When launching a new app, one of the biggest considerations is app store pricing. If you don’t appropriately price your app, you’re likely to minimize profits and even turn users away from your app entirely, regardless of the quality of the app. However, you might be unsure about how to approach app store pricing and the kinds of pricing models that are best for your specific app.
In this guide to app store pricing, we’ll go over some ways to approach your app pricing strategy.
Consider Your Market
Like any other type of product, an app doesn’t simply sell for what it’s worth. Instead, it sells based on what its target audience is willing to pay for it and how it can effectively maximize profits from those purchases. On the other hand, unlike other products, apps come with the added advantage of providing recurring revenue, unlike many physical products that entail one-time purchases.
One way to begin pricing your apps is to test certain pricing models and levels and see how well the market responds to each, which will help determine which pricing strategy to use indefinitely. When gauging the right pricing structure for your app, consider the demographics of your target market. What’s the occupation and income level of the average user? What’s their marital or family status? What are their specific wants and needs that your app can help satisfy? By thinking about the different aspects of your users’ lives and their specific pain points, you can determine how much they’ll be willing to pay for your app, whether you offer one-time purchases or recurring subscriptions.
Additionally, based on demographics and other details about your audience, think about your users’ behavior and psychology. If people perceive your app as providing great value to them, they’ll be more eager to spend more money on it. Conversely, they won’t want to pay as much if your app brings minimal value.
Think About Other Influencing Factors
In addition to your market, you must consider the capabilities of your business and app. You could have the best idea for an app, but you need to be able to bring it to fruition to ensure its success. A well-developed app will be aesthetically pleasing, fully functional, and user-friendly. The costs of developing such an app will ultimately factor into how much you want to charge for it.
Take into account who you need to hire to put your app together. For instance, certain apps may require either full-time employees to help design and develop them, while others may entail outsourcing.
Beyond initial development, you’ll need to think about how to continually improve the app once launched. You may require teams to help regularly update apps in certain intervals. These teams may comprise project managers who are responsible for each phase of the project.
Other overhead costs that could impact app store pricing include insurance, security, and taxes. You also need to take marketing into account and the kinds of expenses you’ll need to cover to reach audiences on multiple platforms, including social media. Without good marketing, your app won’t reach the audiences needed to help make your app truly profitable, making it important to set aside a solid budget for these campaigns.
Based on all of these and other elements, you can better determine what app store pricing strategy is best to make sure your app is profitable.
Consider Using a Subscription-Based Model
While some apps may require users to purchase the app through the app store with a one-time purchase, others use a subscription model. In these cases, users would pay either a monthly or yearly fee to keep using the app. Oftentimes, subscriptions auto-renew to keep people coming back and generating recurring revenue.
It ultimately depends on what type of app you offer. Some of the types of apps that use subscription-based pricing include dating apps, music streaming apps like Spotify, and newspaper apps like The New York Times.
If you’re considering offering a subscription, you may want to offer tiers. For example, you may have three tiers that go up in price with each tier, which gives users multiple options based on what they’re willing to pay. You may also want to consider giving first-time users discounted prices for subscriptions, which will likely keep them on for several months or even years. The New York Times app, for instance, has offered users a discounted subscription of $4 per month (using the even more enticing selling point of “$1 per week”) for one full year, which generates user retention and $48 for each user. At this rate, a larger number of users is more inclined to stay on board for much longer periods.
There’s also an added financial benefit of using subscription models on certain platforms. For example, Apple typically charges a 30% commission for apps and in-app purchases of digital services and goods, but subscription commission decreases to 15% after the first year. Google Play’s commissions work the same way. However, both only charge a 15% commission for qualifying developers that make less than one million dollars.
Based on these commissions, it’s best for app developers and marketers to find a way to maximize user retention akin to apps like The New York Times, which would help them reach that one-year milestone. In turn, you can benefit from an efficient pricing strategy that yields optimal results.
If the subscription model isn’t right for your app, there are plenty of other ways to price your app.
Allow Access to Pro and Lite Versions
Similar to tiers in a subscription, you could offer multiple versions of a freemium app. A freemium app is an app that’s free for users to download but that offers one or more premium tiers, such as “pro” and “lite” versions.
Depending on the app, you could make it freemium in a few different ways:
- Offer the app for free but require users to pay to access certain features, use in-app currency, or achieve certain levels within the app.
- Enable users to use the app for free with ads, with a paid premium version allowing for an ad-free user experience.
- Include all features and functionalities at no charge, but only for a specific period of time. Following this free trial period, require users to purchase the full version for unlimited access.
If you’re planning on offering different versions of your app, be sure to advertise that the app is only free to a certain extent. Otherwise, users could initially download and open the app thinking it’s entirely free, only to find that their experience is unexpectedly limited and leave the app for good.
Look at What Other Similar Apps Do
Another way to figure out which pricing model is best for your app is to simply look at what others in your category are doing. The fact is that monetization methods for apps vary widely depending on the type of app and industry behind it, as evidenced in a 2017 survey of 1,200 app developers.
Some of the biggest differences, as the survey found, depend on whether an app is a gaming or non-gaming app. Generally, in-app purchases (IAP) and in-app advertising were the two most common monetization methods for developers, followed by paid downloads. However, while gaming companies were more likely to use both IAP and in-app ads, non-gaming apps tended to favor subscription-based and commerce models.
Take some time to look at what your competitors are doing and determine whether their efforts are successful for them and worth adapting for your own app. Based on what other similar apps are using for their app store pricing strategy, you’ll be able to figure out what works for you. At the same time, take all other considerations into account when pricing your app, as competitors may be in a better or worse position than you, which influences their pricing structure.
Carefully Choose Your App Store Pricing Strategy
No two apps are exactly the same when it comes to implementing pricing strategies. The target market you’re pursuing, the expenses around your app, the specific value it brings, your business costs, and your competitors’ actions will all play a part in deciding on the right strategy. If you can take the time to strategize and determine which pricing model works best for your app, you’ll be able to maximize profitability, generating more paying users and user retention, which keeps you competitive.
As mentioned, marketing will play a big role in how you decide on pricing for an app. If you’re not properly promoting and growing your app, you’ll have a hard time generating profits. To help you achieve your business goals and maintain a sustainable app, you need the right mobile growth platform. Enter App Samurai, which can assist with user acquisition for any app across a wide range of verticals. Using App Samurai, you can benefit from a comprehensive customized strategy, 24/7 dedicated account management, and ample resources based on your unique campaign style. Subsequently, you’ll be able to continually optimize your app and connect with your target audiences.