The App Pricing Roller Coaster

The average price of an iPhone/iPad app at the time of this writing is $3.13. The average price of a game app is between $1.30 and $2.60. The question that many developers often have once they've posted their app to the App Store is when should they adjust their pricing? How long should they wait before making a price adjustment? What if the pricing adjustment has no impact on sales? Then what?

As we have said in other chapters, your pricing should depend on what type of app you are selling. Even if you are selling a game app, you need to price it more or less in line with the prices for other games in that particular category. Figure 15.1 shows the range of games prices for January 2010 as reported by Distomo. The highest ranked game apps are between $0.99 and $2.99 on the App Store, as shown in Figure 15.2, also provided by Distomo.

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Figure 15.1 Game prices vary widely depending on the game type, as reported by Distomo Analytics.

Figure 15.2 Highest ranked games apps, as reported by Distomo Analytics.

Once you have selected a price for your app, you should maintain that price for the first few months of sales to get a clear picture of how things are going. Avoid the app pricing roller coaster, where you are constantly raising and lowering the price of your app in an attempt to find the best price. The constant shifting of your price does not give you enough time to see how a price is working out. You will not be able to gather any concrete data unless you wait a few weeks to see how a pricing adjustment impacts sales.

This does not mean you can't do a promotion or two to experiment with temporary price drops, but you should plan to keep prices steady for a while to see how sales go and to get a read on the market.

Just like selling almost any software product, it's difficult to raise prices for an iPhone/iPad. This is because the buyer becomes used to a certain price, and discovering what others have paid for the same or similar product is fairly easy to do in this connected Internet world. So, even if you add additional features to your app, you will be hard pressed to raise the price of your current app, even if you are completely justified in doing so. Your existing customers will expect you to add more features as you create new versions, while your current customers will get your upgrades at no additional charge anyway.

Some will argue that new customers won't know if you raise your app's price, but this is not true. People who write reviews of your apps and those who follow your app—like your competition—will know that the price has been raised and will comment on that in reviews or blogs.

There is a way to approach a price increase that can work to your advantage, and that is to create a separate new app altogether with a higher price. It's the same app that you already have for sale, but it has additional features. You can call this version App "Pro" for professional. If you don't already have a free app, you can take your current app and make it the free app. You can call this version App "Lite." Then, you can introduce the new higher priced app to the market. The new price cannot be dramatically higher than the previous price of the old app. however, perhaps a dollar or two more. There is almost no other circumstance where you can easily raise the price of your app without negatively impacting sales.

Lowering your app price is easier than raising it. When you first launch your app on the App Store, you need to give it some time to determine if the price is working. If, after a few months, you are not seeing steady sales or your sales are starting to drop

Continue reading here: Cross Selling and UpSelling

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