A Complete Guide to In-App Purchases

Page reviewed by: Abhinav Girdhar | Last Updated on January 31st, 2024 2:26 pm

In-app purchases are a great way for app developers to monetize their apps. They allow app users to purchase digital content or features from within the app. This content can range from extra lives in game apps to additional features or content in subscription apps. In-app purchases are often one-time payments, but can also be set up as recurring subscriptions. Not only do in-app purchases allow developers to monetize their apps, but they also provide users with an easy and convenient way to access additional content and features.

The concept of in-app purchases has been around since the early days of mobile applications, but the technology has become more sophisticated over time. Developers now have a variety of options for incorporating IAP into their apps, including subscription models, one-time payments, and in-game purchases.

  1. What are in-app purchases?
  2. What types of in-app purchases are available?
  3. What payment methods are accepted for in-app purchases?
  4. How can in-app purchases help you boost revenue?
  5. How to increase in-app purchases?
  6. What are the best practices for in-app purchases?
  7. Conclusion

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What are in-app purchases?

In-app purchases (IAP) are a type of transaction in which users purchase items or services within a mobile application. These purchases can range from digital goods such as game currency, virtual items, upgrades, and new levels to physical goods such as merchandise. In-app purchases allow developers to monetize their applications and increase their revenue while also providing additional value to their users.

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What types of in-app purchases are available?

In-app purchases can range from small, consumable items like coins or lives in a game, to bigger, one-time purchases like a subscription or additional levels. Here are its different types:

  • Microtransactions
  • These small purchases are typically used to buy virtual goods such as coins, lives, or other items within a game. They are usually low-cost and can be used to extend gameplay and add extra features to the game.

  • Subscriptions
  • These are typically used by streaming services such as Netflix and Spotify, where users pay a monthly fee to access the content. Some apps also use subscriptions to unlock additional features or content that would otherwise be unavailable.

  • Premium content
  • This can include new levels, characters, or other content that would normally require payment. An example of this would be a paid expansion pack for a game like Minecraft, where users pay for access to extra content within the game.

  • In-app advertising
  • This involves displaying ads within an app or game that can be clicked on by the user. The revenue made from these ads is then shared between the developer and the ad network. This is a great way for developers to monetize their apps without having to charge users directly for purchasing items or subscriptions.

  • Bundles and special offers
  • These allow users to buy multiple items at once for a discounted price. This type of in-app purchase is becoming increasingly popular as it allows users to get more value out of their purchases and encourages them to spend more money on apps and games.

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What payment methods are accepted for in-app purchases?

In-app purchases are transactions made within a mobile app, such as a game, where users can purchase virtual goods or services, such as premium content or extra lives. The most popular payment methods accepted for in-app purchases include credit cards, debit cards, PayPal, direct carrier billing, Apple Pay, and Google Play.

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How can in-app purchases help you boost revenue?

In-app purchases offer countless benefits. There are multiple approaches to increasing your sales and driving revenue using mobile services. As per a recent study, 24% of people shopping using their mobile devices are more likely to pay for in-app purchases than they do for paid apps.

However, in the case of in-app purchases too, you can’t just ask users to pay as soon as they have downloaded your app. You need to have them trust your brand first. They will not pay if they don’t know you even if you are offering the best list of in-app purchase selections. Offering a free trial with a few in-app purchases could be a decent start.

In-app purchases are one of the major app monetization strategies that you can use to make money with your mobile app.

How to boost app revenue with in-app purchases?

Here are a few major ways that you can use to make your in-app purchases work.

  1. Make Your App Users Curious
  2. In-app purchases can be very profitable if used right. To make your app users curious about your in-app purchases and get them hooked on your app services, let them play around with the basic details for free. Do not just ask them to pay as soon as they open their app. This will help them see the value in making in-app purchases and they will go for them.

  3. Use Push Notifications
  4. Many online shoppers with abandoned carts and inactive apps end up getting distracted or giving up on in-app purchases. They usually forget that they were going to buy something in the first place. You can use push notifications to remind these users about your app and the offers they are missing out on. Push notifications help you get these users to finalize their sales. With push notifications, you can send these app users the details about what they were going to buy, this helps you bring them back in.

  5. Promote Your In-App Purchases
  6. Promotion is necessary when you are trying to sell something. This offers people an opportunity to make a purchase. For example, when you create an iOS app, you get to promote up to 20 in-app purchases on your App Store product page. It helps you let people see how they can use your app at a reasonable price for a better experience.

  7. Deliver What You Promise
  8. Make sure you stay honest with your users. Don’t be like online ads that promise something and then deliver something different. Try your best to keep your customers’ faith in you. This will help you convert their clicks into active sales. People with good app experiences will trust your brand, promote it further, and will be more likely to make a purchase.

  9. Irrational Pricing Strategies
  10. Sometimes you get a surprising increase in sales with prices that sound like a great deal. For example, you own an online bookstore. You offer your readers a web subscription for $50 and a printed subscription for $100. And, when you will offer both for $100, it would sound a little irrational but will drive up your sales. People purchasing books at this price will tap their back thinking how they are smarter than everyone else that they have noticed this price point.

  11. Follow Color Philosophy
  12. Make sure the in-app purchase content in your app is engaging and appealing. Along with other important things, colors also influence customers’ purchasing behavior.

    Check out how colors impact users’ habits.

    • Red creates a sense of urgency which is perfect for time-restricted offers
    • Yellow help you gain buyers’ attention
    • Green relaxes audience
    • Orange encourages users to act
    • Blue carries security and respect
    • Black goes with luxury goods and helps you indicate the valuable products in your in-app purchases offer
  13. Keep Analyzing Your IAP Strategies
  14. With multiple rivals and increasing competition in the market, you should continuously optimize your service. Make sure you improve your IAP strategy and come up with more effective and appealing in-app purchase content every time you make an update.

  15. Offer Loyalty Programs
  16. Loyalty programs can motivate users to make more purchases. These programs help you improve users’ app experience, establish your brand loyalty, and get a huge base of loyal customers. With loyalty programs, users earn reward points with every purchase and when these points reach a certain limit, they convert into attractive gifts or monetary gain. This process encourages users to make a purchase using your app while stopping them to go to other brands.

    You can gamify your loyalty programs to make them more interesting for the users.

  17. Offer Quality Experience
  18. Users will be more attracted to your in-app purchases if there would be something different and exciting about them. For example, if you offer an ad-free paid version of your app, users will be more likely to purchase it. When users subscribe to your premium services, they will certainly expect improved functionality and better performance.

How to increase in-app purchases?

An app is developed largely with the intent to make money at some point. There are a number of revenue models which can be applied to your app depending on a multitude of factors. Some, not many, have garnered some success by charging people for downloading their app, while others still have tried the same with in-app advertisements. However, for a majority of mobile apps and their owners, freemium models and the feature of in-app purchases have become the go-to model of monetization. It is quite easy to first convey the value that a free app has to offer to you and get the users hooked before charging them for certain value-added features or content via in-app purchases at strategic times.

In order to maximize revenues through in-app purchases, conversion tracking and optimization assume a lot of importance.

In-app purchases are purchases that are made from within a mobile application. These purchases are made by the users when they want to access special content or features within the app like power-ups, hidden levels, coins, offers, and more.

Why is it important?

It’s true that mobile users today are becoming more and more dependent on their mobile devices for just about everything. They have actually been known to research the khakis that they want to buy on their mobile apps, before walking into the store and buying it. This might not look like a big deal to you as a business owner, but there is more here than meets the eye.

Whenever a buyer abandons a purchase to go complete it either on your website or in your brick & mortar store, they are exposed to a number of distractions that might lead to them changing their mind altogether. Hence, it is the brands that can manage to convince the buyers to complete their purchases on mobile by providing them with a seamless purchasing experience, who are more likely to become well positioned in the future.

The eCommerce companies have benefitted the most from the growth of mobile apps. As compared to mobile websites, apps keep the users better engaged, leading to a 286% increase in products viewed, a 23% increase in purchases, and an increase of 120% in conversion from the view to purchase. Mobile marketers have been using a variety of tips and tricks to increase the number of app downloads, but that is not the be-all and end-all of an app’s success. Any business needs to drive purchases and revenue and the tips that we are going to list out hereunder would help you flourish your business through apps via in-app purchases!

  • Convert Web Visitors To App Users
  • It was just a few years ago that most eCommerce companies were quite smugly focusing only on their web presence and mobile apps were mere add-ons. Users could easily access their desktop websites on their mobile phones. This has drastically changed today as mobile web engagement is effectively negligible. Those who have a strong web presence but have been a little late to wake up to this trend need not worry, because there is a way to harness the web traffic that they are generating. Most people are researching on their mobiles and are quite often making their way to your website, this is where you can step in and save them from the jittery jerky checkout process on the mobile website. Tweak your website with deep links that would take the user to the corresponding page in your app thus enhancing user experience and driving up in-app purchases.

  • Use In-App Messages To Your Advantage & Drive Up In-App Purchases
  • In some of the apps, especially retail and booking apps, in-app purchases are not mere secondary features, but an integral part of the app. The basic idea of a user browsing through a retail or booking app is to make some kind of purchase. The trick here is to convert the window shoppers into buyers.

    For this purpose, in-app messages can prove to be quite an effective tool and medium. The sales, deals, and discounts are attractive to the users. Quite like the brick-and-mortar stores, any such sales need to be promoted in the apps as well. In-app messages are a great way to promote all those wonderful deals that you have for your customers.

    Another way to push in-app purchases is through personalization. When you look at each buyer’s browser and purchase history, you can push specialized products in accordance with their buying behavior.

  • Consider Multiple Marketing Channels To Drive Engagement
  • Mobile marketing is anything but one-dimensional, hence a marketing campaign across a variety of channels is the only effective way to stand apart and drive bottom-line success. These channels that we speak of, may include but are not limited to paid acquisition, content sharing, email marketing, etc. These might all differ from one another in terms of their maturity, projected success or failure, and the kind of returns they bring on the investments, but one common link between them all is that they can all benefit from deep linking.

  • Limited Time Offers
  • This works best once your users are accustomed to making in-app purchases already. In that scenario, you may go ahead and offer a special discount, deal or offer on a certain purchase, but the catch is to do it in a limited time frame. This is a strategy that has stood the test of time, and it works even today. When you impose a time limit to the discount or deals you offer, there is a direct impact or feeling of ‘buy now or lose out’ which tends to create an urgency in the buyer.

  • Deep Linked Marketing Emails
  • It’s true that there are numerous mobile marketing channels, but email marketing is probably one of the most mature and effective ones. Traditionally eCommerce companies have been depending heavily on email marketing to drive buyer engagement and revenue. In recent times, however, the majority of users are reading their emails on mobiles where the mobile web interface proves to be a hindrance in the traditional user flow.

    In response to this, you, as an app developer or owner would need to insert some well-placed deep links into the marketing emailers, so that the users are routed optimally toward an enhanced overall experience.

  • Lure Them With New & Shiny Things
  • It is natural for most of us to be attracted to anything that is new. When you have a user base that is already hooked to the in-app purchases, it is important that you keep their interest by offering them something ‘new & shiny’ every now and then. Novelty and variety pique the interest of the app fans and make them come back asking for more while readily making in-app purchases.

  • Explore Options To Find What Works For You
  • Though email marketing can be deemed as one of the oldest yet most effective channels for promotion, these days there are so many more channels for you to explore. It is a good idea to venture in and explore the channels that are available to you. These include:

    • App Discovery
    • Paid Search
    • Social
    • Referrals
    • App to App
    • Content Sharing, and many more.
  • Timed Offerings
  • This is especially effective in gaming apps. The moment right after the user has downloaded your app, is the moment when they feel the best about it, they feel positive and are enthusiastic about exploring it. A nudge for in-app purchases at this time is a good idea to exploit this euphoria. At certain points when your user is choked, or at a crucial level, a suggestion for the appropriate in-app purchase is likely to be converted into a real sale. Timing is crucial and it would be wise to use it well.

  • Get’em Hooked!
  • When it comes to in-app purchases, it works the same way as the app rating or review requests. The user has to be hooked or deeply engaged with you to be actually interested in going forward with an in-app purchase. It is a good idea to offer your core value proposition right at the beginning and then let them know quite clearly what the app is going to be used for. It may be deduced that the more you can engage your users, the better user experience you can offer, higher are the chances of the in-app purchases actually happening. Getting the user hooked is a combination of two factors, first, the criticality of the problem and the desperation to look for a solution for that problem, and second, how quickly and effectively can you offer the solution to the user’s perceived problems.

  • Let It Be A Seamless, Flawless Experience
  • One of the most critical things about an app for a user is his experience of actually using the app. It is important that the experience a user has with the app is easy, seamless, and flawless. When the experience is jerky or abrupt, the chances of a user engaging with the app go down and so do his chances of making an in-app purchase. Offer them tutorials, to make sure that their experience of using the app is not frustrating or confusing in any manner. At the initial level, make the wins or other interactions smooth and easy, as they keep going up the levels, making it harder to win.

  • Monitor & Use In-App Behaviour To Drive In-App Purchases
  • The in-app behavior, when used properly, would offer you great insights. When you understand the user behavior patterns in the way they interact with the app and the way they navigate through the app, it gives you the opportunity to strategize the in-app purchases. If you send out push notifications for every offer and in-app purchase you have in your kitty, you might end up frustrating your user and losing him if he decides to uninstall the app because of it. However, if you use triggers like a certain in-app activity to shoot out relevant push notifications suggesting a particular in-app purchase.

  • When The In-App Purchase Is A Subscription, Offer Extension Of Trial Period For Free
  • There is a large group of users who are pretty engaged and active on the app all through the trial period, and then go completely quiet once the trial period is over. It is for these clients that a free trial extension model works the best! This extension may be offered in exchange for feedback or insight that you can later use to rectify issues or build up your database and insights.

  • Let Your Free Plan Be Just Good Enough, But Not Too Good
  • The free trial period or free trial version should be good enough to bait and hook your users, but make sure that when they get really engaged with the app and begin using it extensively, they hit a barrier when they are compelled to go for in-app purchase in order to unlock and avail special features. This is one of the most effective ways to gain advantages of onboarding and user engagement.

  • Encourage Customers To Finish Their Purchases
  • For mobile marketers, the intent to buy is not enough. They have to wait with bated breath till the user has input their payment information and clicked the ‘Buy’ button. The abandoned shopping cart is a bigger phenomenon on mobile than any other platform and mobile messages are one of the most effective ways to reduce it. Push notifications and emails are the best ways to tackle the issue. In case a user adds something to their cart but doesn’t check out, it is a good idea to reach them through any of the outside-app ways and nudge them a little. These notifications work better when personalized in the following ways:

    • “You’ve left an item in your cart” is impersonal, try mentioning the name of the product they left behind.
    • If the product they ordered is limited in stock, mention it. Create a sense of urgency to encourage them to complete the purchase before stocks run out!
    • Keep an eye on the user’s in-app behavior to time your push notifications in a way that they get it when they are the most engaged.
  • Offer Special Deals When Users End Free Trials Early
  • During the trial period, most of the users are positive about the app and it is a good idea to use this time well. Offer special offers, if they upgrade to the paid version in the first two days, and encourage the users to end their trial period sooner. The users who have been using their app extensively for the first three days are more likely to convert than those who don’t. Offer them an early bird discount or other such advantages and use the in-app analytics of these users to identify the real accelerators.

  • Promote Premium Services
  • When you are offering premium services, it is important that you get it out there, make some noise, and let others know what you are offering. Let the users know of the advantages they will get when they sign up for the paid services. There are three major ways in which this may be done:

    • In-App Messages – while the user is exploring or using your app, they are the most engaged. At this time in-app personal messages can help them point to the special features, help them forge a relationship with the app, and even consider going for the premium features.
    • Drip Campaigns – this is essentially an automated email marketing campaign where emails are sent out automatically according to a defined schedule. The trick to having an effective drip campaign is getting the timing & relevance right. They are great for announcing new updates, features, or price drops for an app.
    • Text Messages – text messages tend to have a higher engagement when compared to email messages as about 90% of text messages are read within the first three minutes of receiving them. Text messages, however, limit the length of the message to 160 characters, so it is important to provide information in a crisp and defined manner.

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    What are the best practices for in-app purchases?

    As IAPs become more widely used, best practices have emerged to ensure user satisfaction and safeguard against potential risks.

    • Clearly define the user’s goals and expectations
    • This includes understanding the types of products and services offered and how the user will use them. It’s also important to consider any additional fees associated with the purchase. The app should provide a comprehensive description of each item, including prices, terms, and conditions.

    • Ensure a secure purchase process
    • A secure payment method should be chosen that is compliant with all relevant regulations. The user should also be provided with a clear explanation of their rights and any related fees. Users should be given the opportunity to review their purchase before completing it.

    • Avoid aggressive tactics such as pop-ups or intrusive banners
    • Such tactics can frustrate users and lead to negative reviews or even legal action. Instead, users should be provided with clear information on the purchase and allowed to make an informed decision without pressure from the app developer.

    • Create a system for tracking purchases, refunds, and cancellations
    • This will help protect both the app developer and user from any disputes that may arise. The system should also allow for easy cancellation of purchases if necessary. Any refunds should be handled quickly and efficiently.

    • Provide users with a clear way to contact customer service
    • This should include contact information, a FAQ page, or even a dedicated customer service team that can respond quickly and address any issues that arise.

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    In-app purchases are a great way of making money by using your mobile apps. In-app purchases help you monetize your online business and can take it to new heights if done right. However, they should be used responsibly and with caution in order to ensure that users are not taken advantage of and that they receive the best possible experience when using the app.