Ah, the ultimate question for developers trying to maximize their profits on the Marketplace: “What should I charge for my app?” The question is simple. The answer is always far from simple. As a developer who spent intense and likely long hours making an idea come to life in the form of a Windows Phone app, honing it and tweaking it and then tweaking it once more, this decision is an agonizing one. Fear, uncertainty and doubt creep into your head… What if I overprice it? Even worse, what if I underprice it? How many apps will I have to sell/distribute to break even? Every single app situation is unique; there isn’t any single silver bullet that can solve your pricing questions. This post is meant to provide you with a set of tools to help you come to an answer to that incredibly important question.
$5.99 for that? Are they crazy? How many times have you found an app you wanted to purchase but balked at the price? Probably quite a few times. And here’s an even more interesting question: After balking at that price the developer is charging for that app you want, how often have you bought it anyway (even if you had to walk away first and then come back later to purchase it)? It’s a good question and says a lot about the psyche of the typical consumer with app shopping on the mind.
The most successful entrepreneurs selling apps and games on application Marketplaces (it really doesn’t matter which mobile platform we’re talking about here; Windows Phone, iOS, Android, Blackberry – it’s all the same for this context) have something in common. They know their market, their target customer and the purchasing behaviour of their customer. In other words, they intrinsically know the true value of their app to prospective purchasers.
So how do these successful app publishers know what price to charge their app? Well, frankly they do their homework. Think of it this way: if you were in the market to purchase a fast food franchise, I’m guessing you wouldn’t just hand over a suitcase full of cash to the franchisor and say “Here, now gimme my franchise!”. Of course you would research it first! Things like how much does the franchisor charge as a startup fee? What are the recurring franchisor fees? Are there minimum revenue targets required to keep the franchise? Is there an ideal (or at least good) location for my franchise? Is my location going to attract the clientele I am targeting? etc., etc., etc.
It’s essentially the same thing with pricing an app. Doing your homework (and not cheating or copying, mind you) goes a long way to driving the success of your app. For example:
The equation above is about as obvious as it gets. But your revenue goals may vary greatly from other publishers’ revenue goals. Are you looking to break even? Make a profit? Make a monster profit? Every decision comes at a price so be aware of the cost of your goals.
There are basically three revenue models in the Windows Phone Marketplace (at least, the way I see it).
Free is free. As in beer. Meaning you build the app, you publish the app and make it available to anyone and everyone with a Windows Phone for free with no real strings attached. In this model, price = 0, meaning your revenue is also 0. There are lots of reasons why you would want to build free apps, but I’ll leave it to you to think of some of them.
Freemium is free, with a catch. The catch could be implemented in a number of ways. The most obvious way is advertisement-supported. That means that you are giving away your app for free to anyone on the Windows Phone Marketplace who wants it, but you are generating your revenue from ads that exist on the app. There are tons of apps in the Marketplace that have adopted this model. The catch to you as a publisher, however, is that the revenue stream you get from this model will vary. The revenue you get from an app in this model depends not only on the number of downloads, but also how often the users will open the app. If users download the app and open it once, your revenue will be small. If your app is popular and often used, however, the app may actually far exceed the revenue you would get from a paid app. For more info on how freemium can work, there’s a really great blog post by the author of the Krashlander game that you might want to check out about how his app did.
Paid apps are exactly what you would expect. Users download your app and (eventually) pay for it and continue using it. If you price your app or game right, this model is a great one as you can almost forecast the revenue you get from your app in the Marketplace based on download trends and run rates. If you use the paid app model, however, please be aware of a few things:
As you can see, pricing your app correctly requires work on your end. Do your homework and it will likely pay off in spades for you. That said, you can still have a number of tricks up your sleeve to entice users to buy your app. I discuss some of them now:
Good luck! If you have other pricing strategies that you have found worked, feel free to comment!
This post was the second in a series of five posts on strategies for being successful on the Windows Phone Marketplace. The first post (publishing in the right geographies) is here. The second post (trial mode and the art of the upsell) is here. The fourth post (differentiation using Windows Phone-specific features like Live Tiles and Push Notifications) and fifth post (how to get promoted in the Windows Phone Marketplace) are upcoming on this blog.