The ultimate guide to subscriber segmentation for apps

Appropriate subscriber segmentation is a pinnacle part of any subscription app’s marketing strategy. Too often businesses put all of their attention and focus on simply converting users to a subscription, winning-back users who have churned, and forgetting to add value in-between. As the number of household subscription businesses is on the rise, so is the competition to be a part of a customer’s monthly subscription outgoings. 

In 2024, the average consumer held approximately 8.2 subscriptions, spending around $118 USD per month, which totals $1,416 USD annually. Projections for 2025 estimate an increase in spending to about $133 USD per month, equating to $1,600 USD per year. Therefore, businesses need to ensure they’re continuing to provide value to customers, far beyond the initial conversion-to-paid.

By using appropriate subscriber segmentation, app publishers can engage users at key stages of their purchase journey. In this guide, we will explore how to apply this framework to any subscription app business, providing actionable steps, industry best practices, and real-world examples to illustrate the impact of effective segmentation.

Understanding the various subscriber segments

The App Subscription Lifecycle Framework provides a comprehensive view of a subscriber’s journey through distinct stages. These stages include:

1. Freemium Loyalists: Users who consistently engage with the free version but prefer not to upgrade to a paid plan. They may derive enough value from the free features to meet their needs, or they may not see a compelling reason to upgrade. This segment is important because they contribute to active user metrics and may serve as advocates for your brand, but also represent a potential conversion opportunity if leveraged effectively. 
2. Prospective Premium Users: Users who are in the onboarding phase, exploring your app to understand its value proposition. These users possess similar behaviours and characteristics to those who ultimately convert.
3. Active Subscribers: Paying users who regularly engage with the product and continue to derive value from their subscription.
4. At-Risk & Churned Subscribers: Subscribers who are showing signs of disengagement and are at risk of churning or former subscribers who have churned but may be open to re-engagement.
5. Product Champions: Highly satisfied users who advocate for your product and promote it to others.

How to nurture each lifecycle stage to increase overall conversion

Freemium Loyalists

With just about every consumer subscription business, there will be a proportion of users who download the app or product and never convert to premium due to low intention combined with the fact that they don’t display the same behaviours or engagement levels as users in the “Prospective Premium User” bucket. For example, they may never create an account or activate using the core value prop. Unless you can find some way to directly or indirectly monetise them, these are users that you don’t really want in your funnel. 

Strategic considerations:

• First consider why these users are in the Freemium Loyalists bucket. Does the free experience already solve their problem and they have no need to upgrade? MyFitnessPal, a calorie and nutrition-tracking app used to provide a food barcode scanner feature for free. However, you could upgrade for additional insights into your nutrition. As many users only wanted to track basic calories for weight loss, this strategy likely hurt conversion as users had their problem solved 100% by using the free version alone.

• Consider if these users add value to the platform in terms of referrals or contributing to the network effect. If it’s the former, you might want to consider ways in which you can add “strategic friction” to your product so that users who are getting lots of value from the free experience, have an incentive to upgrade. This could look like a paywall that triggers when someone wants to save data to their device or complete a project on a utility or creative editing app, for example. If it’s the latter, find new ways to monetize these users with a hybrid monetization model. For example showing ads or enabling in-app purchases for some features that they may have a one-time use for. MyFitnessPal and Duolingo are both great examples of apps using a hybrid monetization model.
• If you’re not already using a free trial model, you could consider using a trial for this particular segment as an extra push to convert. But be careful not to roll this out to all users if your CVR for potential subscribers is already good. Specifically, you could unlock a free trial for these users, rather than a blanket approach which could cannibalise existing conversion potential.
• Micro trials may also be effective if there’s one particular feature the user is showing an interest in. These trials allow Prospective Premium Users to experience a subset of premium features or services for a limited period of time. Micro trials differ from traditional free trials in that they are often shorter in duration (e.g., a few hours or a day) or are limited to specific features rather than the entire premium experience. For example, an editing app might allow free users to access a “pro” feature (e.g., advanced color grading) for 24 hours. Afterward, users are prompted to upgrade to the premium tier to continue using that feature. 
• Some products have taken the hard paywall route which involves removing the free experience completely. You need to have a high volume of users to make this approach viable.

Note: “Strategic friction” refers to intentionally adding small, calculated obstacles or limitations in a product’s free version to encourage users to upgrade to a premium subscription in order to fully solve their problem. Strategic friction requires a delicate balance – too much friction can alienate users, while too little may fail to nudge them toward upgrading. 

Examples of strategic friction include:

1. Feature limitations: Allowing free users to access basic features but requiring a premium subscription for advanced ones (e.g., saving edited projects, exporting data, or accessing exclusive content). Canva, a popular design tool, allows free users to temporarily access specific Pro features, such as premium templates, images, or advanced editing tools. However, when a user tries to download or export a design that includes Pro elements, they’re prompted to upgrade to Canva Pro or pay a one-time fee to access that specific asset.

2. Usage caps: Restricting the frequency or volume of use, such as limiting the number of downloads, messages, or activities free users can perform in a given time frame. Krisp noise cancellation software utilizes this method by allowing free users 60 free mins of noise cancellation per day.

Actionable steps:

1. Identify why users stay free – Determine if the free experience already solves their problem or if they contribute value in other ways (e.g., referrals, network effect).
2. Introduce “strategic friction” – Create incentives to upgrade by placing paywalls at key value moments, such as saving work or exporting content.
3. Explore hybrid monetization – If conversion isn’t viable, consider ads or one-time in-app purchases for select features.
4. Use targeted free trials – Offer free trials selectively to this segment instead of a blanket rollout to avoid cannibalizing conversions.
5. Experiment with micro trials – Provide time-limited access to premium features (e.g., 24-hour unlocks) to drive upgrades.
6. Consider a hard paywall – If your user volume is high, test removing the free experience entirely to drive conversions.

Prospective Premium Users

Strategic considerations:

• Start by onboarding and activating free users so they understand your value proposition and build a habit around it. 
• Ensure your onboarding meets the following criteria:
  • Include a clear demonstration of the core value prop (e.g. images, videos, clear descriptions of what the product is and how it works).
  • Collect key marketing permissions as early-on as possible. For example, push notification permissions, email marketing etc. This will ensure you can win back users, who drop out of the onboarding, through marketing communications.
  • If possible, activate users as a final step in the onboarding. For example, you could guide users in a meditation app through their first meditation. Or in a photo editing app you could show users how to edit their first image with a guided demonstration.
  • Use your onboarding to demonstrate the value of the paid subscription, and if appropriate, showcase the difference in value between free versus paid. You’d be surprised at how many app publishers don’t do this early in onboarding. Masterclass enables users to quickly access a sample of the content in the app. A banner is then displayed on the home page which clearly states that users need to convert to paid to get unlimited access to the Masterclass content.
  • For more on how to build an effective onboarding, check out Andy Carvell’s guide to creating a “Kick Ass Mobile App Onboarding” here.

• Experiment with price and packaging. It can be difficult to determine which features should be behind a paywall, and competitor analyses often don’t tell the full story. But there are two key tools that can inform your decision.
  • Identify features that users value with a MaxDiff Analysis. Survey users to identify the product features or benefits that they value the most, and to pinpoint the value proposition that best aligns with their specific use cases. These insights are essential for structuring your various subscription tiers and offering an appealing package.
  • Identify how much users are willing to pay for certain features with the Van Westendorp Price Sensitivity Meter. Using a set of four questions, this technique plots a graph that gives a price range that seems acceptable for paid access to the product or specific features. Once the data has been collected, it’s possible to create a line graph representing the price on the x-axis and the number of respondents as a percentage for each of the prices on the y-axis.

Actionable steps:

1. Optimize onboarding for activation – Clearly demonstrate your core value proposition using images, videos, and guided walkthroughs.
2. Collect key marketing permissions early – Secure push notification and email opt-ins to enable re-engagement if users drop off.
3. Guide users to their “aha” moment – Encourage hands-on activation by leading them through a first-use experience (e.g., first meditation, first photo edit).
4. Showcase premium value upfront – Clearly differentiate free vs. paid to drive awareness and intent to upgrade.
5. Test price and feature packaging – Use MaxDiff Analysis to determine which features users value most and Van Westendorp’s Pricing Model to assess price sensitivity.

Active Subscribers

Strategic considerations:

• Onboard premium users to the advanced features of your product. Just like free users, premium users need to be onboarded to the premium experience and shown how to get value out of their premium access. This could look like a guided tutorial or video showing users how and where to access key premium features. 
• Personalize the user experience and ensure users continue to get value from it. This is particularly important in today’s economic climate when competition is fierce and consumers are actively thinking about which subscriptions to cut back on. If you’re marketing a utility app, encourage users to opt-in to reminders to utilize the product. If you’re marketing a content app, send personalized content recommendations based on user behavior and preferences, and ensure a steady stream of new content is readily available to combat fatigue.
• Regular market and competitor analysis is a subscriber engagement strategy that is often overlooked. The consumer view and value perception change over time, so make sure to regularly collect data on the features that users want and are willing to pay for and evolve your product accordingly.
• Lastly, once you’ve got a steady stream of paying subscribers, consider ways to segment highly engaged “power users” and offer them a higher-priced subscription tier with features they’re likely to use. For example, if your product is a creative editing tool, you could consider offering a “pro” subscription with more advanced editing features to daily users while converting infrequent users to a more basic plan.

Actionable steps:

1. Onboard premium users effectively – Guide them through key premium features with tutorials or videos to ensure they get value from their subscription.
2. Personalize the experience – Use reminders for utility apps and personalized content recommendations for media apps to keep users engaged and prevent churn.
3. Monitor market and competitor trends – Regularly gather data on user preferences and feature demand to adapt and enhance your offering.
4. Upsell to power users – Identify highly engaged subscribers and offer a premium tier with advanced features, while providing more basic options for infrequent users.

At-Risk & Churned Users

These are subscribers who are using your product less, and are at risk of churning, if not already churned.

Strategic considerations:

• Identify why users are disengaging. There are a few reasons why someone may start to disengage with a product. For example, they may be bored with the content, or they may have even used the product so much that they experience burnout. They may have had a change of lifestyle or habits and the product no longer solves their problem, or a competitor may be winning their attention.
• Reinforce the product’s value through habit formation and targeted communication. The key differentiation between disengaged users and churned users is that disengaged users still have a need for your product, otherwise they would have churned. The goal here is habit reinforcement. But first you need to understand why users might be disengaging. A combination of market intelligence and user insights is needed.
• If appropriate, consider introducing gamification streaks (Duolingo does this nicely).
• Reminder notifications can be extremely powerful in re-engaging users. Send reminders of techniques that users may have learned when they first started (e.g. fitness or meditation techniques), or perhaps a reminder of why they started using the product in the first place (e.g. to lose weight, learn a language or reduce anxiety).
• Re-engage former subscribers with tailored win-back campaigns and CRM strategies. FOMO messaging (“fear of missing out”) may work well here. For example, ClassPass leverages FOMO through push notifications about popular classes filling up quickly or reminding users of unused credits that are about to expire.
• Address pain points that led to their churn.
• Consider any changing use cases. For example, perhaps a meditation app user initially wanted to use mindfulness to get better sleep but is now more interested in calming techniques to reduce anxiety.

One example of changing use cases can be seen in a period-tracking app that experienced a decline in engagement among a specific segment of users. The retention team at Phiture Mobile Growth Consultancy identified that these users were not following the expected monthly usage pattern and launched an in-app message survey via Braze to understand the underlying reasons.

The survey revealed that a portion of these users were pregnant, which explained the drop in cycle tracking activity. To address this shift, a strategy was developed to reinforce the period-tracking habit once these users reached the post-pregnancy stage. This involved reintroducing engagement tactics similar to those used during the initial activation phase, with adapted creatives designed to reestablish the habit. Additionally, to maintain engagement throughout the nine-month period, the app introduced relevant content on women’s health and pregnancy.

At the same time, Apple had enhanced its Apple Health app to include cycle tracking, providing users with an alternative solution. To remain competitive, the period-tracking app needed to emphasize its unique value proposition, particularly through continued investment in women’s health research and the sharing of expert insights with its user base and community.

Actionable steps:

1. Diagnose the cause of disengagement – Identify why users are losing interest, whether it’s boredom, burnout, lifestyle changes, or competition. Use market intelligence and user insights to uncover these reasons.
2. Reinforce habit formation – Since disengaged users still have a need for the product, focus on habit reinforcement through targeted communication. Remind them of past progress, learned techniques, or the original motivation behind using the product.
3. Use gamification & reminders – Implement gamification strategies, such as streaks (like Duolingo), to keep users engaged. Send timely push notifications that highlight key product benefits or encourage users to return.
4. Adapt to changing use cases – Ensure the product evolves with users’ needs. For example, a meditation app user who started with sleep-focused sessions may now be more interested in anxiety reduction techniques.
5. Monitor competitive threats – Stay ahead of alternatives by continuously enhancing the product’s unique value. If competitors introduce similar features (e.g., Apple Health’s cycle tracking), emphasize differentiation through research-backed insights, premium content, or exclusive benefits.
6. Create targeted offers or new features to entice them back.
7. Highlight improvements made since they left.

Product Champions

Product Champions are vital to subscription businesses because they serve as powerful advocates for your brand, amplifying your reach and credibility. Their genuine enthusiasm and satisfaction with your product can translate into organic marketing through referrals, reviews, and word-of-mouth recommendations. 

Strategic considerations:

• In order to leverage highly satisfied users, you first need to identify them. The easiest way to do this is by using in-product surveys (e.g. NPS or CSAT). In-app messages can be an extremely effective channel for running surveys and doing quick “check-ins” with users to see how they’re finding the product. Once you identify happy users, you can follow up with an offer for a higher-tiered subscription with more advanced features or leverage these users in other ways, such as encouraging referrals or prompting them to leave a rating or review.
• Product Champions can help reduce your Customer Acquisition Costs (CAC). By recommending your app to their friends and family, champions generate high-quality customers without the additional cost of paid marketing. Referral programs, in particular, can leverage this dynamic.
• Engaging Product Champions with exclusive perks or insider benefits not only keeps them satisfied but strengthens their relationship with your brand. Brand loyalty and a sense of community can set the tone for other users. 
• Champions are deeply familiar with your product, making them excellent sources for insights on improving features or understanding what’s resonating with your audience. Make sure to follow up with these users to request feedback which will help you continue to develop the product.
• Seeing other users express enthusiasm for your app can encourage engagement and motivate at-risk or freemium users to stick with or upgrade their plans. It can be effective to display quotes from satisfied users on paywalls and upsell messaging. Headway an app for reading book summaries, uses quotes from Product Champions, during onboarding, to increase onboarding completion and conversion rates. Imprint, an app for learning with visualisations, uses a similar technique.

Actionable steps:

1. Identify highly satisfied users by utilising surveys.
2. Implement referral programs to reward advocacy.
3. Engage champions with exclusive perks or insider updates.
4. Share user success stories and testimonials.

Summary

By applying the strategies outlined in this guide, you can attempt to meet users needs at all stages of the subscription lifecycle, which will ultimately increase conversion rates and reduce churn. Rather than focusing solely at the top and bottom of the funnel (e.g. initial conversion or churn win-back), this framework ensures you’re providing value to users throughout the duration of their subscription. Remember, successful segmentation is an ongoing process that requires regular refinement and experimentation.