One of the largest questions facing a developer can be how to properly price an application. Not only is there the decision of between freemium and paid, but developers must also figure how to effectively drive sales through pricing.
According to findings by Distimo, putting an application on sale can drastically increase sales when done properly.
A couple of key take-aways from Distimo’s findings include:
- Average revenue increased for iPhone apps +41% on the first day and 22% during the duration of the sale
- Average revenue increased for iPad apps increased +52% on the first day 19% during the duration of the sale
- Average revenue increased for Android apps increased +7% on the first day and 29% during the duration of the sale
- Apps that only decreased prices by a small margin saw revenue declines (For example, decreasing prices from $10.00 to $9.00)
- Apps that had large decreases saw revenues increase (For example, cutting the price in half)
So, what does this mean?
In short, positioning sales properly can yield tremendous revenue increases. It is important to take advantage of buying “peaks” when pricing an app.
For example, as people get their new smartphone or tablet during holidays, it may make sense to put your app on sale in order to increase exposure. Not only can you expect higher sales, but you can build from this initial user base to continue momentum.
If you have multiple apps on the marketplace it can also be beneficial to co-ordinate a brand-wide sale. A great example of this practice is EA games. EA will run holiday sales on all of their games to increase brand exposure and create a halo effect of sorts.
Most importantly, Distimo’s data shows there is no “right answer” when it comes to pricing your app. The best results will come from experimenting to find that perfect balance between customer value and willingness to pay.
Oftentimes app developers will charge $0.99 for their app because it’s considered the norm. But this thinking can cost you valuable revenue.
Instead of choosing a generic price, look at competitive apps in your category and price based on those.
For example, let’s say you’re the developer of Week Cal calendar app (the calendar app I love). You’re looking to release your app soon, thinking you’ll offer your app at $0.99 because it seems reasonable to you. If you take the time to do some research and realize that all your closest competitors are priced at $2.99, this should immediately raise a flag.
So you ask, but if I can drop my price so low, won’t more people use my app and I’ll make it up in volume? While this may seem to make sense at first, you, as a developer, should stop and think about the fact that you’re losing $2 on every app you sell!
If you’ll look, Week Cal has priced their app at $1.99, which is certainly a good medium to settle on.