Two Pricing Strategy Takeaways from Apple's App Store
This article is a guest post from Jack McDermott, Co-Founder and CEO of Balbus Speech, one of the market leaders for effective speech therapy apps and tools. Here he writes about his experience in Apple's app store.
Anyone dealing with software pricing knows one thing in particular: it’s really, really tough. Most companies struggle to find the ideal balance between price, value and user acquisition costs. Not to mention most software products come without recurring revenue—so you better make your one sale count and not leave cash on the table.
It’s even more challenging when you’re selling apps on the App Store, where nearly 9 out of 10 downloads are free apps. Price Intelligently has already written a great post on freemium here, but with well over 700,000 apps, the iTunes App Store is a pricing battleground that favors the lowest possible price: free. For independent developers, it’s sometimes impossible to stand out from all the rest. But, just like catchy marketing or a refreshing user experience, pricing is another way to attract new customers.
photo credit: PhotoAtelier
At my startup, Balbus Speech, we develop speech therapy iPad apps. In a specialty market like ours, prices on the App Store range from free to upwards of $99. Our apps, Speech4Good and Speech4Good Lite, are targeted at speech therapists looking to spend between $5-20—no easy feat when the entire marketplace is sunken with free to 99 cent apps. As a result, pricing our apps has been a constant evolution of “trial and error”—our prices have moved anywhere from free to $29.99. Yet through the trials (and with a little help from Price Intelligently), we have learned two key takeaways:
1. Be goal-orientated: Turn "free" into "free to download"
Your app pricing should reflect your company’s goals. With our apps, we recognized that our market is highly selective and comfortable paying for therapy resources. Yet, we also recognize that users can only improve their speech if they have access to our technology. Clearly, we need to think of our pricing structure as a combination of affordable value as well as widespread accessibility—which is evidence of our full-featured version ($19.99) and our “Lite” stripped-down version ($4.99).
On the other hand, if you’re marketing a viral game or music/video app, you may want to compete on features and user experience, not price (most are free to download anyway). Unlike special education apps, these apps have different goals: most often, free to download with restricted features or levels that require an in-app purchase—remember: “freemium” is a marketing strategy, not a pricing strategy.
2. Get creative: correct price points and targeted flash sales
It’s time to change how you think about sales on the App Store. Your goal should be minimal: what value in price do I need to portray to get a potential user to make two clicks and type in a password? This is often all that’s needed and it’s how you should think about your App Store product. In fact, by lowering our price 33% from $29.99 to $19.99, app sales increased by over 200%--making this pricing change a valuable long-term strategy.
What about getting creative with flash sales? We tend to avoid quick sales—which usually hope to spike downloads and make your app rank higher on the App Store. Our market is less elastic in this sense, as speech therapists and students typically research and compare apps before purchasing. But if you’re looking to temporarily drop your price, do it with a clear purpose. For instance, we recently partnered with “Apps for Children with Special Needs” to promote a back-to-school app sale—this way we maximized our marketing reach with a partner while also promoting an event or occasion as the reason for our sale.
In summary: Iteration in any pricing strategy is key
So with these ideas in mind, there’s only one thing left to do: try it for your app. We've been able to refine our pricing strategy so we can do less “trial and error” and make more sales. Pricing is a process just like marketing, product development or even sales. The sooner you treat your price strategy this way, the sooner your app sales will exceed your goals.
To learn more, check out Price Intelligently's Pricing Strategy ebook, their Pricing Page Bootcamp (it’s free!), or learn more about their price optimization software.