App Pricing Strategies - Paid of Freemium

If you’ve been into the app market for long enough, you’ll know how saturated it can get, especially when it comes to popular titles. Remember Flappy Bird? Haha, yeah, that went over well for many – except the creator himself. No doubt he was able to rake in large amounts of money, and I don’t blame him.

Your pricing strategy might very well be considered something of a path that you’re going to take with your application. Most businesses/app companies plan for months ahead, and while the recent trend has been to reduce the price to $0.99/per download — the trend of freemium is also starting to emerge.

Paid Apps

The initial pricing module since the very early days, has been that of where you pay for what you’re given. It’s hard to think back and see freemium as a viable payment option – except for the gaming industry – for apps.

In many ways, the size of your business/company that you run is going to determine the initial signup rate of your paid application. That will also be responsible for some of the early reviews, which should help to drive more sales in future.

A paid app means that you’re selling your product directly, there is no middleman involved and the user knows that he is going to get access to all of the features, within a single payment. I can imagine this being very successful in the categories of education, business, technology, etc,.

Those were people don’t want to spend a lot of time making decisions on whether they want to upgrade for the latest cool thing. You could say that a paid app is more like a product. (of a product, in many cases)

Freemium Apps

With that in mind, we can look at freemium apps as a good way of making money for the categories that fall under gaming, entertainment, content, etc,. Gaming is definitely the top category as far as freemium pricing model goes. Extras, new levels, new features, new characters, skins, all those things are great for a freemium application.

They bring in constant revenue, and you can always add additional ‘products’, and keep making steady revenue. But, it’s not that simple, not in most cases. A freemium model can also mean that the user is never going to become a paying customer, and instead use the application only for the necessary (and free) functions that it offers.

The problem lies in apps/games sharing very similar rewards for a small payment. It’s hard to provide something unique for the value of under a dollar, and many developers are starting to realize this. Which ultimately leads us to…

Increasing Your Paid Apps Price

Just a few years ago, nobody expected to see applications and games on the app store, priced at $5 dollars a piece. You’d think that is a crazy amount of money to spend on an mobile phone app, but the truth is – it’s actually a lot cheaper.

When you think about it, paying all that money that a freemium application is squeezing out of you is just pure nonsense. Even if you’re the type who can discipline yourself, the average payment for ‘extra 100 stars’ is roughly $2-3 dollars. That’s insane!

It’s safe to say that trying out this method might actually prove to be of more profitability, I’ve seen colleges who’re developing apps for the app store, raise their prices from $2 to $4 and cash in those profits overnight!

But, Always Consider the Customer

Yes, it’s a lot of talk. Most of this is going to be relevant only if you’ve tried both pricing models, and seen the benefits and disadvantages of both, before committing to making swift decisions.

What we need to do, is analyze and survey our customers, get their opinion on what they think is the best way to price your applications and whether they’d be ready to pay a single – pricey – price one time, rather than investing in something over and over.

The question is, what have you done to improve your understanding of these two pricing models and are you confident enough to be making the decision right now?

1 comment

  1. Corey

    If you look at the latest AppAnnie reports (or IDC or Millenial Media), it is clear that Freemium is almost always the more profitable route than paid. Some categories like Business may be exceptions, as noted in this post, but even that is changing. The best example is the #1 revenue generating paid app in a category actually switched to the Freemium model, and ended up making even more revenue as a Freemium app.

    (btw, if you’re publishing a game app, publish it as a paid first, then change it to Freemium. You get more exposure that way!)