Today I’d like to get into some detail about the third and final preliminary document, the business model. First let’s see how it affects the mockup for the app. There’s no doubt that the business model is an essential component of the business plan, but why should we worry about it in the mockup phase?
The answer is that nearly all apps are developed as software as a service and are not based on a predetermined fee, so monetization and promotion must be integral parts of how the app itself functions. Simply put, the app has to sell itself, and we need to plan how this will happen very carefully.
So how do you begin your business model? By defining the goals you need to reach. While costs and revenues are addressed in the business plan, here you can have other goals, such as:
- the total number of users/installations/registrations.
- the number of sessions/day.
- the total time in minutes of use/day.
- a given number of significant events (for example purchases, shares on Facebook, etc.)/day.
After we have identified our goals, we need to describe the characteristics that the app must provide in order to achieve them. This phase is very complicated, and my advice is to start by looking at how apps similar to your own work. It’s really difficult to invent new business models from scratch: it’s easier to adapt existing ones to our specific case.
To avoid getting too technical, I’ll share the case of the example application ToBuy. The value of this application is that it optimizes the purchasing process in the supermarket. However, this value can’t be directly monetized: few people would be willing to pay to have it, in part because there are many free competing apps out there.
A good goal for ToBuy instead is to maximize the total number of times you go shopping each week. This requires:
- That the app be free, both in the app store and when using it.
- That creating a user account is not required, to avoid conflicts before users even begin to enjoy the value of the app.
- That there must be functions for sharing the app on social networks. The simple function for sharing your shopping list is not enough by itself, because that occurs within the family.
How can this goal be converted into effective monetization? Not with in-app ads, which require more than a million installations and extreme app user loyalty in order to be effective.
ToBuy might however represent a marketing channel for supermarkets: knowing what a person wants to buy makes it possible for them to influence purchasing decisions. For example, you could develop an API that lets a supermarket send a notification like this: “Shop here, you can save up to 12 euros on your list today.” Then if the user accepts, perhaps they’ll find their list already organized to match how merchandise is displayed in the selected store.
Beyond the ToBuy example, it’s clear that monetization affects app design from the very beginning, so the Business Model is an essential element of the preliminary information needed to create the mockup.
Next week I’d like to talk to you about actually making the mockup, working from the three documents we’ve analyzed. In the meantime, if you want, try to write up an alternative Business Model for ToBuy – I’m curious to see what you’ll come up with.