There are several monetization strategies now being tested by vendors who are introducing new mobile apps. Some vendors try freemium with third party ads, others require a payment before an app downloads, and still others may have installed in-app purchases. And there are many hybrids.
When building a mobile app the big question is no longer “How much are you going to charge for it?”, but “How are you going to monetize it?” Vendors need to give this matter serious thought before they build it. Otherwise resources that should be used improving a product might be wasted writing the lines of code to monetize it. Ironically, this often lessens the value to the user.
At Kachingle, our marketing strategy for selling apps is to bundle them together. We bundle apps that are complementary to each other, sell them in a single offering, and at an enticingly attractive price. We ensure that the value in the bundle will be irresistible to customers.
Bundling is a marketing strategy with a long history of successes and it is widely used today in selling cars with luxury and sport packages, with cable TV channels, with tool sets, with cosmetics, and so on. It is also used by big software companies like Microsoft and Adobe who, because they have so many products are able to create one-company bundled offerings.
Bundling is tried and true, but more importantly, it has special implications for cloud supported software. When product costs are marginal, and the value of an offering can be increased easily, full advantage should be taken to make the offering more attractive. Studies have shown that bundling increases the total dollar amounts of sales. If you don’t use bundling, and your product’s costs are minimal, you are leaving money on the table.
Our business model is simple. We have a robust usage-based micropayment platform that is capable of collecting and distributing monies in a myriad of different ways. We collect subscriptions from bundle subscribers and distribute 85% to the app vendors. We distribute the funds in proportion to how much an app was used. This, we believe to be the most fair. The popular apps will get more money, and they should. (The distribution algorithm takes into account factors such as intensity of interaction, list price, and other variables.) Included in the 85% vendor’s share is a vendor customer acquisition bonus. This is the extra money a vendor receives over the lifetime of a customer that they has bring in. It is the vendor’s reward for bringing that subscriber into the bundle. Kachingle retains 15%, and we pay all the financial transaction fees (e.g. PayPal, credit card, etc).
The Kachingle platform is versatile and includes other parameters besides usage in determining how funds are distributed to create a fair distribution of subscriber revenue.
With all the value packed inside a bundle more users will find reasons to sign up than if only one app was offered. Churn rates will be lowered and vendors can concentrate on product development. Vendors are not restricted or limited from selling their apps outside of the bundle. An app a vendor might sell for $2.99/month may only net the vendor 50 cents/month when bought in a bundle. But if the conversion rate is high, the total revenue can be substantially higher. (Note – we have built a sophisticated financial model for vendors that takes into account variables; e.g. price, conversion rate, etc.)
In reality, Kachingle’s bundling of apps is much like a co-op. The vendors bring their wares to market and they get paid based on what sells. They are in competition with each other and yet they are all partnering together for common success.
The advantages for customers are pretty obvious; they get 10 or 15 or more apps for the price they would have had to pay to get only several of them. A one-time sign up and single monthly payment are also pluses. And there is no worrying about any app, sometimes forgotten, going unused and unnoticed yet paid for on a bank statement. Even apps that are used infrequently now become attractive to customers, since they are part of a very attractive bundle.
Further, with such a great offer, potential customers will be compelled enough to make the leap from free to paid. Jumping over “the penny gap” and becoming a paid customer is the toughest obstacle to overcome in making a sale. Once a user becomes a paid customer the user/vendor relationship is changed. A paying customer is easier to upsell and more likely to buy other products from that vendor. Even freemium apps have to overcome the penny gap.
“What are other advantages for vendors?” Well, we actually solve some of the biggest problems vendors face when they build and market apps.
Problem: ”What code do I write to monetize my app?
Solution: None. You only need to integrate with our simple API and that can be done in less than a day.
Problem: ”What do I charge?”
Solution: Don’t give it a price. In a bundle the app is not free but it does not have a price either. Your app’s value is different for each subscriber and you are paid based on each subscriber’s usage of your app.
Problem: “How do I get exposure?”
Solution: Every vendor in the bundle will help promote your app and feed the funnel. The bundle is what the vendors are selling and they will choose to feature your app prominently if it helps to show value and increases conversions from free to paid.
With Kachingle, virtual partnering is possible. A big obstacle of partnering is the paperwork and formal documents that must be signed by two partners in a co-marketing agreement. This often is time consuming, expensive, and an inflexible agreement. Products change and so do market conditions. To be a virtual partner in a bundle, a vendor only needs to partner with Kachingle.
Virtual bundles are also available to users – subscribers can create their own unique personalized bundle by purchasing a set of app points.
Our customers are the vendors. Vendors retain full ownership of their customers.
We are reaching out to vendors of all types of apps.
Kachingle sponsors the Freemium SF Bay Area Meetups. Our Freemium Meetups are an exciting exchange of ideas and information on monetizing apps. It is a great place to meet other developers. Vendors come to listen to our terrific speakers and discuss how to make money. What works, what doesn’t, and what is new. Mobile app vendors are especially welcome and we plan to have some upcoming speakers who will address the specifics of monetizing Android and iOS apps. All presentations are archived and a full videos available for those who are unable to attend in person.
Kachingle is a startup company with high hopes that its bundling platform will revolutionize the way apps are sold. We expected to have our first bundle targeted at consumers. But, surprisingly, most of the vendors approaching us were from small businesses. We now have several major business software companies eager to use our platform. Our initial API is available for PC and Web apps. We also have lots of interest from mobile app vendors. We are building the APIs for Android now and expect to offer them within a few months. In the meantime all mobile app vendors can try out the demo bundle at www.kachingle.com and review the API documentation in the section for developers.