When getting a mobile app developed, something you need to consider is how it should be priced such that it can generate revenue. Of course some apps are not designed to generate revenue and may be used to allow aspects of your business to be done more efficiently. However, many apps are designed at the outset to be a source of income and there are several strategies for how an app is priced.
Free apps are of course very popular as the user pays nothing. So for maximising the number of downloads, it can be a good approach. Sometimes businesses offer a free version of an app to get interest and then encourage people to download a separate ‘deluxe’ paid version, which is not free.
With free apps however, you can still generate revenue if you wish. This is through the use of in-app advertising – where adverts are shown and you receive revenue/commission when actions are taken. This action could be when the advert is clicked, or it may require more, such as the user signing up after clicking. There are multiple ways these adverts can show in your app – this includes showing in a bar at the bottom of the app or a more in-your-face popup adverts that you have to interact (click on or close) in order to continue using the app. Adverts can be static images, animations or videos.
Free – With In-App Purchases
Another popular approach for app pricing is to make the app free, but disable certain functionality. To access that disabled functionality one or more in-app purchases must be made. The advantage of this is that as the app is still free, there is little barrier to stop people wanting to download it. They can then try the app out and if they find it useful, they pay for the in-app purchase and access additional functionality. One example of this that we developed is Hypno Sessions – with this app, you get one session included for free, then others are available as in-app purchases.
Paid – One-off
The oldest and simplest pricing strategy for apps is a one-off purchase. This requires payment to be made before the app can be downloaded. This can limit the number of downloads of the app, as people may not want to risk spending money without trying the app first. For some apps, this can be preferable – for example if the app uses a paid 3rd party API, it’s good to be sure that you will have received revenue (via the app purchase) to compensate for this cost.
Paid – Subscription
An alternative to one-of payments for an app is a subscription – such as a monthly or annual subscription. The subscription charge would typically be lower than a one-off fee and from a user point of view may be preferable, as they have the control to stop payments if they no longer wish to use the app. Assuming your app works well and is useful (and therefore people don’t cancel), subscriptions are one of the best way at providing a longer term recurring revenue.
App Store Payments vs Other Purchase Methods
As default, the app stores (particularly Apple App Store) require in-app purchases, one-off and subscription apps to be paid for via the app store. For many types of apps, it would be against the guidelines to take payment outside of the app store – e.g. via your own website. The Apple guidelines do however permit certain types of app to utilise other purchase methods – this includes ‘reader’ type apps (e.g. magazines, audio), enterprise apps and free apps that accompany an paid web-based service (e.g. VoIP phone, email service etc.)
Which is the Best App Pricing Strategy?
There is no simple answer to the best app pricing strategy! It depends on a number of factors, such as: the type of app (and whether it is B2C or B2B), what your competitors do, what overheads your app has and what kind of marketing you plan to do for the app. Generally though, free apps with in-app purchases are one of the most popular options. When considering the business model for your app and calculating forecasts, you must also factor in that Apple and Android will take a commission from each purchase made. For apps with in-app purchases or that are paid, the amount you charge needs to be carefully considered too – too cheap can give the impression it may be low quality (and put people off) and equally too expensive can of course put people off too.