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Value creation is the foundation of a successful app business. It involves creating a product that solves a real pain point for customers and has strong product-market fit. Companies can achieve this by conducting tests, such as the 40% test, to determine how many users would be very disappointed if they couldn't use the app anymore. Additionally, identifying clusters of users with specific needs and filling those gaps can expand product-market fit. Examples include Quizlet expanding into homework help or Matter offering readable podcast features.
In the highly competitive app market, it's crucial to quickly demonstrate the value of the app to users during onboarding. Effective onboarding focuses on removing unnecessary noise and frontloading key value points to bring users to the aha moment as quickly as possible. It is important to show, not just tell, users why the app matters and how it can benefit them. Examples of successful onboarding range from minimal screens with clear messaging, like Reflectly, to immersive onboarding experiences, like RISE that simplifies complex problems.
Repeatable value ensures that a subscription app can provide ongoing value and retain users over the long term. This is particularly crucial for subscription businesses where ongoing user retention is vital. Content-based apps can achieve this by regularly offering new content that keeps users engaged. Tools-based apps, on the other hand, focus on delivering new functionality and uncovering fresh insights, keeping users connected to the app. Understanding the cyclical patterns of user engagement and expanding value promises during key periods, such as back-to-school seasons, can further enhance repeatable value.
Remarkability emphasizes creating a product that generates organic conversation and word of mouth. While viral growth isn't the only metric, having a unique and compelling product that users want to talk about is crucial. Consumer subscription apps often benefit from different types of word of mouth loops, such as personal viral loops, social viral loops, financial viral loops, or casual contact viral loops. Building a dedicated community of loyal users who engage in offline word of mouth is also instrumental in sustaining long-term retention and growth. Notable examples of remarkable apps include Tinder and Strava.
Value capture is a crucial step in the subscription value loop, where companies need to find the right balance in capturing and delivering value to customers. Effective value capture ensures the sustainability and profitability of a business. It involves understanding the willingness of customers to pay and aligning prices accordingly. Companies can use tools like Van Westendorp analysis and conjoint analysis to determine optimal pricing strategies. Additionally, alternative payment methods, transparent purchase flows, and thoughtful cancellation flows are essential for successful value capture.
Promotions and pricing play a significant role in capturing value from customers. Thoughtful promotional strategies, such as activity-based discounts and geography-based pricing, can better align the value of a product with customer willingness to pay. Promotions are not just about generating immediate revenue; they also build trust and customer satisfaction. Pricing is a critical lever in value capture, and companies should use tools like Van Westendorp analysis and conjoint analysis to determine optimal price points. By finding the right pricing and promotional strategies, companies can meet customers' expectations and capture more value.
For consumer subscription apps, maximizing value capture involves understanding the unique dynamics of the market and aligning pricing and promotions accordingly. This includes considering alternative payment methods that are preferred by customers in different regions. Companies should also focus on providing transparent purchase flows and optimizing cancellation processes to maintain trust and customer satisfaction. Thoughtful promotions and pricing strategies, based on customer behavior and demographics, can help meet customers where they are and capture maximum value. By implementing these strategies, companies can improve subscriber conversion, revenue, and overall business sustainability.
On the podcast: Phil's Subscription Value Loop framework, what it means to create robust value for customers, and why A/B testing shouldn't be your first step in price optimization.
Top Takeaways:
📈Quantitative growth models can help inform your growth strategy. These models are built around key user actions and growth loops incorporating variables like acquisition, retention, and monetization. They serve not just to align the company around common growth objectives but also as a tool to identify strategic leverage points for driving user and revenue growth.
📲The subscription value loop can model successful consumer subscription apps. This loop, devised by Phil Carter, is a framework for consumer subscription apps that focuses on value creation, delivery, and capture. It identifies the most impactful areas to allocate resources, aiding in decision-making for product development and marketing strategies. It emphasizes the importance of balancing value creation for the user with the business's need to capture value, ensuring a sustainable and efficient growth model.
🔁The 4Rs of value creation — robust, rapid, repeatable, remarkable — emphasize creating a product that solves real customer problems with strong product market fit, delivering value quickly, ensuring long-term engagement and value through repeatable benefits, and being compelling enough to spark word-of-mouth promotion. This framework guides in developing products that not only meet immediate user needs but also maintain their relevance and appeal over time.
💲Value delivery is efficiently connecting users to your valuable product. The playbook of relying on paid marketing to acquire users no longer works, due to increased app store competition and reduced efficiencies caused by ATT. The healthiest subscription app businesses are built on a robust organic acquisition strategy as a foundation, where paid ads are supplementary.
🎯The 5Ps of value capture — paywall, pricing & packaging, payments, promotions — focus on the strategic elements crucial for monetizing a subscription app. Paywall strategies should, as well as adopt general best practices, be tightly aligned with the nature of the app; pricing & packaging perhaps offer the greatest leverage for later-stage apps; payments is about an awareness of alternative payment methods and ensuring you have a clear and transparent payment flow; and promotions should be thoughtful and targeted.
About Guest:
👨💻Founder and CEO of Elemental Growth, an advising consultancy focused on helping app businesses unlock their potential.
🔁 Phil developed the Subscription Value Loop, a framework for understanding how to maximize growth in consumer app businesses.
💡 “If you don't have a repeatable value prop that can sustain long-term retention, and your primary growth loop is paid ads, that's where you see a graveyard of companies that have just completely failed.”
👋 LinkedIn
Links & Resources:
Companies Phil has helped:
Episode Highlights:
[0:44] From consultant to growth guru: Phil’s journey into the subscription growth world began with mission-driven app businesses like Quizlet.
[5:25] What you need to know to grow: Any quantitative growth model will be “wrong”… but you’ll learn so much building one, you should still do it.
[8:30] The Subscription Value Loop: A framework for identifying product-market fit, building a remarkable solution, and investing profits into shoring up your competitive advantage.
[13:48] The 40% rule: Determine product-market fit by how disappointed customers would be if they could no longer use your app.
[23:05] Perfecting the elevator pitch: A great app onboarding experience is snappy, immersive, and packs a punch.
[33:32] Avoid churn: Build repeatable experiences designed to bring users back again and again.
[38:24] Go viral: Find out how to get and keep your users talking.
[45:37] Organic is healthier: In today’s crowded (and post-ATT) app stores, paid ads can’t realistically be your primary growth lever.
[50:22] Keep the engine running: Balancing how much value you capture versus provide can be a challenge — especially when it comes to free users.
[1:11:12] The price is right: How to determine the optimal packaging and pricing for your app.
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