How to: Monetize with Office add-ins and apps
This blog post is part of a series based on our newly published guide for being effective in “Going to Market” with your Office add-in or service. This blog series is targeted for people developing add-ins and apps for Office. We’ll follow up in later posts about deploying add-ins to organisations, best practices for a great user experience, licensing for add-ins and more!
After identifying what your solution does and what business problem it is solving, it’s time to build a strong strategy for business success. The basis for any monetizing strategy is to know your user base and make sure your approach fits with their behavior.
But first: Be active about driving usage
As discussed in our previous post How to: Run effective campaigns to get new users for your add-in, it’s important to take ownership of your add-in’s success by winning more users to your solution. The funnel towards engaged users narrows down after each step, so making sure you have new users arriving to the beginning of the funnel is key.
Users are most likely to trust your solution to bring added value when the user experience (especially the first-run experience) is smooth, trustworthy and frictionless. All monetizing strategies are built on the premise that users enjoy using your add-in or app, and are looking to get the most benefit out of it.
Choosing your monetization strategy
There are several methods to determining the right monetization strategy for your products. One such approach may be based on where you are at in the lifecycle of your solution:
If you just starting your app development, you have the opportunity to design your strategy from scratch. You can setup a fully freemium model with in-app upsell or advertising, or build your strategy from free trial to a subscription to a full corporate license.
If you already have a paid solution in the market, you might want to focus on the pricing strategy and differences between perpetual purchase and subscription model.
For further information on how to upsell your Office add-in services, see our guidance on implementing licensing.
Freemium vs. Premium vs. Subscription and others
Of the various options available, how do you pick the right approach for your solution? There could be several factors affecting the decision such as the target market, competition, the use case of your solution and the repeated usage of certain functions within your add-in or app etc. Consider who your users are, what problem they are looking to solve and if they are willing to pay for it.
Below are some considerations with the different options:
If the goal for your add-in or app is to increase the stickiness of your existing solution and provide additional value to your customers, usage is the right metric to focus on, not revenue. Offering a fully free add-in or app might provide a competitive advantage and increase your overall brand awareness.
Freemium add-in or app is a great place to collect valuable leads and layer in your own customer management. A simple sign-in request within the add-in that prompts users to create an account won’t generate revenue at that moment but might lead to a closed sale further down the line. With user’s consent, you can kick off your sales communications with an email or a sales call.
Freemium with gated features
You can offer a limited version for free and upsell your users to gain additional value with full-featured version. You can offer a simplified use case or a limited set of functionalities without the user having to pay. Users will see the benefits and understand the value of using your add-in or app and are then more inclined to pay for extended version. Remember to stay mindful of freemium users throughout the add-in lifecycle. If the user is accustomed to getting something for free, it should stay that way even if the add-in or app gets updated.
The simplest monetizing strategy is to sell your add-in or app as a onetime purchase. Users can make the decision of paying beforehand and they’ll know there won’t be any additional purchases later. Stay transparent to that promise and don’t add any hidden costs for users who have paid for your solution. Asking customers to pay for something they thought was included can lead to poor ratings & reviews and bad customer feedback.
To convince a potential customer to purchase your solution before knowing much about it can be challenging. Pay close attention how you position yourself against the competition and how you tell the story of your solution. Make sure you are easily discoverable in the Office marketplace, you have good quality screenshots highlighting the core functionalities of your add-in or app and that the potential customer can easily understand what are the benefits of using your solution. More details about that in our Office GTM Guide for ISVs in the Launch First release section.
Whether you are looking to monetize through perpetual purchases or subscription model, you might consider offering a free trial for a limited time. That will lower the bar of trying out your solution and help users identify the value your solution offers. As mentioned before, happy users are more likely to convert into paying users. Customer value directly leads to trial conversions and upgraders. If users are not able to receive value during the trial period, they will abandon without paying.
Deciding the length of the trial period may require some optimizing based on user feedback. How quickly can users start to experience value from your add-in or app? How much repeated usage is needed before users get familiar with the functionalities and features? Will you include full or limited functionality during the trial? All these questions need to be answered when planning your monetizing strategy.
Subscription model works best when your add-in or app has repeated usage and long term engagement. It works particularly well if you are offering continuous value and regularly updated features. Users will feel vested in your solution and are more likely to be retained.
Subscriptions can bring in reliable revenue, help you plan longer term and perhaps allow the flexibility to try out discounts or bulk prices for enterprises.
Advertising within your add-in or app will allow you to monetize without charging the user directly. You remove the purchase-barrier and lower the bar for customers installing and using your solution. Advertising works best when you have a large user base and enough relevant information about your users. Advertisers want to target specific users, on particular devices and even within a very narrow segment based on their job title, skillset and geo-location. When done right, ads can be a good choice. But remember to stay mindful of the user experience and not to distract your users from your add-in or app UX.
There are various 3rd party advertising solutions out there, but consider the risk to expose users to inappropriate content, competitor products and spam-y methods, that may lead to poor retention.
You may choose a volume business or premium priced offerings, nevertheless, the price you set today isn’t necessarily the best price for tomorrow, so remember to stay agile in pricing. Plan continual reviews of your pricing strategy and make adjustments as needed until you find the balance between price and value.
If your solution is comprehensive with various features and use cases, consider flexible pricing options. Free trial versions with tiered subscription offerings help customers evaluate their usage needs. And if you are targeting enterprises you might consider volume licensing.
Plan your strategy
- Evaluate the options and choose the approach that works best for your business
- Test your strategy and optimize for the best return of investment
- Continue to actively review your pricing strategy
Related topics, see “How to implement licensing for add-ins“
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