Apps are not a product or a service, they are a complete marketing framework.
Digital companies are adapting to the shifting boundaries of digital technologies by pursuing continuous innovation strategies. Any organisation is a media organisation and as such, it needs to develop its web presence to foster a user community and a proprietary distribution system.
In this context, an app provides an interesting marketing mix. An app is both a Product and a Place (or a means to reach our customers). An app has a unique revenue model (Price) and is in itself a Platform for other services (Promotion). An app, therefore is a whole marketing framework, requiring a uniquely oriented mindset.
In this post, we are going to discuss app development and present some practices that can help you develop a great app.
To help you navigate the topic, we’ve broken up the article into sections, to allow you to find what you are looking for right away.
1. A few quick facts about apps and the app market.
2. When apps are “a solution in search of a problem”, you are off to a rocky start.
3. How to come up with an app idea that people will be willing to purchase.
4. Best design practices, and wireframing elements to put your idea onto paper.
5. Revenue models, and in-purchase strategies to fund your app development.
6. Conclusions, and final recommendations.
1. A few quick facts about Apps.
Before getting too excited, we need to realise that the app business is often seen the new frontier of a get-rich-quick scheme. In the early days, apps have provided great first-mover advantages to those who have dared to enter this market when entrepreneurs had little or no knowledge of its potential.
Now, more than 10 years down the road, we can’t keep thinking that developing an app is, by any means, a form of innovation. On the contrary, apps are a saturated market, with a threshold to access which is getting lower every day.
By no means we intend to discourage you, but here are some quick facts to put your ambition in check.
- Customer acquisition cost is high. There are currently a little less than 3 million apps on the App StoreAndroid Store. It’s challenging to compete when so much is already being offered. The top 8 out of the top 10 raking apps are owned by Facebook, Google and other tech giants.
- Retention is very hard to achieve. More than 25% of apps are only used once. It’s very difficult to get your customer to ‘lock-in’ into the app. Moreover, 35% of apps are not open more than 10 times. Your app needs to offer something truly unique, in order to make it worthwhile your costumers’ time.
- It’s a capped market. Research shows that the average person uses no more than 27 apps on a monthly basis. The majority of people download 0 apps per month. This is because most customers have already decided how which apps they are going to use. Switching is not simple because of the “soft lock-in” that technology provides. This also explains why gaming is so important: it has a fast obsolescence rate and it appeals to a very young audience.
This list should help us realise that technology is a tool, a mean to a greater purpose. We should not start our app, let alone a business, based on the “everybody else is doing it, so why can’t we” principle. On the contrary, we need to figure out a problem, through Jobs to Be Done, that will help our customers deal with their own problems. Many companies instead start from the technological end and work backwards. This is what we are going to discuss in the next section of our article.
2. When Apps are “a solution in search of a problem”.
If what we discussed so far has not made you change your mind you are in the right track. Now think of your business as a boat sailing onto the ocean, sailing away from red oceans and always seeking blue oceans. Red oceans are highly competitive markets which rely on fierce competition to acquire or maintain market share. This is where we find large and small players alike competing in price, adopting cutthroat techniques.
What we’re looking for instead are blue oceans or untapped pockets of market potential. In many cases, this can be done “simply” by changing our mindset.
Blue Ocean Strategy is a management theory which provides many insights and visual tools to help founders create value and reduce costs, by applying a createeliminate, increasedecrease framework in order to generate demand and maintain a 10 to 15-year early mover advantage into the newly created ocean of value and opportunity. However, this value innovation approach is hardly followed by entrepreneurs, who instead start the race from the finish line and move backwards.
Start with a problem, not with a solution. In my experience as a business angel, I’ve often met teams of founders starting from technological innovation (such as for instance ‘blockchain’) and then moving back towards the provision of an online service. This approach does not lead to understanding what jobs your customers are looking to get done, and therefore does not lead to a persuasive value proposition.
We need to start with understanding human behaviour and customer behaviour before we can understand what kind of technology may help us provide value and reduce costs.
3. In this inflated marketplace, how do you come up with an app?
What can we do in this crowded market space to come up with an app? In order to understand this question, at the most basic level, we need to study consumer behaviour. We need to realise in fact, that we might be discussing two separate things at once: (1) how to start a digital business, and (2) how to design a digital product. In most cases, the two things overlap because many companies are founded in the perspective on launching a product. In this post, we discuss how to start your own digital business and using crowdfunding to test its potential.
Focusing instead on the creation of a digital product, we need to consider the following:
1. In order to help our customers, we have to understand their needs.
2. In order to understand their needs, we need to understand their behaviour.
3. To understand their behaviour we need to understand their culture.
Simple enough, right? Well yes. But here’s the catch: all cultures are different. If you rely too much on the culture dimension you risk developing a hard-to-scale product. This is no small issue, as an app is the perfect packaged item to be downloaded and adopted worldwide.
This is why the 67 Human Universals are our starting point. These universals relate to needs and habits which are found universally across the globe. This is a good place to start in order to develop an app which potentially appeals to a wide audience: all of humanity.
You need to start from a wide audience, because as you develop your product, you will need to pick niches and market segments, restricting your market every step of the way.
But here’s the real challenge…
Not only you need to develop an app which may be interesting for a wide audience of individuals, but you also need to make sure that the app is also worth paying for.
In order to address this additional challenge, we can rely on Maslov’s Hierarchy of Needs Theory.
According to Maslov’s Hierarchy of Needs, not all of our needs and behaviours are on the same level, there is a very strict hierarchy to follow when we satisfy our needs. Starting from the most urgent, the order goes as follows:
- Physiological. This category doesn’t need much explanation as it represents essential physiological needs humans need to fulfil in order to stay alive. Our bodies are self-sufficient organisms, so it’s hard to figure out what kind of app, we may ‘really need’ in this category.
- Safety. This is the category which describes needs which do not only have to do with ‘being alive’ but with ‘staying alive’. This is a category which may be prone to exploitation due to the rising importance of privacy, online security and password management, for instance.
- Love and Belonging. The Beatles used to sing ‘Love is All You Need‘. From an app perspective, this is still accurate: we need friendships and relationships to fill up a big part of our lives. This is a very relevant priority for all of us, and it explains why social media has been such a powerful phenomenon across markets. Social media platforms have empowered us to create and maintain relationships which are a very profound existential need.
- Self Esteem. This is the category which relates to self-esteem, respect, status, recognition and freedom. These needs relate to more socially-oriented needs when the status is a currency. The fashion and luxury industry fits into this category, as an example of something which can be unnecessary and essential at the same time.
- Self Actualisation. This is the ‘being all you can be’ part of the pyramid. This category of needs can be fulfilled only those who have been able to successfully fulfil all over tiers of the pyramid.
Pursuing the satisfaction of needs which are universal and low in the hierarchy of human needs will allow us to develop apps that will help our customers solve urgent needs, and be willing to pay for our products. As we go for the upper tiers, establishing urgency may be more challenging, or could limit our market to only the wealthiest customers (HNWI), which – you guessed it – are highly sought after.
4. Let’s get started with wire framing and best design practices.
Going through the challenges of the previous paragraph will require a lot of effort, but on the bright side, once you have figured out what problem you are going to devote your time to, you will be able to start creating your unique solution.
The next step is making the intangible, tangible.
How? With wireframing!
To approach app design, we don’t need to be developers, “just” being creative will do. There are a million different ways to design an app, and we need to navigate through each option to develop the best app design possible.
Wireframing can help you create the user interface and realise the vast possibilities when it comes to displaying information, images and menus within a very limited ‘screen real estate’. If you’d like to try it out, with Balsamiq.com it’s fairly easy to get started and try it out with your own hands.
Don’t worry you don’t have to start from scratch, Google is here to help you with a list of best practices to follow. Here’s a link to their data-driven guide.
Google’s research analysed 6 areas where design and workflow optimisation impact the app’s functionality and the end-user experience. If you don’t want to go through the whole guide here’s a short summary of what you can find on Google’s guide to UX optimisation.
- App Exploration. With Apps, our number one priority is making the best of the screen space we have available. In this sense, it’s mandatory to show the value of the app upfront making it very clear what are the uses of the app, and what functionalities it provides. We also need to connect with our customers by creating user-friendly categories, with clear distinctions and no overlap between them. People don’t necessarily know what they are looking for when they navigate an app and we need to make it easy for them to go back when they make mistakes. Also, consider that apps need to provide location-sensitive results and provide seamless transitions when moving from a native app to the mobile web.
- In-App Search. The search bar is very important for our customers as it’s oftentimes their guiding light through the app itself. The in-app search, therefore, needs to be very clear and use effective indexing with filtering and sort options. Filtering is very important, especially when it comes to comments and reviews.
- Commerce and Conversions. Ecommerce conversions follow Pareto’s law, whereby 80% of our revenue comes from 20% of our customers. In this sense, it’s very important to nurture our customer’s experience by providing their search and purchase history and previously recorded information. Also, enabling comparative shopping features is an essential part of the “customer online journey”. When thinking about transactions, the customer’s “perception of security” is essential. Moreover, in order to optimise conversion, apps need to provide multiple third-party payment options to support the checkout process.
- Registration. Getting users to sing up to a newsletter requires the delivery of an effective and persuasive risk-reward balance. Users need to be provided with high value in order to interact with an application through their email address. This also entails for a well-designed application when it comes to password management, making sure that password insertion becomes a frictionless experience is mandatory to making sure customer keep coming back to the platform.
- Form design. If getting your customers to enter one email address in one empty field is a challenge, then entering more than one piece of data at once can prove almost impossible. It’s important to make sure apps provide user-friendly forms, which communicate errors in real-time. When it comes to data entry, also, matching keyboard layout with the form required input (numbers or letters) is advisable.
- Usability and Comprehension. Remember that language needs to fit your customers’ profile, and you need to speak the same language your users speak. Also providing text labels to clarify visual information is necessary to clarify the balance between form and content. Moreover, customers need to be provided with visual feedback anytime they perform any significant action, to reinforce the responsiveness of the application.
Alright, so now that that’s done, let’s talk about money. In the next section of the post we’re going to look in revenue models so that we can find out how to make a quick buck after all this hassle.
4. And what about revenue models?
As we’ve seen in the article on the Business Model Canvas, as we try to give our best answers to our start-up questions we need to take into account revenue streams.
In the case of digital apps, there are three revenue models which can be applied to approach this ‘block’, feel free to mix and match them until you find your perfect blend.
Here are the most common revenue models for apps:
- Free (Brand Building). In this case, companies allow users to download brand-building apps, in the same way, the company creates brand-building websites. The focus is to support the brand and developing an omnichannel distribution strategy for the consumers. The app in itself does not increase the product’s price, it is designed to allow customers to engage with the brand.
- Freemium, free to download, pay to access advanced features. In this model – one of the most commonly adopted – companies allow users to download apps and access basic functions. If users enjoy the app and want to use advanced functionalities, they will be asked to pay a price to access premium features.
- Premium – In this case, the app will be downloaded at a cost, either in a one-time payment or through a subscription format.
- In-App purchases create the premises for a mixed revenue model. This is particularly common with gaming apps, as the developers are able to monetise the community they have developed around their app by creating bottlenecks. These bottlenecks require users to pay a fee in order to speed up unnecessary waiting time. In many cases, customers pay real money to access digital currencies. If you pay close attention you will notice that it’s really hard to find out how much of a digital currency actually convert to real money.
Done! Well done, you were able to get to the end of our guide. Give yourself a pat on the back, we went through a lot of information. One more thing left to do: let’s wrap things up in the conclusions.
As the ACDC used to say, “it’s a long way to the top if you wanna rock and roll“. Coming up with a great app is not only a technological challenge, it’s an anthropological one. In a market that is growing more and more ‘red’ because of competition (in the words of Blue Ocean Strategy), we need to find new mindsets to innovate the way we serve our customers. 440 Industries is here to help, and if you look at the bottom of the post you’ll find a lot more information on app development, entrepreneurship and business strategy. Enjoy!