Every once in a while, we come across small business clients that want to develop a native mobile app. And we can understand the sentiment. After all, consider the data:

• 91 percent of mobile phone owners keep their phone within arm’s reach all the time.
• 93 percent of all internet users go online via a mobile device.
• 91 percent of time spent on phones is on apps.[1]

As a business, you certainly don’t need the data to know mobile is “the now,” and likely a lot of the immediate future. But the question of whether you should build an app is a different one. Here are a few things to think about before you begin down your app journey.

Native apps can be costly. Outside of white-label apps that don’t need a lot of customization, most cost anywhere from tens of thousands of dollars to millions depending on the amount of functionality, coding, and design requirements. In 2020, the median price to create an app by mobile agencies is $171,450, according to a Clutch survey. (Note: The typical cost range stated by app development companies is $100,000 – $500,000.) Smaller apps with few out-of-the-box features can cost less –anywhere between $10,000 and $50,000.

Most apps don’t get used. One in four people abandon an app after one use. And, on average, US app customers use about 30 apps per month but spend 80 percent of their time on just 5. The question for you is, will you be one of those 30, much less one of those 5?

Your margin is taken by Apple and Google. If you charge customers to get your app, 30 percent of that revenue is taken by Apple and Google upfront. (And no, there’s no getting around that if you want to allow customers to purchase through your app and offer it up in the App Store or Play store.) For subscriptions, Apple and Google both will charge 30 percent the first year and then 15 percent starting in the second year. With that kind of “tax,” many businesses won’t be profitable so make sure you know what you’re getting into.  

You have to build in version updates and version support. App development costs aren’t a one-time thing. It’s critical to keep updating your app to fix bugs, improve functions, and keep up to date with new versions of iOS and other operating systems. The average cost of maintaining an app is about 20 percent of the upfront development cost per year. So, if you spent $50,000 on app upfront, expect to $10,000 per year to maintain it. And then you have to make sure your system still support older versions of the app should people not automatically update.

Go or No Go: Making Your App Development Decision

So, how do you decide whether or not to do a mobile app? We have six questions you can ask yourself before you dive in:

1. What’s the purpose of the app? How does the app fit into your overall marketing and / or product strategy? If the app, for example, is your entire business, you have your answer. But other than developing the next hit mobile game or creating the next Netflix, it gets a bit more complicated after that. If you’re a retail business and you’re thinking about additional sales, keep in mind the Google and Apple “tax” we mention above, as well as some considerations below in terms of native functionality. If you’re a B2B app, how does it serve your business customers? Is it ease of use? Does it help them streamline a process or provide additional convenience? If the goal of the app is engagement, how much are you willing to pay to engage existing customers and does the content you offer bring regular usage?

2. Who is your target audience? How often do you see customers using the app? As mentioned above, many apps don’t get used by customers who download them. Do you see customers regularly using the app, say daily? Monthly? If you don’t see customers using it regularly, it may not be worth your time. That’s why understanding your target audience and behaviors upfront is critical.

3. Should you build an app (native app) versus just creating, say, a responsively designed web site? The general answer is that an app adds value if one can take advantage of a smartphone or tablet’s native functions and provide incremental value or convenience. (Example: the camera, calendar, mapping, music, geo-location, auto-login, alerts etc.) Sometimes, it’s just about convenience (Amazon, for example), but it’s important to remember not every app is Amazon.

4. What type of app do you want to build? Here are the top 10 downloaded categories of iOS apps in the App Store from 2020:

4. • Games
   • Photo and video
   • Entertainment
   • Utilities
   • Shopping
   • Social networking
   • Finance
   • Lifestyle
   • Productivity
   • Education

There are obviously many more here. But determining what type you want to build will also be a question of budget and strategy (above).

5. How will you earn money? Here are a few ways other companies structure apps:

• Offering apps completely free. Typically, these apps are meant to engage customers with the brand and other content. There is no charge and no revenue. In this case, companies use it as more of a mid-funnel engagement strategy for existing customers.
• Offering apps for free with ads. Companies in this case make money by advertising on the app. The 30 percent Google and Apple take still applies here as well.
• Upfront purchase of the app. This is often a way that businesses can generate revenue upfront, without needing or getting any engagement. But remember, Google and Apple will take their 30 percent cut of any revenue generated here.
• In-app purchase. Apps often provide a free experience in the beginning but then use an in-app payment to complete something or take the full course etc. Similar rules apply here to the revenue “tax.” 
• Mobile payments for in-store purchase. A good example of this might be Starbucks’ app, which allows customers to use the app to make in-store purchases. These types of transactions are not subject to the App Store or Google Play store tax.

6. What’s the target ROI? Like any other technology investment, most companies look at a 3-year horizon. Will you make your money back or make money on the investment after upfront and maintenance costs and distribution marketing costs? When you begin, we’d recommend building a simple business model, incorporating upfront and maintenance and marketing costs over the 3 years.

Choosing an Agency or Out-of-the-Box Solution

There are companies that specialize in out-of-the-box solutions: For example: non-profit event apps, shopping apps, or utility apps for small business that have similar identified needs that can be built of ahead of time and white-labeled with minimal customizations. If you have a broader app idea that requires more involved data integration, design, and / or more specific needs, you should definitely choose an agency to help you. We asked Taylor Ansley, Chief Product Officer at Sweb Development, a mobile design and technology firm in San Antonio, what to look for when choosing an agency. His advice: Choose one that will prepare you for “sustained” success. “Publishing a native app turns your company or organization into a software vendor overnight, whether you’re prepared or not,” he says, noting that your budgeting needs to account for not only updating apps, but customer support and marketing functions as well to retain users. Ansley also recommends looking for an agency with  experience working with iOS and Android software development kits (SDKs). “Many designers can create a stunning mock-up, but implementation will be costly and fragile the further you venture from platform norms,” Ansley says. Finally, it helps if you work with an agency to consider what a minimum viable product looks like, so you can test the market.

A few more tips when looking for an agency:

• Knowledge and experience with the iOS submission and requirements process. (Most should have this.)
• Past work the agencies have done. Do you like the agency’s design aesthetic? Do you like what functionality the apps ended up with?
• Compare hourly rates. Many smaller providers work just fine for your needs.)
• Come prepared with requirements or functionality you know you’d like to see. This can help you save money and time in the long run if your vision for the app can be executed.

iOS: Some Things to Know

Most app developers submit through the App store first, because of Apple’s dominance in phones. A few areas to think about.

• Generally, Apple is the gatekeeper in terms of apps. If it’s accepted by the Apple App Store, which is usually the first submission, it typically will get accepted by Google Play.
• Exclude non-App Store purchasing unless you’re ready to pay the 30 percent tax. In addition to taking 30 percent of all app purchases, it’s getting harder to include any sort of purchase options or processes in the App Store that don’t go through Apple. So, even promoting subscriptions inside the app while not charging them through the app itself will likely get rejected.
• Submission Process: Depending on how large the app is, it can take a few weeks after submission. Have the agency or company that’s building that app submit on your behalf.
• Bugs/Issues: Apps often get rejected that have bugs and that can slow the process down significantly.

Keeping Costs Down

Finally, let’s cover a few ways you can limit upfront expenses on apps, particularly as a smaller-to-midsize business.

• Do your audience research upfront and on your own if you can. Agencies will often charge for audience research, so the more of that you can conduct that in-house, particularly geared toward your mobile app, will be helpful in saving you money.
• APIs with your developer teams. One of the most labor-intensive pieces is synching data with the app, as you’d want to personalize the experience for your customers as much as possible. Having APIs for data exchange is super-useful. Talk to your developer team and make sure they’re responsive to agency requests.
• Defining Your Requirements Upfront: Be as specific as possible for what you want to do and what you want to include as functionality. Brainstorming sessions with the agencies can cost money and time.
• Stay Involved During Development: Take a good look at the prototypes an agency builds and make sure you are getting what you want. Too much back and forth creates delays and adds costs.

Conclusion

While we can’t tell you whether to take the plunge or not, hopefully this guide has been helpful to your decision-making process. We wish you the best of luck in all your marketing endeavors, mobile or otherwise.

Whether you’re an entrepreneur or a small business, we can help with your mobile strategy and approach. Learn more about our full-service Marketing Consulting or Marketing Help Desk support options. We also provide corporate marketing training and marketing boot camps on mobile and other topics that are open to the public. Contact us anytime.

[1] Hootsuite/We Are Social 2020