As compared to websites, that engage more traffic because of referrals and affiliates, APIs require modern applications to attract more clients, and in this way, they will help generate revenue; it is obvious that if your API is developed in a good way, more developers will use it to make real-world applications, no matter if your API can provide only single functionality. As derived from referral marketing studies, APIs can provide 26% more Customer Lifetime Value, abbreviated as CLTV, as compared to other client attraction platforms.
Let us have a look at a modern application, Spotify. They are keeping their end users happy by promoting great stuff to them. They are using APIs to attract and engage new clients to them in 2 ways:
Customer lifetime value (CLTV) helps us determine the success or failure of a business. We can check how much profit one customer can give us. Retaining the customer is the best way to calculate this revenue.
According to Elie Ofek, a Marketing Professor at Harvard Business School, customer lifetime value (CLTV) can be calculated as:
CLTV = ARPU x r / 1 + d – r
In this formula ARPU denotes average revenue earned per user, r is the retention rate or how long the customer retain with you and d is the yearly discount rate. According to formula, we can conclude that as the retention rate increases linearly, exponential growth in CLTV also increases. Whereas, increase in ARPU only increases the CLTV linearly.
When more people use the particular application that is built using your API, you will get more market share. With time, when a huge number of people use your API-built application, it will be difficult for your competitors to fight with you. Developers need help moving to some other API supplier. In the same way, users will stick to you, and they will last long with your services. Thus, increasing your retention rate.
Famous API platform Evernote is doing a great job. It is allowing third-party developers to market their applications that use its API and increasing customer engagement.
When you want to sell more to existing customers, this is the best way to increase revenue. In this way, ARPU also increases and thus CLTV. You can take charge of those special features which can be sold only. Free version users cannot use that API feature. Access will be given to those who have purchased it.
Web Single Sign-On is a perfect example of this approach. You can upsell to the customers who don’t want interruption using the app to access your OAuth server by using the IDs of their users or customers via SAML.
You can also take extra charges from the customers that exceed the limit. For example, an internet service provider organization in Asia takes extra charges from a client who exceeds the monthly data package. In this way, your revenue will increase, and your customers will be retained.
If you want to make more revenue, another way is to attach your existing customers to your previous basic offerings. In this way, your API’s demand will increase and, thus, your profit. According to the table, we can say that affiliate marketing can derive 8% more CLTV as compared to other acquisition methods. Using APIs to meet the demand of customers in the form of innovative applications has the potential to enhance your income. It is very obvious that if any developer party is successful in making an application using your API, customers will increase, and you will see your websites from a devoted affiliate that has been your customers.
APIs also play a vital role in distributing content to a maximum number of users. If your business success factor is based on the number of customers that engage with your website, you can easily promote it by using APIs. However, it is also possible without an API, but using an API will give a maximum boost. For example, websites like Booking.com and other hotel booking applications follow this strategy. If you have searched Google for hotels near you, you likely end up with a search result for Booking.com. This is because booking.com has the advantage of using API to distribute its content. Smaller companies are failed to manage big data sets due to their low resources.
Have a look at another example, Fyndiq. It is a Swedish online retail company and a maximum boost in sales was seen after releasing its public API in March 2011. Another reason for Fyndiq’s huge success is its integration with an outside vendor, who exposed its sales to all of the outlets.
E-commerce Integration : We developed an API solution for a leading ecommerce firm, managing order processing and inventory management. This integration resulted in reduced errors and enhanced operational efficiency.
Healthcare Data Interoperability : Collaborating with a local hospital network, we facilitated secure data exchange between healthcare systems, improving patient care outcomes and operational agility.
Financial Services Integration : Our professional developers collaborated with a top financial services firm to bridge core banking systems with third-party applications, empowering users to manage finances seamlessly across platforms.
Smart Home Automation : Teaming up with a home automation startup, our experts created APIs to unify smart home devices under a single interface. This allowed homeowners to control various systems effortlessly, enhancing convenience and comfort.
Logistics Optimization : Working with a global shipping company, we developed APIs to optimize route planning and cargo tracking processes. By using real-time data, logistics managers could make informed decisions, reducing delivery delays and operational costs.
It has been clear from the above article that APIs play a vital role in generating more revenue for your business. The five ways discussed above can be used to create more revenue. It can be used with or without an API, but using an API can give you an immense boost in sales, and your chances of hitting success for your business will be multiplied.
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