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➤ Feedback Mechanism: Customer Knowledge Value (CKV) measures the monetary value associ- ated with the pro ts generated through a customer’s feedback, idea or suggestion over a period of time (Kumar & Bhagwat, 2010). A great way of engaging customers is to make them a part of the process. Apps typically are continuously being updated with new features and content. Taking feedback from existing customers is critical to understand which features/content are popular and necessary. e content, design and feature development should be done accordingly. It is easy to add a feedback mech- anism in an app by means of a feedback button, social or web links and reviews (in app stores). Another important method is asking for surveys
or ratings at the end of the usage by way of in-app noti cation, pop-up message or an email.
network externalities to develop retention & loyalty
App developer companies should work towards creating network externalities in the subscription model wherever possible. It has been de ned by Katz and Shapiro (1985) as “the value or e ect that users obtain from a product or service [that] will bring about more values to consumers with the increase of users, complementary product, or ser- vice.” us, app developers should look to create a community consisting of di erent app users where each one is competing with the other. An example could be displaying a leader board including the names and scores of the users. is could be in a multiplayer game format, where users don’t know each other, or in a social circle format where users are acquaintances, and they challenge each other to receive a better ranking.
Fitbit, a tness app, enables its users to create custom challenges within their social circle, and this social in uence drives users to engage more with the app to see themselves at the top of leader board. e type of social in uence behind this behavior is the ‘behavioral contagion theory’ which states that “the occurrence of behavioral contagion depends on the relative advantage an initiator’s action has established over the other members of the group. e greater the advantage, the more
likely it was that the initiator’s action would prove contagious, in line with predictions from Homans’ principle of distributive justice”(Stephenson & Fielding, 1971). For example, once a customer initi- ates a certain action, such as recording a very high distance covered on the rst day, others will start competing to reach the top. is is also supported by social comparison theory: where competition occurs with regards to a set standard, herein the leader board, the only meaningful position is to be at the top (Garcia et al., 2006).
A similar type of social in uence could be seen in examples where popularity and compatibility a ects the customer decision. Spotify, a subscrip- tion-based music streaming company, extensively uses network externalities as exit barriers to develop retention. A Spotify user has access to real- time information about what his or her friends are listening to, can share songs with friends with one click, or can stream playlists created by friends. Such network externalities can be applied to con- tent-driven subscription apps with relative ease as customers and their peers are already using them on a perpetual basis.
Who to o er subscription to?
Seventy-six percent of the revenue generated by apps comes from in-app purchases (IAP) followed by paid apps at 24% (Forbes, 2013). Breaking it down further, gaming apps account for the highest share, about 40% of IAP (Microso ). is provides an ideal setting for app developers and companies to segment customers who are not only loyal, but also pro table. A forward-looking metric like Cus- tomer Lifetime Value (CLV) has been used in the industry to garner higher sustained pro ts.
For the aforementioned content-based apps to make use of the subscription model, calculation
of CLV for each customer will help identify the most pro table ones as well as those who are not. As shown in Figure 2, content-driven apps could
be suitable for all revenue models. A way to distin- guish which customers to target within these apps is through CLV. Since these apps possess the purchase information of their customers, they could o er customized subscriptions including bundled deals
DisrUPtioN & iNNoVatioN
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