written by Nitin Saboo
The art and the science of choosing the right pricing strategy
It has been said that the exercise of pricing is as much an art as it is science. There is no doubt that pricing is a challenge, especially with the iPhone/ iPad applications because of the nascent stage of the App store. iPhone app developers would do well to carefully examine all aspects of pricing as it pertains to their product, make careful pricing decisions, monitor and measure sales results, and make adjustments as needed to maximize their revenue. You can maximize sales results for your app through better marketing and marketing includes spending some time on the challenging area of pricing.
The goal of successful pricing should be the focus on delivering value instead of just a low price app. The right price for your iPhone/Ipad app is where the profits are maximized. Thus the highest price you can charge without reducing your pool of customer should be any developers goal.
Questions that should be carefully considered when pricing your app:
- How much does your competitor charge for a similar application ?
- What are the differentiating features between your app and someone else?
- How would you define your app and the demographic market?
- Most importantly how does my app compare to the free apps available in the market?
- What were the actual development costs involved?
Competing against Free Apps
One of the more challenging aspects that iPhone / iPad app developers are coming up against from a pricing perspective is competing against free. Many developers get discouraged thinking that their app may not fare so well against competing free apps. However if your app truly has functionality that goes beyond what a free app can do, then you should not worry… as much. In fact, some free apps can help drive sales of your app because the user finds that the free app will only take them so far.
Getting your app to stand out is always possible against free apps. Carefully look at the free apps and design your free app to take advantage of the free app’s weakness
App Pricing Strategy
After developing the app the big challenge of monetization and finding the right price point remains a crucial juncture. There are various misconceptions associated with pricing. Often developers think that in order to compete on the app store they must price their app very low, like $0.99. The thinking can be influence by one of the following :
- Developers see a lot of downward pricing pressure on the App store from what you’ve read and think you had better not price your app too high
- Developers think customers will expect you to charge only %0.99 for your app since You believe everyone else is and hence succumb to the pricing pressure
- Developers see dollar sign looming and think low price will attract tens of thousands of buyer even if they have no use for the app
- Developers think that pricing their app at $0.99 will help their app into the top 100 sales result
The best strategy to avoid these biased thought process is to provide a free version of the app and let the users try and thereby establishing a following for the app. This allows them to preview the app, test drive it and get a feel for it, before committing monetarily. This is a long term strategy, which will take time but if done correctly will help you realize the truth worth of you app.
Breakeven Analysis
Developers must conduct a breakeven analysis to determine how different price points will affect the breakeven timing.
Lets assume that a developer has spent $5000 to develop your business application with the belief of selling 100 apps per day. A Basic break even analysis at Different Price Point for the app would be :
Based on this table it is better to price your app a little higher at first and carefully monitor results. This also gives room to adjust pricing if needed. Also provides an opportunity in limited time offers where the developer can drop the prices to spur sales.
Developer should not undersell by pricing the app too low to begin. They can always lower the price, but it’s harder to raise it. Remember, in any economy people are willing to pay for quality at a reasonable price but they are not willing to pay for poorly designed apps at any price.
Reference : iPhone and iPad Apps Marketing: Secrets to Selling Your iPhone and iPad Apps by Jeffrey Hughes
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