Pricing an App – Choosing the Right Pricing Model for Your Mobile App

While you might have been developing that app out of fun, or on a whim, I'm sure that your primary goal is to make money. After all, you would be left with nothing after spending a lot on developing and making a really great app.

However, because of a lot of options for monetization for your app, you might be wondering what is the best and most effective way to shoot up your profits.

While in-app purchases are definitely raking in the money, there are still other ways to actually bring in revenue. There are currently three pricing models that pull in revenue from these apps. Depending on which one you choose, the rise of your profits would greatly depend on your chosen model coupled with your own creativity and innovation.

Here are our tips on pricing an app. 

Free apps & games with optional in-app purchases

While free apps and games do not really sound appealing to developers, it is considered to be the model, which actually brings in a lot of revenue. According to a report by Distimo, in-app purchases make up for 76% of all revenue in the Apple App Store. About 90% of all revenue, in February 2013, was actually generated by in-app purchases in Asia. Hence, this pricing model has been getting more and more popular over the past few years.

free apps

This pricing model gives users a free app or game, but with limited features. Typically, developers release their apps without any cost, but would typically have features that are limited (e.g., can only save 5 files, can only store 10 files, can only export a 1-megapixel photo). Users would get access to the unlocked, full version by making an in-app purchase.

There are many things that developers typically bundle upon ‘unlocking’ a premium version with an in-app purchase. It’s somewhat an upgrade from the limited app that users got for free.

in-app purchases

Other apps offer additional content or additional features upon completing a purchase. Other free games might give you access to exclusive characters or maps, and apps can give you additional perks or benefits upon paying for the full version. Others even constrain the use of ‘free’ apps to a certain period of time, such as a week or a month.

But why is this price model quite popular? It allows users to get a taste of what the app can offer. At the same time, it also allows developers to improve the app’s value. It also helps the users decide, since he has already tried the app itself. When a user gets hooked to an app, or find that it’s worthy to pay for, he won’t hesitate to shell out $0.99 or $1.99 to buy the full version.

One-time payment for apps or games

mobile paymentUsers pay to download the app. Other updates are free. The app is typically linked to your account, and you can also download the paid app to your other devices, provided that you use your same account.

A paid app should always hook your users the first time they see it, especially if you want users to pay for your app without even letting them try what it is. Moreover, it’s a one-time payment – there’s no repeat payment from your customers. To make sure you have a continuous flow of profits and revenue, you need to actually attract new customers all the time.

How would you know if your app is going to succeed in the paid-app category? A lot of paid apps are actually utility or productivity apps, such as apps for annotations, or for making zip files. Considering what your app could offer, you should successfully gauge whether people would actually pay for your app.

Paid apps with additional premium features and/or content

Users feel that this pricing model is unfair. Apps are paid before being downloaded, but additional content and features need additional pay. It’s quite hard and tricky to switch to this kind of pricing model, especially if you are just starting out in the app industry. However, there are some apps that do well with this kind of price model. Most apps that work well with this model would be those that are really needed by more targeted users, and would normally not be offered by typical developers. Specific niche developers, such as flight simulators and medical books, typically use this kind of pricing model.

An additional price model: free apps fueled by advertising

This is an emerging pricing model that has been gaining popularity over time. This is a free pricing model, but the developers earn money by displaying ads inside their apps.

mobile advertising

Today, there are a handful of apps that use this kind of monetization. Some run non-intrusive ads at the bottom of the apps or at the top. However, some users find some ads too intrusive already. Others also allow users to remove the ads by offering them to ‘pay’ for an ad-free experience.

This kind of monetization would typically be effective if users need to run an app for longer periods of time, or more frequently. Developers usually earn money when there is a lot of downloads and users.

So what is the best pricing model for pricing an app?

Depending on the model you choose for pricing your app, it can either make or break your app. Choosing to monetize your apps would entail a lot of strategic planning to make your chosen model work well to help your apps rake in revenue and profits.

The value of our app will determine whether your app would be a business that could bring you a lot of money, or simply a hobby that would just be a fad. By determining the best monetization price model that works well for your app, you can unlock a very good source of passive income.

Most app developers prefer to sample their apps for free to some people first, before launching their apps. That way, users are able to know what’s in store for them, before even buying the full app or making some in-app purchases.

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