatory — you ought to keep the prices right.

It’s because if your prices are too high, the number of conversions may actually drop & if you keep the prices too low, then your revenue will suffer.


IAP could be something magical for you. It has the potential to turn your sales around, scale your business and take it to the next level — only if executed properly.

Feel free to contact us if you have any doubts regarding the same. Our experienced development & marketing team would help you out with any query you’ve got.