Tag: recurring revenue streams

How to Make Sure your App Services Meet Customer Needs

customer-development

If you look at app development in a simplistic way, it’s easy to end up with a rather straightforward life-cycle for an app project:

  • Win the business.
  • Work with the customer to build the app to their satisfaction
  • Get it “out the door” and into the app stores.
  • Get paid and move onto the next thing.
  • Perhaps earn some follow-up revenue if the customer comes back for changes.

Plenty of app development firms work in exactly this way, but it doesn’t take a genius to see that it’s actually rather short-sighted and reactive. It’s also a way of doing business that attracts spells of feast and famine – times scrabbling around for the next project and times when too many jobs are happening at once.

It’s actually pretty simple to adapt your app business so that you can approach things from a far more proactive stand-point. This means more revenue, happier customers, and a more consistent workload for your team, with fewer peaks and troughs.

Here’s a five step guide to better molding your services around customer needs:

1. Break free from the “job and finish” model

It may require a change in perspective, but it’s important to get away from the mind-set where an app project begins when the customer signs the contract and ends when the app hits the stores. In reality, this really isn’t the way; building an app isn’t the same as building a house.

Once you’ve broken out of this way of thinking, it will become natural to explain things to customers in the right terms. Version 1.0 of an app is just the start of the journey if the app is to be in any way successful.

 2. Explain that the project’s not over when the app is built

Once an app is live, there’s still plenty to do. Apps need promoting so that people actually use them, for a start. Then, there’s the fact that however well you’ve tested things, bugs can and will inevitably come to light once more people are let loose on the app.

It’s imperative that someone keeps an eye on user reviews and deals with support queries too, as this can help expose bugs and reveal misunderstandings as to how the app is supposed to work.

All this is just the start. The important thing is that customers understand this fact!

 3. Manage expectations regarding ongoing work

It’s one thing making clients understand that there’s more to “having an app” than building it and releasing it, but clients do need to know what to expect financially. They’re not likely to give you a blank check or an open-ended contract!

However, this doesn’t mean you shouldn’t be up-front about telling them what to expect in terms of ongoing costs. Often, companies have no problem spending money when the reason is well explained to them – what they don’t like is unexpected or unclear invoices. Or having this news sprung on them right at the end of the project. Lay it out up front for them and explain that’s just the right way to approach an app to make it succeed.

So, build app updates into your plan; tell customers how frequently they’re likely to need to issue bug-fix releases; and make clear what kind of money they’ll need to spend – not just to get the app “out there,” but to get people actually using it. One of the best approaches is to explain that you work “Lean” and that focusing first on an Minimum Viable App is the most cost effective approach, with subsequent releases prioritized around how the app is actually getting used.

This benefits all concerned: the clients know what to expect, and you lay out a long-term stream of ongoing revenue you can rely on.

4. Understand your client’s business

If you’ve read this far, it’s probably becoming clear that the general objective is to aim for more of a partnership relationship with your clients than one that’s focused around selling a one-off service.

If you’re going to make this work in the long-term, it’s essential that you really start to understand your client’s business.

This has long been a problem for techies of all kinds. IT technicians and developers “working in isolation from the business” is a frequent management complaint, and often a very valid one.

If you are able to separate yourself from this (often all-too-true) stereotype, and make it your business to learn the priorities and objectives of the companies you work with, you really will stand out from the pack. Really getting under the skin of your client and understanding their business and what they need their app to achieve will mean more trust, more work from your clients, and more referrals.

5. Proactively suggest improvements

Really, this leads on from the last point, but you cannot truly deliver here unless you first understand the business of your client(s).

Once you do, you’ll easily be able to merge your technical knowledge and your knowledge of the app marketplace with your knowledge of the customer’s company – and inspiration for app improvements will surely follow.

By keeping the ideas flowing, you will be able to ensure your clients stay focused on the ongoing development of their app – especially if you can suggest ways to boost their revenue. Ideas that are obvious to you may not occur to people removed from the app scene, so don’t underestimate the value of your inspiration.

Keeping an app business customer focused isn’t rocket science, but it is something plenty of firms get wrong. One of the easiest ways to do this is through a monthly App Report. Discussing regularly how the app is performing and suggesting areas where improvements in the app can be made is one of the best ways to drive improvements in the app, and ongoing revenue for your business.

By going back to basics and getting it right, you can form long-term partnerships that continue to please the customer AND make you money – long after version 1.0 has landed in the app store.

Further Reading

Found this useful, then these related articles could also be of interest.

Ask the Right Questions

To really understand your clients needs its about asking the right questions up front. Here’s 20 questions you should make sure you get answered up front to make sure your the app project succeeds for you and your client.

Take an iterative approach to save your clients money and time

Agile development methodology and shipping your first app as an MVP is all about getting the app into the hands of users as fast as possible and then in short time iterate the development of the app to optimize how its performing. There’s no replacement to the real world.

Push notification service – 5 easy steps to grow recurring revenue

Push Notification Service

 

In this post, we’ll explore how to get going with one of the easiest recurring revenue offerings — a push notification service for your customer’s mobile apps.

One of the biggest concerns any mobile app publisher will have is “Will my app be a success?”. And while success comes in many forms, ultimately it’s about app user engagement — getting more people using the app, more often. There’s nothing more frustrating for a client, (and for you I guess) than investing time and cash, in an app, and it becoming a “static” statistic — one the 83% of apps that become zombie apps.

As an agency, you have a great opportunity to help your clients and manage this concern. It’s your job, after all, to make sure the app you give them is a great app. In the eyes of the client greatness comes in two parts. First, an app that does the job it’s set out to do. Second, an app with a community of highly engaged users delivering the business results your client needs to get a return on investment. Many Mobile App Development Agencies focus hard on the first part, with little attention paid to helping build highly engaged users.

But you’re different. Right? You stay with your clients through the life of the app, so your clients get a better outcome from their sizable investment with you. That’s why big companies the length and breadth of the land work with you, year after year. They stay with you because you continue to offer them value, by continually helping their app perform better and better. That’s why you are special, that’s why YOU are different.

So in this blog we’ll show you one way to do this with a Push Notification Service. This is a great place to start building services that tackle that second stage of “greatness”, customer engagement, AND a perfect service to start building agency recurring revenue. A Push Notification Service lets you stay with your customers through the life of their app; working with them to building highly engaged user community for their app. Your customers win. They get a better app. You win. You build recurring revenue services that will give you a better business. A business that’s built on strong foundations of recurring revenue. A business that’s worth 8–10 times more when you come to sell.

Why are Recurring Revenue Services Important?

At Kumulos we get the chance to talk to and work with some of the largest and most successful mobile app development agencies in the world. One thing struck us a while back. Big mobile app development agencies generate a large share of client income from recurring revenue services. The question is: Do they do this because they are big? Or have they grown big because they do this? Well, we asked them. And they told us, every one of them, that building a monthly recurring revenue base for their business was the single most important ingredient in allowing them to succeed. They said it gave them the breathing space to innovate and grow, by taking the edge off meeting monthly expenses, like payroll. They said it took stress out of the decision to scale, removing some of the anxiety that they’d over-stretch themselves.

When we asked them to think back about the challenges they said the biggest problem was knowing how to get started: which services to pick, how to package them up and how to price. So to help you get started, in this blog we’ve picked a Push Notification Service. Its one of the easiest places to start and can offer real impact on the successful outcome of your clients app.

What is a push notification service and how does it help my agency grow?

A Push Notification Service is a series of campaigns driven by your mobile app agency to increase user engagement within your customer’s apps. The types of campaign you build will depend on what the objectives of the app are and where you need to make the biggest improvement, so you focus resources on the areas that will have the biggest impact on the outcome your client needs from their app.

Push Notifications are a great way to remind your client’s app users that you’re thinking of them. Push campaigns for your client’s app users should act as a discreet nudge, rather than being overly sales focused or intrusive. They are there to draw wandering app users back into the app by offering them information or something that they find useful. Push messages should also be timely, well personalized (you can do this by segmenting your audience into different groups) and highly engaging, without each message being perceived as an annoyance.

Why your customers value them so much is because they drive engagement within their user base. Users that are in the app regularly and have been in the app recently going to be highly engaged with the app. The more engaged users the better the app will perform.

So here are 5 ways you can create your first agency push notification service:

1. Start small and scale up

If you’re new to running push notification campaigns for your clients, the best thing to do is to start small, scale up gradually and use a Build/Test/Learn/Optimize approach. Many App Agencies start by working with an existing customer who has a decent sized user base, but has struggled to get that user base to engage.

Understanding the client and their app users is going to be important here, so you can build the right sort of campaign for them. Once you crack this with one client it’s relatively easy to then wrap this up in a service and offer it to the rest of your clients or to new prospects apps that you’d like to work with. Showing new customers how you can drive success for them is a sure-fire way to win that next mobile app project from them.

2. Cover all of the major push bases

This part is obviously very important. You can’t deliver great push campaigns for your clients until you have the basics covered. The good news is that there are some great quick wins when it comes to creating your first push notification service for clients.

You need to have a high percentage of your app users with Push Notifications enabled. These won’t be enabled by default by the app. They are an opt-in feature. It goes without saying that there’s little point sinking effort into running push campaigns if very few of the current app users have push messages enabled. How the app invites users to accept push messages is really important. Make sure it’s clear why this service will be valuable to them and make sure that there is a critical feature in the app that needs push enabled. A quick win here is to look carefully at the app onboarding process and see how you can improve the percentage of new app downloads that activate push within the app. Next is to see how many existing users you can get push enabled for. If there’s a new feature coming out that needs push, this is a great opportunity.

Creating user segments is a huge selling point when suggesting a push notification service to new and existing clients. The days of effective mass-marketing techniques are long gone and it’s essential that you adopt a tailored approach for each customer you work with. ‘Blanket bomb’ push messaging is grossly ineffective and leads to high push notification opt-out rates. It’s important to work with each app you develop to identify clear user segments based on behavioral traits and characteristics of their users. The segments you pick will in part be driven by the nature of the app and what your client needs to achieve. The trick is then using the right messaging to target each individual user segment.

Great push messages always possess a clear call to action (CTA). Once app users have opted in, they expect mobile marketing messages to be delivered in a highly targeted and contextually relevant manner. Avoid fluffy language in your messages and make sure that whatever action you’re asking the app user to perform, that it’s clear, concise, and most importantly, liable to deliver value for your app client. Convey urgency in your messaging and make it clear what your client is offering.

Timing is essential. Make sure you always use the right time zone and avoid waking app users up in the middle of the night. This is one sure fire way to generate eye watering opt-out rates. Using holidays or special events can also be a great way to ensure that your messages are perceived in a contextually considerate way. Timing is essential, but frequency of deployment is also crucial. Be very careful when it comes to defining push frequency. Over communicating is almost as bad as no communication at all. So strike the right balance between frequency and the relevance of the message to that target segment.

So having covered the basics of your first client push campaign, it’s time to start thinking about how you test and manage on an ongoing basis. Use split testing to create and analyze different variations of each message and test varying message lengths and styles to suit your client’s audience.

3. Prove that you can deliver great value

Proving that you can deliver great value is all about having the right reporting and analytics tools in place for the app, at the get go. This also means always starting with the end in mind and define with your client what the key measures of success and performance indicators will be. This might tie into engagement such as the ratio of daily active users to monthly active users, number of downloads with push enabled or monetization of push notification offers. What is success, of course, depends on your customer’s priorities for their app. So make sure you agree a clear set of KPI’s based on the technical and commercial priorities.

We’ve touched on this earlier, but it’s important so worth mentioning again. You’ll need to focus on increasing opt-in rates and minimizing the number of app users that opt-out and abandon your campaign. This is not just something that you can do once and forget about, it’s about constantly finding new ways to optimize the performance of your app clients push campaigns. An area where you can constantly provide value to your clients and a service that should be baked into your Push Notification Service Offering. To prove your value, make sure you produce reports monthly and that you are offering insight and recommendations on how things can be improved, rather than just giving clients the raw data. That said, there is a place for just communicating raw information. See the section on pricing below.

Make sure you Test, Test, Test. If certain tactics (perhaps altering frequency of deployment and style of messaging) prove to be successful, then you know where to double down your efforts. Similarly, if certain push techniques aren’t working and causing high app abandonment rates, dial them back. This is common sense of course, but it’s easy to lose sight of this, so worth stressing.

4. Roll out your services

Once you’ve proved a Push Notification Service can be successful for your first customer, you can start to consider how your market them to your existing customer base and to new customers. The trick here is to leverage the success of your first client campaign to convey value to other clients. Again, this will all come down to analytics and concise reporting that gives prospective push notification service customers an insight into why this is essential to drive success for your clients app. You need to convey that you’re focused on the right push notification KPI’s and develop marketing programs for your agency that enable you to scale up your push notification service. This may be as simple as baking this service into your sales process and customer on-boarding, to making sure that all new customers know this is just part of your standard offering. It may be targeting existing customers to get them to adopt this or it may also be a very lucrative way to target existing apps built by our competition. Competition that most likely is only focused on the build phase of the app.

Often one of the best ways to achieve this is by having a dedication optimization account manager. Generally speaking, app developers are not always best positioned to deliver optimization and push services to clients, and it’s tough to make the leap and hire someone in the hope that someone will buy. Kumulos may be able to help you here. We support App Agencies who want to offer these services, but don’t have the in-house skills right now. We offer Kick Start App Optimization Services that helps you get going. We act as your optimization back office and then transition this to you once you’re ready.

5. Get your pricing right

Most Agencies want their Push Notification Service to make them money, so it’s important that you have it priced correctly. If you don’t already have a push notification system in place that enables you to deliver these services, there are a bunch of different platforms that you can choose. Find a decent platform that fulfils your app client’s goals and make sure that you’re able to access the right analytics to measure KPI’s. Ideally try and use a platform that enables you to package up these KPI’s into a weekly or monthly report that outlines the success of each campaign and makes recommendations in terms of what you plan to do in order to enhance campaign performance.

A good way to structure your offer is to have a number (three seems to work best) service packages and offer tiered pricing. This gives you two advantages. First it allows you to sell progressive services, services that you can upsell when the client is ready to take a more strategic service for you. It also lets you show that’s you can “right fit” the service for each client. A tailored service rather than a one size fits all.

First Tier – Reactive Push Notification Service

This is as you’d guess simply reporting on the key metrics of push within the app. Things like percentage of downloads that have push enabled, the number of push notifications sent, the number opened, the number of unsubscribes. This is a good entry level service, just to let your customers see how things are performing. It’s a fully automated service, so you’d sell it at low price to get the customer used to paying you monthly.

Second Tier – Proactive Push Notification Service

As you’d guess it’s a bit more involved and your customer pay more for it. It covers the same metrics as the reactive push notification service, but offers insight and commentary into what should be done to drive the numbers in the right direction. Improvements to the app onboarding to drive up notification opt-ins, changes to messages to drive down opt-out rates and more. This is a great way to flag up work your customer needs done. Work that you would do for an additional fee.

Third Tier – Managed Push Notification Service

This is where you run everything for them. All the campaigns, all the messaging. Everything. You agree the KPI’s and targets up front and you commit to delivering that for them. To do this you really need to have a good understanding of the customer and their target audience, so most App Agencies progress to this having first delivered Reactive, then Proactive Push Notification Services. Of course, this is the highest cost and highest margin service you can offer and an awesome way to really get close and stay close to the client.

The critical thing here is to consider the cost of deploying your push notification services in terms of systems and labor. You’ll find that it will be pretty labor-intensive at first to build highly effective and highly engaging campaigns. So make sure you allow for this in the price you agree with your customers. Also make sure that your app customers are committed to you with a monthly retainer. This lets you plan with more confidence and know it’s worthwhile sinking that effort in up front, safe in the knowledge that you are building a long relationship with the client and, of course, a long term revenue stream for your App Agency.

Final words on building a Push Notification Service

So, one of the key ingredients for building a successful (and valuable) mobile app business is an underpin of monthly recurring revenue. It takes the edge of your monthly running costs and makes sure that money keeps coming in, no matter how busy you are. There are many services that you can offer, but the best ones are those most closely aligned to the needs and desired outcomes of your clients. A Push Notification Service isn’t right for every client or every app. But for those that need a highly engaged user community this is the easiest way to deliver services that customers will pay monthly for. It’s also easy to build clear KPI’s for your work so you can easily demonstrate your value add.

Here at Kumulos, we’re fanatical about helping mobile app agencies grow and we have some awesome features to help you achieve these goals. If you’re a mobile agency looking to increase monthly recurring revenue streams, check out Kumulos today and sign-up for free.

Cracking the App Recurring Revenue Conundrum Part 3 of 3

recurring-revenue

In Part 1 of Cracking the App Recurring Revenue Conundrum we covered why App Recurring Revenue is the life-blood of any ambitious mobile app agency. We showed how you could map app recurring revenue services against the typical lifecycle of a mobile app. In Part 2 we dug a bit deeper into how to structure services around the key questions app publishers have and how to make app recurring revenue progressive. This showed how it can be easy to upgrade their service when their needs mature and suggested what you could include (and exclude) within your post-build app services to build a strong app recurring revenue platform for your business.

We now round this subject off with the last pieces of the App Recurring Revenue Conundrum. In Part 3 we’ll cover how to price, how to deliver and how to make sure you make a profit.

Delivering App Recurring Revenue Services

If you are asking your app clients to commit to giving you a check each month, its important to make sure that you show the value of your service regularly. You have to make sure you get the price point right, make sure they value what you do and make sure there’s a clear distinction between the Reactive, Proactive and  Fully Managed service levels This was covered in detail in Part 2. It’s also essential of course that you understand how much the services cost to deliver and what profit margin you need from the App Recurring Revenue Services.

How to price

So this is the tricky bit. How much to charge. Too cheap, your customers won’t value it. Too expensive and they may question its value.

The most important thing is to start your base-layer service at an affordable price point. A cost that’s easy to just say yes to. Its also essential to position this as an entry service (some thing that in time the customer will out grow) explaining its a good place to start. The higher up the “Value Curve”(Value Curve is explained in Part 2) you get the price goes up (along with your margin of course).

App Recurring Revenue

Given the Base-layer Service (see Part 2) is just observing what’s happening, the report should be almost 100% automated, so low cost and low labor effort to produce each month. This service is there to help you show your value to your clients AND most importantly spot areas they need to address, areas where you of course can help them further, and charge them of course on your normal project hourly rate that applies.

This is a full topic in its own right, so we may struggle to do it justice here, but so we give you the concept,  here goes.

There are two approaches you can take, Value Based Pricing or Cost Plus Pricing.

Value pricing – set your price based on what value you see it delivering for your clients. The easiest way to do this is based on a percentage of the cost for the app build. If the app cost $50,000 to build, 1% a month for the base-layer service seems reasonable – a monthly report on your apps performance $500. As you move up the Value Curve 1% (Base), 5% (Mid), 10% (Managed) a month seems reasonable. The cost is higher, because the service is more valuable, it also reflects the additional effort you will need to put in, moving the engagement from Reactive (We’ve seen this), through Proactive (We have seen this, so have done that), all the way up to (You want us to achieve this outcome, this is where we are against that target).

Cost plus Pricing – Work out the profit margin you need on top of the costs to produce it, both systems and the agency labor you need to deliver the service. So take an example of App Hosting. This typically would be a service component in the App Care Services as show in the diagram above.

Here’s a working example. We’ll keep the math simple and assume your charge out your time at $50/hour.

  • You buy in your MBaaS  hosting, data base, content management, API & micro-services you need to run the app for say $50 a month.
  • You add on labor to deliver that service, say an hour a month to produce the report, manage backups, and the various dev-ops tasks that you are doing to keep their infrastructure running well – costing you another $50 in time. In reality this should be completely automated for a base-layer service so $50 falls straight through to the bottom line.
  • Now you charge this out at $150 per month, per app – (or adjust for your own labor rate).

In reality you’ll probably come at this with a combination of Value and Cost Plus Pricing to settle at a level that feels right for your business and your client’s ability to pay.

Profit Margin

Rule of thumb is the higher up the value curve you go, the more value you are adding and the higher the profit margin you should be able to command. Some App agencies we talk to decide to offer these services “At Cost” or even as loss-leaders as the  additional revenue that these services generate from spin-off work is where they see the value.

So as we said earlier, the margin you get from the services will depend how high up the value curve your services are. From the research we’ve done, baselayer (Reactive) services (that are largely or completely automated)  rule of thumb, most companies get around 50% profit margin (more if you load “labor” into this automated service). Proactive Mid-layer is further up the value curve, will involve more management time so justify a higher cost and higher margin. Software tool costs should be pretty much the same as the base-layer services, but will involve a considerable amount of time to analyse results and suggest remedial action. Rather than 1 hour of labor for the Reactive Service, most agencies cost in 7 hours a month in labor for offering their Proactive Service. Margin is typically higher on labor so your Proactive Service would cost would be $400 per app per month ($350 labor, $50 for your mBaaS tool).

Managed App Services, where you commit to delivering the outcome for the app, will be the highest margin service you will offer, at the top of the value curve. You are in effect taking on risk by delivering this service and therefore need to ensure you price this risk on to your service. Its risk in that you are committing to delivering the “Single Definable Objective” of the app.  Again software costs will be pretty much the same, but you’ll be using a combination of labor and probably media costs (google adwords, advertising, social media) required to make sure you maximize mobile app downloads and build highly engaged app user base.

From what we have observed with Kumulos Customers you should aim for around 80% profit margin on labor and around 50% profit on any systems you are using to produce those services. Also around 10% on any media you are handling.

Automated Service Reports – branded as Yours

So this is the important bit. You must wrap all these services up into an easy to digest, simple to read report so they can see the physical output of what you’re doing. You’ve got to make sure the report is easy (or even completely automated) to produce with the base-layer services.  For services further up the value curve make sure you are annotating the report with observations, comments and suggested actions, (especially if those actions require the client to sign off the budget for the follow on work).  Make sure the report is consistent each month, so there’s a regular flow to what you are communicating and make sure that the report is covering the key questions that your app customers will have.  Lastly, and most importantly, make sure the report has your branding all over it, so it’s your name they see each month. Send these reports regularly (see Frequency below) and follow up with a call to highlight areas that you think need attention. You are showing your clients how you can help make their app a success, so they will naturally give you more work to help solve their problems.

Frequency

In terms of frequency, a monthly service, will be… eh, monthly. Wont it? Well the App Publisher is going to be more interested in the first few weeks and months, so a call/meeting to discuss your report weekly initially makes sense (and costed as such). It will settle into monthly, 3 to 4 months down the line when the anxiety around the initial launch subsides.

When you move your services up the Service Value Curve and are offering Proactive or Fully Managed App Services then we’ve seen clients happy to get a report monthly ,paying for the service monthly but unless there are any big changes, get together quarterly.

Regardless of the service you’re offering, what’s essential here is understanding that issuing the Agency Branded Report is a sales event. It is something that you must follow up on and make sure your clients reading and digesting what the report is telling them. If you don’t get questions, be worried, be very worried. It’s a sign that they aren’t as engaged as they should be. Low engagement means they probably don’t value what you are doing, so there’s a high likelihood of them cancelling your App Recurring Revenue services.

What’s arguably even more important is that the Report/Meeting is also the time to opportunity spot new projects coming down the track – the latest platform update to iOS# that will require a review and partial rebuild and of course changing business needs that may require a completely new version of the app or a new app serving a new purpose, that of course you are now head of the line to deliver for them.

Why this approach brings success to App Developers?

When we ask mobile app development businesses why this approach works for them, three common themes keep coming up.

Service that sells follow on work

Get this right and you have your client paying you to find you more work. Work that, of course, you price up and deliver as micro projects. Smaller pieces of work that you can easily fit around some of the bigger app projects. No matter how good you are, no app is 100% right first time. It’s about launching fast, learning and refining how the app performs. That’s the essence of Lean Thinking.  Your post launch service is about analyzing and learning to improve how the app performs and building those improvements into 1.X releases.  Work that you are there to do for them, of course.

Start small and progress… Reactive => Proactive => Managed.

It’s about turning project based revenue into ongoing services that your customers pay monthly for. So you keep your customers paying . Best way to do this is sell something small to start. Make it easy to sell and easy for your client to say yes to. Get them used to, and valuing what you tell them, then move them up from Reactive “We have seen this”, to Proactive “We have seen this and this is what we need to do”, to ultimately committing to a stated outcome “We have delivered this (single objective), and are now doing that to drive the number higher).

Low risk to the App Agency

As you move up the value curve, in effect the risk on you increases. At top level – Managed – you are in effect committing to delivering an outcome, so with that there’s some risk. For example, you will deliver X numbers of “quality” downloads of the app. So you really need to understand the app, to be sure you can attract the right folks into the app. By starting with the “We’ve Seen this” Reactive base-layer you learn about the app, and your client, so you know what risk your taking on, before you commit. Then when you are comfortable with the app you can suggest your customer moves up to your Proactive Layer.

Summing up

Like most business owners you’ll get why its important to build app recurring revenue services.  It just makes sense to give yourself a more stable income base to the business, a stronger foundation for growth that gives you regular income stream to take the edge off your monthly running costs. Its one thing understanding the need, its another thing knowing how to make it happen. We hope this 3 part blog gives you some ideas on how to get going and how to keep your customers paying once you’ve delivered them their app.

This is a big topic. Something that’s difficult to cover everything in one go (well three bites actually). But hopefully it’s got you thinking and given you some ideas to make those first steps towards growing recurring revenue for your app business.

Still a bit uncertain how to start, then we can help. We can offer you a helping hand to get going with recurring revenue services to support your mobile app agency, get you going and then transition this to your business when you are ready to take this on.

Hope this helps and you start today to give yourself a better App Agency tomorrow and if you want some help, just get in touch.

Good luck.

Cracking the App Agency Recurring Revenue Conundrum Part 2 of 3

recurring-revenue

In Part 1 of “Cracking the App Agency Recurring Revenue Conundrum” we talked about why it was important for every mobile app agency to build app agency recurring revenue into their business and why it makes sense to build these against the post build phases of a typical mobile app life-cycle. We also covered the 3 key things to consider when offering recurring revenue services.

We now get into the detail of exactly how to build your service offerings. We’ll cover the key questions these services should address. We’ll also show how to build a progress service offering introducing the concept of the Service Value Curve. This helps structure different levels of service so you can offer entry level services that progress up to a full managed outsource of the App. This approach lets you start slow and then progress up the Value Curve should this make sense to you and your clients.

So lets cover how you could approach defining and aligning your post build app agency recurring revenue services.

Build App Agency Recurring Revenue – Productize your Service

What works great is to “Productize” your services. Break what you offer down into chunks so your customer can easily see what they are paying for. Think of it as a menu, or a catalogue of services that you offer your clients.

Make it a service that covers the things your customer cares about most.

  • Is my app working properly?
  • How many people are using the app?
  • How much are they using it?
  • What areas of the app are they using?
  • How good is the experience for them?

Build this into a simple to understand service, because simple sells.

Package these up into services that you deliver (and charge for monthly), sell them as an integrated part of your offering and NOT an after-thought and you have yourself a recurring revenue model.

The best approach is to start by sell a monthly service that’s a natural extension to the build project.  App “(After)Care” where you look after the hosting and keep the app hosting infrastructure, databases and content on the app in good shape. Then build services around improving the outcome of the app for your clients – more downloads, more highly engaged app users and you have high valued offerings that your client would be happy to pay for. You also have yourself a Win/Win.  Your clients win by you helping them to make their app a success. You win by get your services on retainer, and a check monthly to take the edge off your monthly fixed costs.

A Working Example – App Overview Service

It’s about turning project based revenue into ongoing services that your customers pay monthly for. Best way to do this is sell something small to start. Make it easy to sell and easy for your client to say yes to. Get them used to paying and asking you to help them fix the problems you find, (on the clock).

Here’s an example, we’ve seen work very well with one of our Mobile App Development Agencies that use Kumulos.

App Overview Service has 3 categories that together cover the 5 main areas your customers will care about most. This example is and “entry level” or “base-layer” service. It offers just a reactive services in that it will answer the questions, but stops short of suggesting any remedial action. This means you can largely automate this service and primes conversations with your clients on what you’d suggest to fix the problem (which you would do for a fee of course).

App Overview covers…

  • Is the system working as it should? – Reactive Care
  • Is the app user base growing? – Reactive Grow
  • Are the down-loaders engaging with your app? – Reactive Engage.

App Agency Recurring Revenue - App Overview BaseLayer Services

It works best to make this base service reactive. A service that simply states the facts and points out the good and the bad of the important things to do with your client’s app. A “This is what we have seen” service. This will then create a dialogue with your customers, to suggest what should be fixed or done differently.

So start with a service that simply states “We’ve seen this”.

Start small then move up the Value Curve

Start by selling them the “base-layer” services. This will give an overview of the important questions. At the same time position more in-depth services, services that you offer, but they don’t need right now, but are there when their needs “mature”.

App Agency Recurring Revenue - App Services Overview

When their ready, move them up the stack to “Proactive” services.

“We’ve seen this, and this is what we have done to fix it”.

When you’re both ready, move onto Managed Services. This is an outcome based service –

“You want us to achieve this. This is what we have achieved so far and this is what we are going to do next.”

As you move from Reactive, to Proactive to Managed the Value Add increases along with the fee and of course your margin. So ultimately you want most of your clients on retained Managed App Services.

App Agency Recurring Revenue - App Services Value Curve

Deeper Dive – Your Service Catalog

So staying with the Reactive Overview (base-layer service). This is what you’d typically include –  7 specific service components.

App Agency Recurring Revenue - App Overview Service Components

In Scope

App Infrastructure Services – the app hosting, API environment and bandwidth that’s required to keep the app running.

App Database Management – to maintain the backend databases, including minor app content changes. Track data storage trends.  – Pre-paid block of X hours.

App Stability & Bug Fixes – minor enhancements to keep the App running well, fix crash causes and make minor enhancements to the app – Pre-paid block of X hours.

Performance Monitoring– How well is the App running, are services responsive, is there any system latency that’s slowing down how the app is performing.

Adoption Tracking– Trends the volume of the number of times the app is downloaded, looking at short, mid and longer term trends, is adoption growing or slowing.

Activity Tracking– Trends how the app is getting used. Once the app is downloaded is it getting used and is usage growing or slowing. Have any recent changes or new feature enhancements changed how the apps being used? What are the most used and least used areas of the app.

App Platform Tracking – Shows the which platform versions of the app have been downloaded, the current mix of platforms and whether over time which platforms are most popular.

Out of Scope

Arguably more important than defining what’s in scope for your service, is explicitly defining what’s out of scope. This helps you set expectations up front and make sure your clients (and the team delivering the service for your agency) know what’s included and what’s extra. It also makes it easier to define when your client is ready to move up to the next “proactive” service.

The things that are typically out of scope include

Content Management Services – ie regular and frequent update of content. Spelling mistakes are OK or the occasional change.

App Development – including new features, existing feature/function enhancements (that aren’t bug fixes) and platform version upgrades.

The advantage of this approach is it gives your customer transparency around what is priced into your service. It also means you can structure the service as a menu, some are mandatory (like App Infrastructure Services – i.e. App hosting), others will depend on the type of app you’ve built. For example, if it’s just built in iOS, the App Platform Tracking service block isn’t going to be any use.

Summing up Part 2

In Part 1 we covered why its important to consider the full App Life Cycle as part of your App Agency offering. This means you are not limiting your income to just the few months of the mobile app build, but across the multi-year life of the app. We also explored the 3 main things you need to consider when getting ready to build recurring revenue offerings – Skill-sets, Making it a core part of what you do and Start slow.

Here we covered how you could productise your post build service offerings making sure that they cover the 5 key questions your customers will have about their app. We’ve suggested an example of how you can make this work by offering an entry level or base-layer service and structuring your service offerings so its easy to move your customers up the value curve when you and they are ready.

In Part 3 we round this off with how to present and deliver App Agency Recurring Revenue services. We’ll cover the importance of the monthly report and regular review meetings to make sure you drive home your value. We will also cover the mos tricky part of this –  how to price.

Cracking the App Recurring Revenue Conundrum Part 1 of 3

recurring-revenue

This series articles “Cracking the Recurring Revenue Conundrum,” along with a number of other articles we have written on the subject of App Recurring Revenue, should give you some ideas on how to start building a strong recurring revenue platform to underpin the growth of your mobile app business. Every business owner knows that any business built on a app recurring revenue model is plain and simple a better business to have. A more stable business. A better match of income to fixed running costs. But it’s one thing knowing how things should be, it’s another making it happen. Especially when the day to day feels like your running hard, just to stand still.

App Recurring Revenue. How to sleep at night and grow your business with confidence

For business owners, sure money’s important. But the need is probably more basic. It’s about sleeping at night. It’s about removing the anxiety of how to make pay-roll. Or when to add an extra head to the team, move the business up a gear and let it grow faster, but not over-stretch and put the business at risk.

At Kumulos, we talk to lots and lots of mobile app development businesses and of course they get why Recurring Revenue is important. It’s not rocket science after all. Get some regular money flowing into your business, take the edge of meeting monthly costs – and ultimately get to a position where the company doesn’t rely on winning a new app build project to make pay-roll.  Nice place to be. Right!

But change can be tough. Here we’ll answer how to take the first confident steps to building a better more sustainable mobile app business, and how you can build on those initial steps to move your business away from relying just on winning mobile projects. So you sleep at night, get the breathing space to grow confidently AND give yourself a business that’s worth 8-10 times more when you decide to sell up.

The App Life Cycle

So you build apps as a business. Your set up to really focus on just one or two key stages of the App’s life. Probably the first 3-4 months of what’s typically a 2-3 year life of the average app.

What you need to do is look at the income potential of the app across its entire life cycle, not just the Create and Build phase.

App Recurring Revenue

Here we map the typical life-cycle of the app into 3 distinct phases.

Creative – This is a mix of the ideation phase, which is the conceptualization of the app itself, what it does, who it’s for and how the app will work and flow. It also includes the UX/UI design phase, what the app will look like, screen design, how the app will flow and the rest. We see this on average takes 2-3 weeks to get to a point where you have the concept of the app defined, wire frames agreed and app visuals defined.

Build – We see the average mobile app build taking between 2-3 months to complete.  This is pretty much what you’d expect this phase to include. Building the requirements spec, coding the App itself, delivering the App Minimum Viable Product (MVP), building this into the backend infrastructure to host the data for your app, installing the analytics, testing and deploying it into the app store.

Optimize – This covers the post launch activities. We see the average enterprise mobile app lifecycle is about 2-3 years so this phase offers a huge earning opportunity for Mobile App Agencies to build recurring revenue and be positioned for future app upgrades.  This phase is a combination of support and optimization. For support (we call it here App Manage), this would include charging for the data hosting, file hosting of media used by the app or created by users, minor bug fixed, infrastructure and database management, along with probably advance payment of block hours for some development time to do minor enhancements to existing features.  Under optimization, this is usually split into two different forms. Onboarding Optimization – where programs are run to drive new downloaders. Programs such App Store Optimization to make sure you give the app the best chance of being found by the right folks when they search in store. The second Optimization step is optimizing the in app experience for users. Knowing how the app is being used and what areas of the app are popular will mean you can focus down on the Recency and Frequency of the app use to build highly engaged (and profitable) customers. This would include analyzing the app usage data and running programs such as A/B testing to drive up app engagement.

Having services that help your clients beyond App Deploy extends your earnings from the app project from just a few months to cover the entire multi-year life of the app.

Sounds simple and we are going to show you how it’s actually easy to do.

Business Ready?

So a few things you need to deal with up front.

Skill sets – Your business is geared up to sell and deliver projects. You’re now looking to offer services that support the success of the app once its launched. That sounds like a very different skill set. Doesn’t it. Well, yeh. Your right. But we’ve found that you don’t need to turn your business on its head and hire a whole new team to deliver this. You can get going with this, see the monthly income build, and then when you’re ready build out a team to deliver much deeper, more involved offerings around the marketing the app and growing engagement of users within the app.

Avoid the afterthought- Explain and sell these services as in integrated part of your agency offering. So post-build services like App Management and Optimization are just part of how you do it.

Sold in at the start and positioned as one of the reasons why App Publishers work with you helps differentiate you from the competition.

“Because you support your customers from the ideation of the app, all the way through to how to Grow and Engage with app users. You don’t just build awesome apps, you work with them once they are live to continue to improve and optimize how the app performs.”

So you stand out (win more app development projects) AND you position up front that your services extend along the full life of the app.

Start slow – Keep it simple and start slow. Don’t dive in right away promising you’ll make their app a success. Show your customers the value you can add with a few (very simple) services and once both of you are comfortable then up-sell your offerings (and increase the fee you charge for those services).  Get them used to paying a small amount a month then suggest other areas where you can help.

 Summing Up Part 1

So to sum up, we have discussed why building a recurring revenue base for your App Agency is important. We’ve covered some of the foundation steps that you need to think about particularly around mapping your services to the full life-cycle of the app, not just the Ideation, Design, Build, Test and Deploy phases. We have also covered how this extends your earning window from just a few months (of the Create and Build Phase) to multiple years. This sets the scene to help us go a bit deeper and cover how successful mobile app agencies go about building and delivering monthly recurring revenue.

In Part 2 we will cover

  • Productization of your services,
  • How to extend your earnings beyond the build phase
  • How to align these to the 5 most important questions your clients will have, once you launch their app.
  • A working example of how to build and entry level service to get you rolling
  • What sub-services you could include and what would typically be out of scope
  • How to progress this from entry level to higher value (and higher margin) service offerings

This approach will mean you’ll not only make more money, but you’ll build a bond with your customers that difficult for them to break,  so its you they you rely on for all their future mobile app needs.

Developing Monthly Recurring Revenue through App Development Services

recurring-revenue

Monthly recurring revenue is an essential component of any app development business. Not only is it an essential way to manage your cashflow by being able to rely on money coming in each month it also has a huge impact on how much your business is worth when you come to sell.

Simply put, if you’re trying to sell your company, the buyer will want to understand your company’s ratio of one off project income to monthly recurring revenue. In other words, if 90% of your income is from one-time app development projects, the chances are this will be seen as risky by a potential buyer or investor. An investor will want to see an app development studio with a positive cash flow and healthy ratio of recurring to fixed revenue in order to minimise potential commercial risk. Your app development business should be scalable, solid, dynamic and robust enough to endure periods when new app development projects are hard to come by.

Monthly recurring revenue can be used to monetise hosting and support services for your app development business and give a linear perspective to your cash flow. As your app development business grows, the monthly volume of fixed recurring revenue will increase every time you engage a new customer. If you’re not already doing this, you should be charging a one-time fee for your app development services and an ongoing monthly fee for hosting, maintenance and support services. You should also be recording the time you and your staff allocate to projects so you can sift out the ones that are profitable, but that’s a different blog.

The entire notion of monthly recurring revenue started with magazines and has since spread to everything from window cleaning to video games, from Netflix to internet provision, and of course, mobile backend as a service technologies.

Kumulos, is no different. We use a monthly subscription model because it provides us with a solid and scalable business, so you can be assured your apps are always looked after in the future. In addition, it enables us to bill app developers for the API requests that are actually used and with no minimum contract tie-in. A $10 per app, per month fee is a small amount to pay and thus makes it easy for us to engage with backend as a service customers with no minimum contract tie-in. In the modern era of the mobile cloud and backend as a service technologies, customers are conditioned to pay for what they use and not be tied down in a contract that looks more like a stretch in the state penitentiary. If you’re building a business on the sale of app development services, you should apply this logic and work on a business model that facilitates both types of revenue.

Why monthly recurring revenue?

As an app developer, on the most basic level, you’re selling a service. As apps are a small (normally) and (in relative terms) uncomplicated services, the feeling can be that the easiest way to make money is to keep churning out apps, charging a one-time fee and then only really going back to the app when there’s a reported problem or the customer wants an upgrade. In a perfect world, this would indeed be the easiest way to ensure good profit turnover, but as we all know, the world is far from perfect. Apps break, customers will make impossible demands and arranging constant one time fee transactions can be extremely time consuming, with a higher potential for incorrectly charging your clients for your services.

This is especially a problem if you are a commission based studio, taking jobs from third parties. After your initial fee, how do you effectively manage things like tech support and adding features? If you’re also hosting your client’s apps (which many commission based studios do), how do you go about charging them for that use of space in a fair way?

These are problems that the subscription style monthly recurring revenue model can fix.

Many successful service based companies and app development studios use monthly subscription fees or service level agreements (SLA’s) for their clients. After the initial app development fee, the client pays per month for the hosting space, app maintenance and technical support that means the app can continue working properly. Our system at Kumulos is much the same with our mobile backend as a service technology. Clients pay a subscription that varies depending on API resource consumption along with “add-on” services such as SSL Encryption and extra development user accounts.

The benefits for the business are numerous, the most obvious being a predictable and regular income. As each client is subscribed, we know exactly how many clients we have and just how much they are paying per month. This allows us to see just how much we look to be making, how much we’ll have left after overheads, how much we can bank and also how much we potentially have in case of unforeseen disaster. If we know how long team members attributed to each project and know the cost, we can work out which projects are profitable and which projects will force you to lose your shirt (and your sanity). Remember you should be billing on an hourly basis for you and your team members time, $40 – $60 an hour for an experienced app developer would be a bottom end projection.

It’s important to consider, especially for small developers who are just starting out. If your revenue stream is unpredictable, one major technology break or loss of data can potentially sink your ship before it sails if you can’t afford the repair costs. Something else to consider is that your customer numbers are not as likely to fluctuate using subscriptions. In tough and uncertain economic times such as what we’ve had the past few years, many people cut any new spending, especially if they consider it extraneous. This causes a problem for the single selling business because it becomes increasingly difficult to attract new customers, who are essentially their one and only way to make money.

ASO as a Service, unlocking monthly RRSubscription helps to avoid this for two reasons. One; it helps to promote customer loyalty. If you’re providing an ongoing service that the customer finds useful and is happy with, they are more likely to keep using it, especially if they have already factored in your monthly fee into their own overheads. Two; even if you are not attracting new customers, you still have a reliable revenue stream coming from your existing customers. On top of this, with the aforementioned loyalty creation, customers are more likely to accept rises in price, or to buy add-ons to their subscription to enhance their service.

Another benefit to the monthly subscription is that the barrier of entry is much lower. For example, if you’re a small app development studio with a tight budget, a recurring subscription of $12.50 a month is a much less daunting price than say a $150 yearly subscription, or a $300 single purchase of a service or software.

It’s the same mindset for your customers. In addition, the monthly subscription is something that is easy to drop in and out of. So not only is the prospect of joining a service much less daunting financially, there is also the peace of mind that comes with the knowledge that if it isn’t working out, you can just unsubscribe, or drop out temporarily due to lack of funds, but re-subscribe once things are more stable.

Above all though, the ultimate benefit of a monthly subscription in terms of customers and expanding your user base is that it is a format nearly everyone is familiar with. As we mentioned before, nearly everything these days is done through a monthly subscription. It’s something many people have dealt with for years in their personal lives and perhaps in other areas of their business, so when you as a developer offer it, it’s something they immediately understand and are comfortable with.

So as you can see, there are a great deal of advantages for an app developer in terms of using a monthly subscription package, but how exactly do you go about setting it up?

How to set up a monthly subscription

The setting up of a subscription style payment plan for your customers can be roughly broken down into four main areas:

1.    What are they paying?

Perhaps an obvious one, but it’s also the most important. Have a think about what services you’re planning to provide and decide on what you think is a fair price for them. Take a look around and see what similar developers or businesses are charging and price to match. Don’t sell yourself too low, be realistic about how much it costs you to provide your service and also how much you have to make to turn a profit on each subscription.
On the other side of the coin though, don’t get greedy. Charging too much right out of the gates will scare away potential customers straight to your competition. If you are intending to raise prices, for whatever reason, do it slowly and with explanation to your customers why the prices are going up. A little communication goes a long way.

2.   What are they getting?

This is directly tied into number one, but it’s worth mentioning on its own. Once you’ve decided a price, really think about what services you are providing for that price. What is bundled into the lowest subscription fee? Are there various tiers of subscription? If so, what are the benefits of each? Are you offering “bolt on” services like reporting and analytics, push notifications or app store optimization? What about those services are attractive to customers? Why will they want to pay more to get them?

3.   Choose a payment solution provider

If you’re just starting to introduce subscription as a payment option, you’re unlikely to have the infrastructure in place to manage the billing of your clients. This is where a payment solution provider comes in. For a small fee, they will handle the leg work of providing a subscription payment service to your customers whilst you concentrate on your business. The most recognised providers for this kind of service are Paypal and Authorize.net, although Paypal has the advantage of being a familiar service that most people have used at some point. Many app development companies use solutions like Recurly (http://recurly.com/) to manage this process.

4.   Tell your customers about it!

Again, this one seems obvious but it is also important. Once you’ve decided everything and have put your subscription service into action, make sure to tell all of your customers that it exists. You otherwise run the risk of confusing and frustrating new customers, who feel that they have not been given the whole picture, and at the same time alienating your current user base because they feel that they have been kept deliberately in the dark. Never underestimate good communication with your clients; it can be the difference between seeing your new monthly revenues run like clockwork or seeing your customer base (and your income) slowly trickle away.

Conclusion

As you can see, there are a great many advantages to the monthly subscription style of payment and we at Kumulos hope that this blog has helped you see why we ourselves have chosen it and why it could be the next big step in watching your app development business grow.

Here’s some ideas on how you could add mobile app optimization services as monthly recurring income for your growing mobile app business and how Kumulos can help.