How to Maximize Revenue with Regional Pricing — Dmitry Gurski, Flo

David Barnard:

Welcome to the Sub Club Podcast, a show dedicated to the best practices for building and growing app businesses. We sit down with the entrepreneurs, investors, and builders behind the most successful apps in the world to learn from their successes and failures. Sub Club is brought to you by RevenueCat, thousands of the world's best apps trust RevenueCat to power in-app purchases, manage customers, and grow revenue across iOS, Android, and the web. You can learn more at revenuecat.com. Let's get into the show.

Hello, I'm your host, David Barnard. Today's conversation is shorter than usual and will be featured in RevenueCat's State of Subscription Apps report. Each episode in this series will explore one crucial metric and share actionable insights from top subscription app operators. With me today, Dmitry Gurski, CEO and co-founder of Flo Health. On the podcast I talk with Dmitry about why the Big Mac index fails for app pricing, how Spotify and Netflix are paving the way for subscriptions globally and why lower prices may be the key to unlocking profitable user acquisition in emerging markets.

Hey, Dmitry. Thanks so much for joining me on the podcast today.

Dmitry Gurski:

Hello, Dave. Thank you for inviting.

David Barnard:

I'm really excited to talk to you specifically about regional pricing. It's something we're going to be sharing stats on in the 2025 State of Subscription Apps report. And it's something I don't think many apps have really cracked, but Flo is one of the few apps I've seen that does a really good job at regional pricing. So, at a high level, how do you think about it? What has guided your strategy for regional pricing around the world?

Dmitry Gurski:

So there several principles. My first statement will be that it's not right to use very simplistic approach, like for example, a Mac index or for example to use pricing of Netflix or Spotify. In most of cases it would not work. And for example, why it would not work in case of Mac index, when you're comparing cost of a burger in the United States, it's cost of burger in Brazil. The main reason that you have very different audience like different customers for burger and potentially for your app.

I may predict that average buyer, customer of a burger in Brazil is just like an average person in Brazil. But average customer of your subscription in Brazil probably is a more affluent part of society and probably use iOS device rather than Android device. And because of that, price may be much higher than your Big Mac index would predict. Almost always prices regionally are lower than United States, but there is a huge difference between approached pricing for iOS, for Apple devices and for Android.

If you compare optimal pricing for iOS and Android in rich countries like United Kingdom for example or United States, Android is always cheaper, almost always cheaper. However, not so much cheaper, maybe 20% cheaper or maybe 15% cheaper. Regions like Brazil or difference in optimal price may be huge because a richer part of society use iOS devices. And because of that propensity to pay and ability to pay is extremely different between this categories of users in English-speaking world and worldwide. And because of that the pricing for iOS and Android originally may have very big difference in comparison with iOS and Android in United States or in English-speaking world.

David Barnard:

As a larger app you get to do a ton of experimentation. Even in some of these countries I think that is a struggle for a lot of apps is that they don't have the volume. How do you think about actually testing these prices and how do you run those tests and then how do you evaluate the winner?

Dmitry Gurski:

We have a luxury have huge audience and we have huge audience worldwide. Flo is the biggest health app in the world and we have maybe more than 200,000 installs daily. And of course, having such audience and having 70 million mass active users worldwide, we may afford making a ton of experiments. And because of that we may make such experiments just using the brutal force approach, just like to create enough testing group to put many prices to test. You compare with the initial price and make a decision for each region.

But very significant the moment you consider that we are not measuring price and assessing pricing by conversions. And it's very often a big mistake. We measure pricing by influence on average revenue per user. And why? Because pricing is correlated with many other metrics, conversion rate to trial then activation in trial. Then retention of subscription depends significantly on cost. We have situation when price may be significantly cheaper. For example, price cheaper, but then retention is three times high and overall RPU will be much higher. And because of that we are making decisions not based on price itself or conversion but based on influence on RPU.

David Barnard:

Do you have any specific examples of countries where you did do price experimentation and what the results of that price experimentation was on revenue?

Dmitry Gurski:

We got quite significant success in Brazil this, yeah, and significant means that revenue was growing hundreds of percent or year to year very significantly. And now Brazil is a number three market for us or so maybe market number four, significant market, really significant market. And what happened we reduced price significantly, really significantly. And it helped not just increase conversions and improve retentions but also what was result we didn't expect, it unlocked pre-user acquisition because with this price, the conversions are enough to provide enough signals to networks and that you get the traffic profitably.

We found like a hotspot for pre-user acquisition with this price and we increased volume of pre-user acquisition in Brazil very profitably significantly this year because of that. And it would not be possible with higher prices just because level of conversions is not enough to really start being in auctions.

David Barnard:

It's such a counterintuitive thing, but in a country like Brazil where the ad inventory is so cheap, then the lower prices and the lower prices giving a decent bump in conversion actually makes it work. So that's fascinating. I'm going to go out on a limb and propose that subscription apps across the entire industry, instead of using the Big Mac index, they should be using the Flo index given how much price testing you've done. Do you think that your pricing and your strategy? And I would say percentages. If US is the index of one and then your Brazil price is 0.2 and your Mexico price is 0.3 and your Germany price is 0.8, that would be the Flo index of pricing. Do you think the pricing works very specifically for Flo or do you think that what you've learned about pricing might be even more broadly applicable to the industry?

Dmitry Gurski:

Recently, which we compared our prices of in Flo with the average prices in health and fitness category. And not even in absolute numbers but more kind of relatively to United States. And I would say that it's pretty much correlated, but there are exceptions. And mostly this exceptions maybe not so much about the country itself. May be more about what apps are popular and the age distribution in these apps because Flo naturally has mostly users younger than 35. And other health apps, they significantly sell subscriptions to people older than 45. And then the demographic and distribution of Android and iOS may influence average pricing a lot. And because of that I would not advise to use any index or any benchmark because the optimal price may depends on many parameters, like age of your users, platform, type of product, cultural specifics and it just must be tested.

David Barnard:

That's really fantastic advice. And the cumulative effect of this approach is that Flo seems to be doing much better outside the US than a lot of subscription apps. I mean so many apps I talk to are so dependent on the US and make almost nothing in other countries. What does that look like for Flo? What percentage of revenue or how are you doing outside the US compared to inside?

Dmitry Gurski:

It's true and our international revenue is growing and even this growth is speeding up. For example, this year revenue out of rich English-speaking world increased almost 80% and in the English-speaking world was 35%. And that mix was funds 45% of our revenue growth this year. But my prediction is that long term, Flo will even more money regionally than in the United States. And not even in English-speaking world because I also like Australia, like Canada, the United Kingdom behave pretty much the same as United States.

And now we have maybe 70% of our revenue from this kind of English-speaking world, what is traditional source of money for subscription companies. But regions are growing very fast. And it's much more cultural phenomenon than anything else. And I have a hypothesis that it's pretty much driven by efforts of huge subscription businesses like Spotify and Netflix because we see that when Spotify and Netflix and Apple, when they double down on specific market, for example Germany or then Brazil, then several years after, people there start to pay for Flo subscription or other subscriptions. Just because they get in this habit, they accept that it's okay to pay for digital subscriptions.

And there are plenty of regions where people have decent income, for example, Italy or Poland. And conversions to subscriptions are really low. And not just for Flo but for all companies. And again, not just because people there can't pay, it's because of cultural acceptance of the idea itself that it's okay to pay for digital products.

David Barnard:

Yeah, that's fascinating. The last thing I wanted to talk to you about was Flo is doing something really different than I've seen any other app do. And that's that you're offering a completely free version in a lot of countries. Tell me about why you're doing that and how that's playing out.

Dmitry Gurski:

We believe that Flo is a very valuable, very useful product. And just not believe, we have many scientific research to prove that. And we just think that it's not right to blocks so useful product behind paywall in countries where women just can't pay. Because of different reasons because in some regions they just don't have credit card or they just don't have money altogether. And the conversions to subscriptions would be really low and 99% or even more of our users would not have access to all the most useful features.

And because of our mission we decided that it's better if you just open that for free and hundreds of million women worldwide will be able to become healthier and get knowledge because of Flo. And up to this moment we have given more than 20 million subscriptions. We gifted more subscriptions than we sold because now we have 6 million active subscribers. Maybe this chart, maybe, I don't know, maybe we have sold 10 million or so, but we have given 20 million. And 20 million women worldwide in poor countries, they may use Flo for free.

And there's no business hits. Our idea is that if you are doing something good then people may pay, they should pay, but when the people can't pay, it's almost kind of sinful to hide the product behind a pay wall. And because of that, Flo is for free in more than 50 countries.

David Barnard:

Wow, that's incredible and a great way to align the mission. Are there learnings that do help? Is there data coming from those users or other things that do help propel the business or is it just fully kind of a charity?

Dmitry Gurski:

No. It's just charity. You're not getting any business value from that. They're getting business value in sense that our employees are more motivated because Flo is a good company and our users are more motivated because of that. And we inform that like they are doing this pro-social campaign, but there is no ideal business value. I don't know, like additional revenue or some maybe additional growth we would get because of that. No, it's just because of our mission and our desire, not just even money but also to be a good company and improve this world.

David Barnard:

That's fantastic. I don't know how many other apps are so mission-driven that they would be willing to do that, but I think it's incredible. I mean for other apps there may even be things like they could do. Toms Shoes made this famous, so you buy a pair and then a pair is donated. Maybe some apps could even experiment with that, even if they aren't quite as generous and mission-driven as you and the Flo team are. But I think it's an incredible place to wrap up. Aligning the mission and giving away value for free to those who can't afford and not getting business value out of it is really an incredible thing. It's something I commend you for, but as we wrap up, anything else you wanted to share with the audience?

Dmitry Gurski:

Very interesting moment. He built the subscription apps and he built health apps. And our business model has started working really well and it was difficult, imagine that apps would become businesses with hundreds of million in revenue several years back. And next year Flo will earn close to 300 million if we're successful. And it's the biggest health app in the world with 73 million monthly active users. And in United States, 25% of all women younger than 45 are monthly selective users. Of course we are hiring and I believe that the quality of the team is the main source of success. Let look on our open positions on our website or in LinkedIn and will supply.

David Barnard:

I'll share links to your careers page and LinkedIn in the show notes. So those of you who were inspired by this conversation and want to work for one of the coolest, biggest subscription apps in the world, take a look in the show notes. And Dmitry, thank you so much. This has been such a fascinating conversation. I'll have to have you back. We had pages and pages of notes that we could have talked about. We'll have to do a podcast later in the year and really dive into more of your learnings because you've learned so much and shared so much and I really appreciate it.

Dmitry Gurski:

Thank you very much. Thank you for inviting me.

David Barnard:

Thanks so much for listening. If you have a minute, please leave a review in your favorite podcast player. You can also stop by chat.subclub.com to join our private community.