Developing an iPhone app costs money — sometimes a lot of money. Whether you are an independent developer planning to make a splash on the app store, or an established business trying to generate new revenue stream through iPhone apps, you will have to invest thousands of dollars and a lot of time to build a decent app. Whether you depend on paid app sales, in-app advertisement or in-app sales to make money, how you price the app will play a big role in your success.
If you do not have the time or wherewithal to work out the perfect price for your app, you can simply price it $0.99 and hope for the best. But, if you are sweating blood trying to get calibrate every aspect of your app to ensure profits, you cannot ignore pricing.
It goes without saying that you need to calculate the costs of development, deduct the fees that Apple and payment agencies will charge and arrive at a lowest figure that you need to touch if you want to make profits. For this to happen, you need to determine exactly how many downloads or in-app purchases you need and set a price that is not too low or too high.
While there are no set rules for pricing iPhone apps, there are certain strategies and techniques that can come in handy. Let’s discuss certain facts that will help you price your iPhone app competitively and profitably.
Putting a Price on It – How valuable is your app to users, how badly do people need the services, does anyone else offer the same services?
There is a certain amount that an average iPhone user will be ready to pay for your app. Finding out that magic figure is central to pricing your iPhone app. As discussed above, how much it cost you to develop the app — and how much it will cost to advertise, maintain and update it — are fixed factors that will dictate the lowest price you can afford to charge for your app.
You need to try and find an answer to the question of how valuable your app is to the users. For instance, if you have created a healthcare app that adds a lot of value to the life of the users, they may be ready to shell out good money to download your app. But, if there are a dozen competitors offering the same services through their apps, you cannot price your app significantly higher than their apps (unless you are offering a lot better services or quality). So, the prices set by competitors will also limit the amount you can charge for your app.
Defining Monetization Strategy – Are you relying on in-app purchases and ads, or are your totally dependent on paid app downloads?
There is no rule stating that paid apps should not have any advertisements, but most users get seriously annoyed whey they see ads on paid apps. Free apps are expected to have ads — most users do not mind it. In-app purchases are not frowned upon in either paid or free apps as long as the developer is not trying to rip off the users.
What is your focus going to be? In case you are planning to earn through ads or in-app purchases, you must offer your app (or a Lite version) for free. However, if you are offering a useful or entertaining service on a pay-only-for-download basis, you must set a price that lets you profit. Also, if you are offering something special, you can set a high price on your app.
Most developers offer freemiums to generate interest in the app — you can either let the users try out a Lite, free version of your app, or you can let the users try out the full version for free for a limited time. This will also help you generate a strong demand for the app, take stock of the user interest and price the app optimally.
Experiment with Pricing – I would love to give you a simple formula that would let you arrive at the perfect price for your iPhone app, but there are too many variables specific to an app that determine the correct price. And the right price may change over time, and different prices may work for different regions. Thankfully, you do not have to stick to one price for all the time. Responding to the rise or fall in demand for your app, you can vary your price once in a while to get a spike in downloads.
For example, if you are selling a premium app for $4.99 that offers great value to users, many people will want to buy the app. But the relatively high price may keep some of the users away. When you are getting a lot of attention the news or blogs, you will get good downloads, but the numbers may decrease after a while. When your app is not selling much, or when you need media attention, you can slash the prices to half and offer the app at $2.49 for a limited time. This will help you generate media attention, and all the people who were interested in the app but thought it too costly will jump to buy it.
Wrapping up – Pricing an app doesn’t need to be complicated. As long as you have a clear picture of all the overheads — the cost of iPhone application development, the commission to app stores, app maintenance costs, etc. — you will get an idea of how many apps you need to sell at what price to make money. By defining the right monetization strategy for your app and experimenting with prices, you will be able to determine the optimum price for your app.
Thanks to Ryan Benson who works for PLAVEB, a leading iPhone app development company in Los Angeles. He has been a part of several iOS app development projects and feels that pricing can make or break an app on the iTunes Store.