Setting Your Apps Price

• Price high initially and measure the results. Pricing high does not mean you pick a random high price. It means that you choose a price that falls in the high end of the range for your app's category. For example, if you are pricing a game, the range is generally priced between $0.99 on the low end and $1.99 on the high end. So, a high price initially would be $1.99. However, pricing higher in your category means you've got the features to back up your price. You can't just start out with a high price because you want to make more money!

• Price mid range and measure the results. Pricing in the mid range means you've looked at your category, measured the lowest price and the highest price, and then selected a price somewhere in the middle for your app. For example, you are selling an app that helps users improve their fitness. This type of app has all kinds of competitors and prices. The price range for this type of app is free to $6.99. So, after some research you feel that your app is worth more than free but less than $6.99. So, you start at a price of $2.99.

• Price low and make it up on volume. Most developers do very little in the way of pricing analysis for their app. They simply take the low price at $0.99 and wait to see what happens. For many apps, especially games, this may be the right price. But, again, some research should be done to determine if that's where the starting price should be set.

Regardless of which strategy you end up adopting, you will want to perform a breakeven analysis to know how many apps you will need to sell at different price points to break even. The following pricing discussion makes a few assumptions, as outlined here, for simplicity:

• Nearly all apps on the Android Market fall between $0.99 and $9.99. As you calculate your price, you are most likely going to look at price points in this range.

• We make the assumption that your app will not make it into the top 100 most downloaded apps. This is not being pessimistic, just realistic. You're an independent developer and most likely don't have a huge following for your app yet. In fact, if you are not selling a game app, you might never get into the top 100.

• Because you are probably not in the top 100, you will most likely sell at most 100 downloads of your app per day. For our following examples, we will assume 100 sales per day.

Our first example assumes no marketing costs to launch the app. Also, let's assume you have spent $5,000 to develop your business application. You believe you can realistically sell 100 apps per day, so that's what we'll go with for this example.

The results of our breakeven analysis are shown in Table 10.1. They indicate that it will take at least 70 days to break even for an app that costs $5,000 to develop charging $0.99 per download. Doubling the price cuts the breakeven time in half to 35 days. Obviously, as the price goes up for the app, the time needed to break even goes down. However, it's not that simple to kick the price up a couple of bucks to lower your time to break even. This is where you have to review other similar apps to see what you can realistically charge for your app. If your app is clearly out of the pricing range for similar apps, your app will not sell.

Table 10.1 A Basic Breakeven Analysis at Different Price Points for an App That Costs $5,000 to Develop

App Price @ 100 Sales/Day

Gross Sales

After Google Commission

Breakeven Reduction (First Sale)

Days Left to Break Even (~)

$0.99

$100

$70

($4930)

70

$1.99

$200

$140

($4860)

35

$2.99

$300

$210

($4790)

23

$3.99

$400

$280

($4720)

17

$4.99

$500

$350

($4650)

14

$5.99

$600

$420

($4580)

11

$9.99

$1000

$700

($4300)

If you have only incurred your time in app development, you should still calculate the cost of developing your app based on estimated hours spent on the project times an hourly rate.

As you can see by looking at the table, pricing your app at $0.99 will take you more than two months to break even, assuming you spent $5,000 to develop your app. Again, as an independent developer your development costs will vary. But if you haven't spent real dollars you most certainly have spent many long nights writing code! So, you should calculate your hours spent in development and estimate some sort of development cost.

Based on this table, we are of the opinion that it's better to price your app higher first and carefully monitor the results. By this I mean in the $2.99 to $5.99 range (for non-game apps!) so that you've got room to adjust your pricing if needed. If you have developed a game app, the pricing sensitivity is much greater and you will need to be priced in the $0.99 to $1.99 range as a starting point.

If you have done what we call "pre-launch" marketing activities, you will have established a following of early adopters who will gladly pay your entry price. In Chapter 19, "Components of an App Marketing Plan," we discuss how to develop a marketing plan for your app. The marketing plan is ideally implemented at the start of your development project, not at the end, so that you can begin to establish a following for your app prior to its launch.

After breaking even, you can begin to enjoy the fruits of your labors. Table 10.2 shows how much you could make on a daily basis assuming a 20% marketing expense that may bring you 50% more in increased sales.

Table 10.2 Pricing Analysis Showing a 20% Marketing Expense with a Resulting Increase in Sales

App Price @ 150 Sales/Day

Gross Sales

After Google Commission

20% Marketing Expense for App

Take Home Net (~)

$0.99

$150

$105

$30

$75

$1.99

$300

$210

$60

$150

$2.99

$450

$315

$90

$225

$3.99

$600

$420

$120

$300

$4.99

$750

$525

$150

$375

$5.99

$900

$630

$180

$450

$9.99

$1500

$1050

$300

$750

The issue with any pricing assumption is trying to figure out how elastic the pricing model is for Android apps. Over time, elasticity will become more predictable. Some bloggers have said that lowering their price has had some effect on sales but for a limited time. Others have said that lowering the price has had no effect on their sales. Who do you believe? Well, they are both right. It depends on the type of app and variances in mileage. So, the best approach is to experiment at a price point that makes sense for your app based on your research, breakeven analysis, and type of application.

If you are confident that your app is unique and has qualities and features that no similar app provides, price it higher and measure the results. If over a few weeks your sales start to drop off, you can carefully begin to reduce the price and measure the results. If you are doing solid marketing, driving visitors to your site, have created a following through the marketing methods discussed in earlier chapters, then there is no reason why your app (non-game) cannot continue to sell at sustainable levels for many months or possibly years to come.

Some app sellers have also found some success in making limited-time offers where they drop the price for a few days only to spur sales. If you have a certain promotion you want to do around an event, you can often encourage sales by offering a temporary price cut. Let's say you offer a financial calculator that includes special tax features. You may want to reduce your price for a few days around tax time to spur sales and let your app take advantage of this particular time of year.

Do not undersell yourself by pricing your app too low to begin. You can always lower your price, but it's harder to raise it.

0 0

Post a comment