Let’s put ‘number of apps on the app store’ data aside. It’s an undeniable truth that there millions and millions of apps out there, and a few thousands up and down won’t alter the fact that apps are on the rise.

Being in the mobile app development industry for a long time and first handedly developing apps myself, i’ve been both, cringed and amazed at how companies are pricing their apps. Pricing is one of the crucial aspects which should not be overlooked.

What is the right way to price an app? is one question that has been thrown at me on several occasions. So, I decided to pour my thoughts on the subject.

As you know, apps are becoming an integral part of your lifestyle and are embraced more dearer than fellow human beings. It’s strange, but true. Anyways, the point is – apps are becoming more and more valuable to consumers than ever. So, your pricing strategy should be part of your business plan.

If you are an enterprise, who’ve decided to release an app, build customer base out of it, and eventually generate revenue through it, then you need to know about different types of apps and how it lets you monetize in the first place.

Let’s see what they are.

Free Apps

Now, free apps can mean different things – ‘completely free apps’ and ‘freemium apps’ – and more often people tend to confuse them.

The main goal of offering completely free apps is to attract users. Though the revenue is not generated directly from these apps, they are usually built to drive users to other revenue streams. For example, if you have an website which is the main revenue generation engine, completely free apps can act as a platform to offer goodies like coupons, codes or in-app advertisements and drive users to your website to make a purchase of your product/services.

If you don’t have a website, but want to make money out of your free app then in-app advertisement is the way. Then you can other invite businesses to place their ads in your app and charge them for it. But, if the in-app advertisements are overdone, or are irrelevant to the users they might dump your app altogether.

Freemium Apps

Freemium apps are free up to certain extent. Which means these apps will have some limitations. If users want to go beyond and access certain features or levels, they might have to pay. Gaming apps are a good example.

There are 3 types of freemium apps:

1. As mentioned above, the app has limitations and users need to pay to gain access to features and levels.

2. The app offers full features for free, but is time bound. User have to pay to continue using them.

3. The app is free, but has in-app advertisements. If the user wishes to remove the ads, they have to pay.

Paid Apps

The name says it all. The user purchases the app, and he’s free to use it with all the features. The paid app does come with its share of disadvantages: First, majority of people look for free apps. Second, users want to try out the app before spending their money. In case if you are planning for a paid app, it advisable to offer free trial for a few days so that users know they are paying for the right product.

Paymium

Yes, it is a combination of freemium app and a paid app. Here, the app is offered for free, but additional features come at a cost. This pricing model works well when the content of the apps is superior and the value of the app is high. Users should feel it is worth to spend money for additional features.

Paymium is not the widely used type of strategy, but if the app is of great quality it can generate decent revenue.

Subscription

Just like a magazine, you subscribe the app for specific duration (Monthly or Yearly) along with a renewal option. Newspaper apps are good examples. Many app stores encourage subscription models, and they even provide     interesting offers for app owners. Take Apple for instance, it takes a 30% cut from the App Store purchases, however, if it is a subscription-based  model, it takes only 15% cut.

The subscription is one the profitable models out there. This model drives on trust, and makes way to build a long lasting-relationship with consumers.

Pricing your app. How to do it and what to consider?

To begin with, pricing is not easy as it may seem. As an app owner, you might have to consider several factors before you arrive at the cost.

Let us see what they are.

1. Experiment your app with variety of prices

Apps are just like any other product in the market – it’s not just for what it is worth, but what the market is prepared to pay for it.Apps do not have a definitive shelf life. Through constant upgrades and value adding features it can continue to stay competitive and reap revenue in the long run.

While pricing, app owners inadvertently make these two mistakes. One, they price it based on  the money they spent on the app and try to reap revenue as much as possible right from the start. What they don’t realize is that, by doing this, they have either alienated or excluded the market.

Two, they go the opposite way and offer the app for free with the aim of gathering enormous users and generate big revenues through advertising. By doing this, they are inadvertently devaluing the app to the point that they could never sell it anymore because the perceived value is too low.

Instead, what they need to do is understand what some smart marketers are doing today. These marketers are finding new audiences to test their pricing through secondary or white labelled versions of the software (sometimes throughout the development process), and introduce the app in beta platforms, test pricing different models until they figure it out. Then they either keep the model separately supported or migrate them all to a single platform when they are ready to go to market with their tested models.

2. Let the value of the product be higher than its price

You need to understand the psychology behind buying. Especially when comparing similar products. Before purchasing an app, consumers tend to compare prices of similar apps. It’s a bit tricky to draw them to your product when they are confused which to choose.

But, there is a way to attract them. Ensure that the value of your app is greater than its perceived price. If you give that, the customer will realize that they are getting more value for the money they pay.

Bottom line. There more value for the money, the more willing they are to pay.

3. Know your users

Ilir Alka, CEO & Founder at Fliclpic Inc. has this to say:

Creating a quote for app purchases whether it be charging for subscription or in-app purchases is quite simple! You have to know your users.”

lt makes sense, doesn’t it? What kind of purchases will suit your app depends on the what type of app you have. For some app the in-app purchases would work, and for some it wouldn’t.

Understand the end-users, their purchase frequencies, and their likes and dislikes a far as purchases go. If you give them purchase options that they value to most, they are most likely to go for it.

Understand users. Make the app affordable. Think: Is the app worth the money?

4. How much your competitors are charging

The is no app that is entirely unique. But if you do have built an app that is entirely unique then you are lucky. Similarity is inevitable. There are always some aspects or features similar to other apps.

Answer these questions while do you competitor analysis:

* How much they charge?

* Are they changing their pricing models frequently?    

* Are they priced it high (or too low)?

* What is the going rate for these type of apps in the market?

Insights gained from these answers will help you in determining a reasonable price for your app. Do not blindly go and give it out for half of your competitors’ price, neither sell it for more assuming the consumers think your app offers something special. Be reasonable.

Once you do the evaluation, you’ll be able to arrive at a price.

5. Commision cuts of app stores & refund policy

Usually, app stores charge a certain percentage of cut on app sales and in-app purchases. It is important to consider these cuts these while pricing your app.

Then there are return policies. App stores have their own return policies. Understand them thoroughly. For example, if your app is priced too high, and the features and overall quality of the app is not up to the mark, it might result in a lot of returns.           

Below is a report from Statista showing the average price of paid apps in the Apple App Store and Google Play as of 1st quarter 2018 (in U.S. dollars).

Source: Statista

Conclusion

Firstly, there are no hard and fast rules in pricing your app. You are all welcome to try out different pricing strategies at different stages of your app’s life cycle in the market. Not everybody gets is right at the first time. Even top companies tend make pricing mistakes. Dig out information pertaining to app pricing, if possible meet people who have launched their own apps, both types – people who found success and those who didn’t.

Remember, you playing on a highly competitive turf out there. So, do not rush to make revenue in the initial stage. The key for sensible pricing is to know the market, the value of your app, and your user expectations.

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