Mobile technology presents a whole new range of possibilities for building a business by digital means. Yet it’s hard to make money directly out of apps, because users are resistant to paying for them. Let’s call that Appland thinking! The Oatmeal has a great comic strip on this very topic.
In this interview with John O’Connor, founder of Red Oak Tax Refunds, Appland is revealed as we check out what it takes to build an app to build a business.
Business Models for Apps
There are three principal business models for apps:
- Free – a customer service tool, generating sales, sales leads or revenue from advertising
- Freemium – free, but a small number pay to upgrade for extra functionality
- Paid – a more traditional business model. You pay a fee to buy the app.
The App – Red Oak Snap
Red Oak Snap, developed by Red Oak Tax Refunds, is an app for iPhone that can be used to record landlord and / or medical expenses using a mobile phone. Year end summaries can then be used for a tax refund claim, and photos of all the invoices are stored on the web as back-up to the claim. The app is free to download and free and easy to use, and users derive real benefit from it. The app is designed to generate sales leads for Red Oak, and fits into business model #1 above.
INTERVIEW WITH JOHN O’CONNOR, RED OAK TAX REFUNDS
Tell me a bit about Red Oak Tax Refunds
We launched Red Oak Tax Refunds in the month preceding the emergency budget in April 2009. Seems like a lifetime ago, doesn’t it! We established in Carlow in the Carlow County Enterprise Board offices. We have grown in staff numbers over that period to our current staffing of ten.
We started by offering a tax refund service on a commission basis, effectively a finder’s fee as we do not get paid on that business if we do not get our customers a refund. We have extended that into other personal tax services, such as PAYE landlord accounts. We do not deal with self-employed individuals or do company accounts.
We are fully self-financed and the company is 100% owned by myself and my wife Frances.
At that time, early 2009, there was a renewed appreciation of the amount of money that was going to waste in overpaid tax, so our Budget and Tax Refund calculators proved to be good tools in creating awareness of our tax refund service.
So using Tools & Technology has always been important to the business?
It has really. Prior to starting in the tax refunds business, I worked as a Business Analyst in large systems implementations in Investment Banking.
I have certainly traded off that experience in setting up Red Oak. From the start we have focused, not just on the customer facing tech tools, but making sure we have good systems in the back end to ensure we could efficiently deal with a volume of traffic while retaining high levels of customer service.
And why did you decide to build Red Oak Snap, your new iPhone app?
I suppose firstly, why build an app? I’m going to have to ask you to set aside your preconceptions of mobile phone apps here as being music, games and social media. These are really soft entrance options for people in to the whole world of mobile technology. Now many people are ready to broaden their usage.
The buzz word for me around mobile technology, (read this as mobile phones), is ‘utility’.
By utility, I’m talking about stuff that’s useful: saves us time, saves us effort, and allows us to do things on our terms. These are things that a mobile phone allows beyond what a computer allows, and for the one critical reason – portability. It’s a mini computer that’s on your person.
Where’s the utility in Red Oak Snap?
Red Oak Snap allows you to record, for example, a medical expense that you can claim against your tax bill. You simply need to record: a copy of the receipt, the amount, date and type of expense. With Red Oak Snap you can take a photo of the receipt for your electronic copy and simply record against it the other information needed.
Two critical points of utility here:
- You don’t have to worry about losing your receipts, or filing them, or going through them at the end of the year to total them up. It’s all stored within the app and backed up to the server.
- You can complete the task there and then. You don’t have to put the receipt in your wallet and hope you remember it later and file it correctly. We have removed the likelihood of error.
Our research shows that over 50% of PAYE Taxpayers lose medical receipts which costs them in overpaid tax. With increased use of mobile phone technology, we’re going to see a significant reduction in this, with no extra effort, with increased accuracy.
So why did you make it a free app?
We see Red Oak Snap as a lead generation tool and something that can increase the profitability of our clients.
In terms of profitability, one of the main frustrations of our business that both prevents client acquisition and reduces the refund we can get for our clients is the lack of documentation. We believe the app will help greatly to alleviate that.
Red Oak Snap has also helped us increase our profile and brand awareness. Then, particularly on the PAYE Landlord side, we see significant lead generation benefits.
Will you make the app available on Android?
We will do that in the future, yes.
Do you have to pay anything to Apple even though the app is free?
We just had to pay Apple for a developer license, about $99.
How have you marketed the app?
We have marketed the app through:
- Our existing customers. We contacted them through email, Facebook. One trick we did was look up that “Sent from iPhone” phrase in our CRM to identify particular customers who used their iPhones a lot and we in particular targeted those.
- Social Media. Our Facebook following is largely comprised of our own customers anyway, so I’m really talking about Twitter here. Twitter has a large portion of influencers and good communicators and is a particularly good way to access journalists.
- Traditional PR. In the first four weeks after launch alone, we featured in the Sunday Times, Irish Times and all the local newspapers and radio stations.
- Advertising. We have advertised the product online. We have also had an advert on TV promoting the app as part of our tax services. We have used the app there to hopefully generate business in tandem with downloads.
How are you measuring success?
While the app is free, we are really looking for it to generate new business. In many cases we will be able to monitor the actual business created and tie it back to the app as source.
But due to the nature of our offering, we will have to track carefully how app users convert over time.
The cycle from awareness to conversion to actual business could be a long one, as in our business the product being sold can only be sold to you once a year! So if a client likes our service and would like to use it, it will be up to 12 months before they are ready to consume it again.
John, thanks for sharing your “Appland” experiences with us, and may Red Oak Snap be a “win win” both for taxpayers and Red Oak Tax Refunds alike.
Have you any experiences of building an app to build your business? Please let us know in the comments below!