We all know the App space is very interesting. In 2015 Apple released data showing that App Store developers have earned a cumulative $25 billion from the sales of apps and games. Fun Fact: Apple makes $0.30 cents on every dollar for applications sold, which generates them 3 to 4 billion in revenue per year - android is similar.
The problem with apps, as a developer, is that most of them are free and those that are not, are priced very low - $0.99 cents to $1.99 on average. This creates expectations in customer minds. They expect that if you provide them an app, it better be “cheap” - regardless of it’s capabilities.
Here is a case study
A company came to us asking, “What should the price of our app be”? This company had developed a training course that helps high school students increase their chances of getting into their top school of choice, which they then turned into an App.
After the study was conducted, we not only found what the “best price” of the App should be, but what the optimum price should be if it were offered and implemented through a website.
First off, this was a unique and very important product. Parents saw a huge value in this application because many of them are deeply invested in the process of getting their kids into “the best” college - so the market for their product was enormous.
Through our study, we found that the optimum price that customers were willing to pay for this app was just under $50 dollars, $49.95 to be exact. Which of course would be substantially greater than what most customers “expect” to pay on the app store. However, we found that if their same product was offered through a website, consumers had a 20% overall higher willingness to buy AND for x3 as much as the suggested app price of $49.95. They now could sell it for $149.95 - that is a $100 dollar difference!
Once the company saw this data, they completely changed their product roadmap for development. They Instead focused on the much more lucrative website medium for distribution. This resulted in them making a lot more money and allowed them to grow at a much faster pace - had they chosen to showcase their product in the app store .
The lesson here is to know that your first choice is not necessarily your best choice. Once you have insight & hard data on what people are willing to pay for your product through "medium A" vs. "medium B", you can make the smart & confident choice for pricing - and in turn grow your business faster.
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