Pricing for mobile app? High price vs lower price with equal conversion rates?

This is probably a stupid question. We are testing three price points for our mobile consumer mhealth platform. We are neck and neck with two price points which are pretty much equal in conversions, 1.99 and 4.99 which price should we pick? The high one right?


If you mean the conversion rate is the same (meaning you're making a lot more revenue with the larger price), then that's the right call.

If you mean that your net profit is the same but you have higher unit sales on the first price I would go for the lower price to have more customers (and more chances to have them buy an IAP eventually, or leave a good review).

Answered 10 years ago

Conversion rates only provide a part of the picture. Total number or buyers and/or total top and bottom line dollars made must also be considered.

If 70 out of 140 people purchased at the 1.99 but only 2 people out of 4 purchased at the 4.99 price point - even though the conversion rate is the same (50%) and margins might be better at 4.99 - you should definitely go with the 1.99 price point. In other words - the bottom line is the bottom line.

Lower conversion rates with a significantly higher number sales still equals greater revenues. And all things considered equal this means more income/profit (bottom line money)

So heed this REMINDER: Always remember to look at all key metrics (I recommend at least 3) - and not any one in isolation.

With sales already coming in - it looks like you are on the right track and off to a great start. For any assistance with other questions feel free to get in touch with me. Best of luck!

Answered 10 years ago

Ask 25-100 of your potential clients.

Answered 10 years ago

Go for the higher-paying customers.

The risk in a race-to-the bottom is that you might actually win. Worse, you might come in 2nd.

Early on you want the higher-paying customers because you want their feedback. You want to listen to their feature requests and implement them, so that you can iterate your product and get more $4.99 customers in the next release.

You also need to consider the opportunity cost of maintaining a larger customer base. Assuming you are breaking even on revenue and all other things considered equal then you need to answer 5 times the number of customer support requests on the lower plan.

All things are NOT considered equal. Your $.99 customers are going to have far more complaints, customer service requests, and overall headaches. All of these things are going to distract you from developing an app that provides real value for your customers.

We see this pretty frequently at Ambassador. If you'd like to schedule a call I'd be happy to share more specific insights around how moving up-market has helped us.

Good luck!

Answered 10 years ago

Millions of apps already live in the Apple App Store and Google Play store, and thousands more are launched every month. A study conducted last year by App Annie found that when people are on their phones, they are spending the majority of their time on apps. We have a passion for apps and love seeing the joy our apps bring to people. Apps are becoming more and more valuable to consumers, which is also making the market harder and harder to penetrate. Offering a free app is one of the most effective models, especially if your plan is to attract a lot of users. The goal is not to make money directly from the app, but instead to drive people to other revenue streams. Companies also create free apps to facilitate customer service and to aid customer retention efforts. Banking apps, for example, make it easier and more convenient for clients to manage their finances on the go. On these apps, customers can often receive or activate additional offers, such as a free overdraft or credit limit increase. Those services ultimately make money for the bank, even if the app itself has no price tag. With a free app, you can usually gain users quickly. Users downloading a free app typically expect to deal with ads, but they still want the ads to be relevant to them and to the app. Making sure the ads in your app are interesting and non-disruptive is a good way to keep users happy.
Google AdMob is one such service offered to both Android and iOS developers that allows you to filter your app’s ads by user relevance and ad format. Customization and monitoring are key to not irritating your users and driving them to bail on the app.
There are three main types of freemium apps:
1. Paid: Once users pay, they own the app and all its features. It cost $3.99 at the time of writing this post but was still #19 in the Word category of the Apple App Store and had a 4.5/5-star rating. Paid is a common app pricing strategy, but it is also one of the least effective. A potential consumer will want to know exactly what they are getting by downloading and using your app, and what makes it better than a free equivalent. One approach many brands take to position their app with potential long-term users is to offer a 7-day or 14-day free trial, at the end of which users must pay to continue using the app. Allowing people to try out the app with no pressure or commitment to purchase is a great way to encourage users to dip their toes in the water and see what you’re all about. Users will also have much higher expectations for your app than for a free app. If you manage to attract a user, they will likely be a loyal one.
2. Paymium: The user pays for the app, but there are additional features that can be accessed for an additional cost. Ellen Degeneres’ popular party game Heads Up is one paymium app that successfully draws people in. As of May 2, it is #1 on the iOS top paid apps list. You must showcase the benefits not only of getting the app to begin with, but also paying for additional tiers and features. Games that people are familiar with, such as Mindcraft, The Game of Life and NBA 2K18, do great with a paymium strategy. This is one of the least common strategies but does have the potential to provide great revenue streams for your business. It is recommended you are clear with users upfront to avoid causing frustration. Like freemium apps, paymium apps require continual involvement from the development team to stay relevant, up-to-date, and engaging to entice users to come back and make additional purchases.
3. Subscription: One last pricing strategy to consider is a subscription-based model. Users pay a monthly or annual fee to continue using your app. Some app categories using this strategy are newspaper apps, dating apps and music streaming apps like Apple Music. Apple, for one, is fully on board with subscriptions, even offering an incentive to companies who pursue that pricing model.

Clearly, there is an opportunity to make way more money using this strategy than any other. You are always making money, even if you are not consistently gaining more users. A subscription is also somewhat of a softer approach than asking for direct payment, as it makes the user feel like they are paying only if they continue to find value in the app. Those who choose to subscribe to your app show commitment to your product.
Think about apps as you would any other product. You must play for the market. The way apps differ from other products is that the sheer market saturation causes a noticeably short shelf life. You really need to work to keep your users engaged and coming back for more. Potential customers could be turned off by what they perceive to be a shocking cost, or they might delete an app they have downloaded after receiving too many pop-ups or simply not getting their money's worth. If you choose to assign a cost to your app, know that user expectations will be higher. Users want any app they purchase to provide exceptional quality, even if it is only $3.99. If you have a free app, think about how many users you expect to gain.
Besides if you do have any questions give me a call:

Answered 4 years ago

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