Setting a Price for Your App
Everyone who develops an app for consumer use has to face the question of price. Should your app be free to use? If not, what should you charge for it?
These are difficult questions to answer, especially if you’ve spent countless sleepless hours thinking through every last feature of your app to make it the best it can be.
Pricing your app is a bit more complex than classifying it as “free” or “paid.” There are four different payment models you could consider, based on a number of factors. Before you decide on an app price, take a look at all four models, the benefits of each, and then decide how you can choose the right model for your app.
Meet the App Pricing Models
Free
The majority of apps in the Apple and Google Play store fall into this category. It’s interesting to note the contrast between the two stores. In the Apple Store, 61% of apps are free, compared to 92% of apps available for Android. This is due to Android’s open source software and the fact that it attracts more DIY, small-scale app developers.
In this pricing model, your app will be free of charge to download and use. If you are looking to generate revenue from your app, your revenue stream would come through advertising and directing users towards a larger platform where people can opt into other charges. Free app developers understand their best shot to make money is not with an upfront download charge. Don’t underestimate the revenue that in-app advertising can bring — more than 80% of Facebook’s ad revenue now comes from mobile advertising.
Free apps have the major advantage of being searched first in app stores.
Freemium
Freemium apps are free to download, but place in-app restrictions on what a person can do or access with the free version. This model acts as a teaser, giving people access to the basic functions of an app in order to hook them into paying for additional features.
This includes encouraging users to buy new filters for their photos, extra lives or tools for their games, exclusive recipe content for cooking apps, or items for their virtual farm. Anything that requires the spending of real money to advance functionality in your app space. Remember, in order to get your users interested in the premium version of your app or the paid features, your free version must offer some engaging value at the basic level.
This pricing model is ideal if you want to reap the organic traffic brought in by free apps, but think you have enough features worth monetizing. For some categories of apps, such as games, you may need to plan for regular updates and additions to your available in-app purchases in order to keep users engaged long term.
Paid: One-Time Purchase
In this model, users pay a one-time fee to download your app. Setting a price for your app will depend on a number of factors, including the demographics and interests of your target market, and competitor price points. Interestingly enough, $0.99 is not the most popular price. In the Apple Store, 12% of apps are listed at $2.99, and 8% at $4.99. These outrank the 6% of apps charged at the minimum $0.99 rate.
One challenge of the one-time payment model is that users cannot try out your app before spending money on it — you’re essentially asking users to buy a product without testing it. This can slow downloads, unless your app falls under a niche market, doesn’t have much competition, or comes with heavyweight reviews. These kinds of paid apps are best for popular businesses that already have a large base of loyal customers.
Paid: Recurring Subscription
As opposed to charging users once to download your app, you may consider charging a recurring monthly or annual subscription. This works well for apps that produce fresh content on a regular basis (such as news apps) or those offering ongoing services (such as personal finance apps and streaming apps). One advantage of this model is that you may be able to charge users more in the long run than they’d be willing to pay in a one-time fee, generating a steady stream of revenue for your business. The subscription model also allows you to offer a free trial, which can lower the barrier to entry for new customers.
This model does require you to make additional decisions, such as whether you want to bill monthly or annually, (the answers depend heavily on your target market and how the app is used). You’ll need to plan for the subscription model early during development of your app, as the app will need to recognize the time interval set for your subscription, and be able to accommodate changes in user subscription status, expired subscriptions and more.
Paidmium
This pricing model is a blend of the paid and freemium models. These apps require an initial download cost — plus additional opportunities for in-app purchases. The paidmium model keeps developers on their toes, but should only be used if a company is certain it can continue providing valuable content to users on a consistent basis.
Choosing Your Pricing Model
There are three major questions you should consider when choosing a pricing model for your app:
Who is my audience? Survey results show that those in the baby boomer generation will be less likely to pay for an app than younger consumers, who have fewer reservations about spending money on app downloads.
What are my competitors doing? If you are the only paid app among a sea of freemium apps with similar offerings, your product will drown. Look at the most popular pricing model for your competition and price your app accordingly.
iOS or Android? The Apple Store has more paid apps than the Google Play Store. You may consider different pricing schemes, depending on whether you’re selling in one or both stores.
Pricing for Internet of Things (IoT) Devices
If your app is for an IoT device, scrap the regular pricing model schemes. Because these apps offer highly-personalized, on-demand services for IoT devices, they naturally demand an initial payment from the user for the actual device. Many IoT gadgets come with a selection of apps already installed by the company that produced the device. Consider whether your app would be better sold to consumers, to be downloaded onto their various IoT devices, or to the makers of the IoT devices themselves.
IoT apps offer a range of services in one app (think of a home security app that can identify potential fires, intruders, and lock your front door if it has slipped your mind). While the app itself may be included for free, its provided services are not. As a result, IoT app companies are creating tiered payment models for customers, ranging from the most basic of services to higher paid tiers that offer more flexibility. This allows customers the freedom to choose their level of investment.
IoT apps can also be pay-as-you-go. For example, imagine having an air conditioning unit that’s connected to the IoT, and charges you only for your rate of usage. We already see insurance payment models in which users pay for car insurance per mile driven; the rise of IoT vehicles will make it possible to not only pay-per-mile to rent a car, but also pay-per-usage for any IoT app services you may use while driving that car. The pay-what-you-use approach gives users flexibility in how much they spend for the services your app offers.
Don’t Wait Until Release to Set a Price
It’s best to consider the pricing model and price point for your app before you go into the development stage. This way, your development team can design and produce features that fit what’s needed for your revenue model — whether that’s elements to accommodate advertising, encourage in-app purchases, or direct users to a wider network. During development and design, you can always rework the pricing model as you add or remove features from the app.
By the time you’re ready for release, you’ll not only have a well-built app but also a well-suited pricing model to go along with it, so as your app delights users it also provides you with appropriate revenue.
If you need help assessing a price point for your app, Barefoot Solutions offers a full-service team to guide you in the process, from strategy and marketing to design and development — let us help you bring your app to life.
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Apps and Mobile Changing How We Fly
When cellular phones first hit the mainstream, the airline industry maintained a measured distance to keep mobile use at a minimum. Since 1991, the FCC had prohibited cellular use due to concerns that they could interfere with wireless networks on the ground, as well as disrupt Captain to traffic control communication. Passengers were instructed to turn mobile devices on “airplane mode” or even have mobile phones completely powered down for the duration of the flight.
Additionally, customer satisfaction reports showed consistent resistance to cell phone use, given the concern that voice calls may be a nuisance in such small quarters. Yet since the original iPhone release in 2007, cell phone use has dramatically changed, and just this year the ban on mobile use in airplanes has been lifted by regulators. This new freedom provides pilots and airlines the ultimate decision whether or not to allow cellular phone use in-flight.
There are still agencies such as the Department of Transportation (DOT) fighting to bring back the ban on cell phone use in flights, however the forward progress is an indicator that technology may be utilized more in the airline industry. As previously mentioned, the decision to allow cell phone use is currently up to individual airlines, and some are fully embracing new mobile technologies to add convenience for customers as well as efficiency across the board.
In-Flight Music
Yes, in-flight movie and music entertainment have been around since the VCR. But some airlines are taking in-flight entertainment to the next level, moving beyond in-flight radio and on to mobile apps.
One example is Air France, with their app Air France Music. The app is intended to help flyers discover new music given the region that they travel to. By giving passengers a “sensory” experience, Air France Music provides a unique selection of music onboard with rare and exclusive content from artists all over the world. Touted as helping passengers find, “music in the sky,” users can download and save the new tracks they enjoy to playlists.
However the app isn’t intended only for those flying - users with feet firmly planted on earth can interact with the app as well. Exclusive pieces of music are “hidden in the clouds,” and users can enrich playlists by lifting their mobile device up to the sky. Music notes appear in the app’s tracking screen, and by clicking on the note the user can view the artist, listen to the song, and save it if they wish. Every region from Paris to Tokyo to Buenos Aires have their own tracks, intended to give a nod to the cultural flavor of each region.
Gaming
Games aren’t just for kids, especially during a long flight. Virgin Airlines’ mobile app comes equipped with many tools most airlines include in mobile apps - check-in capability, flight status updates, and seat selection. However Virgin also offers in-flight entertainment by providing not only destination videos, but 2 video games to play during the flight. Similarly American Airlines is also in the gaming arena, offering a trivia game that passengers can play with each other over the WiFi network in-flight, providing entertainment and engagement with other flyers.
Mobile Boarding Passes
One of the biggest changes in 2014 was the release of mobile boarding passes. As a customer checks in for their flight, they have the option for which kind of boarding pass they would like, either printed, online, or mobile. Those who select mobile no longer need to visit an airport kiosk, agent, or print a pass at home. They simply need to scan the open mobile pass at the gate. Airlines that released this feature this year include US Airways, American Airlines, Southwest, and British Airways as well as several others.
For iOS users the mobile boarding pass brings another convenience. With the latest iOS 6 update Apple released the Passbook, a multi-functional app to store reward coupons, loyalty memberships, gift cards and of course, boarding passes. When checking in for flights and selecting the mobile boarding pass, these passes can be stored in a user’s Passbook for easy retrieval upon arriving at the airport.
Real Time Flight Tracking
Those tasked with picking up a friend at the airport tend to have the concern of flight delays. This concern could be alleviated by calling the airline or checking online to see the status of the specific flight. However new apps are available that not only alert you to whether the flight left on time, but will display real time progress of the aircraft, showing specifically where the plane is in the sky. This is great news for those traveling long distances who may have been slowed by turbulent weather or sped up by tailwinds.
The airline industry has been through a myriad of changes in recent years, and it’s refreshing to see the embrace of mobile apps. In fact this year American Airlines, fresh out of their own mobile app ideas, invited 60 developers to compete at SXSW to create the latest app to be supported by the airline. This demonstrates that the future is bright for those interested in building mobile apps for the airline industry.
Do you have an idea for mobile app development? Let us know and we’ll be happy to help you get started.
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