How to make more money with In-app Purchases

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Everyone knows you can turn a profit selling your app, but you can make a lot more money with in-app purchases. (scroll to bottom to watch video!)

We're talking all about the ways to make money with in-app purchases. This is not a new concept; in fact, the topic that comes up all the time. But I've noticed that a lot of people don't know how to translate the idea into action when it comes to their own apps.

The main idea behind profitable in-app purchases is a time-honored concept known as the decoy effect.

Think of concessions at the movie theater. They've got small, medium, and large sized sodas. Prices might be $3 for a small and $6 for a large, but the medium sits at $5. For just a dollar more, you can get twice as much beverage, so of course everyone gets the large!

The important takeaway is the fact that the large soda brings with it a much higher profit margin than the small. People are driven to the higher priced item by the idea that it's more product for the price, especially compared to that close medium price.

The same is completely true for in-app purchases.

If you group the in-app item pricing closely like this, users will almost always go for the top option. Simply put, this means a much higher profit margin for you as the app seller.

This strategy works because of basic psychology principles. Whether you're selling sodas or digital widgets, people feel the psychological pull toward the pricier option.

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Let's talk about a few things you can do to implement this idea in your own apps:

1. Add more in-app purchases

This step is nearly self-explanatory. You simply need to add things to buy in your app. Whether your app was paid or free, there's the opportunity for in-app purchases for users who enjoy it.

So go ahead, add more things to buy. Create new things within your app, whether it's a game, photo app, fitness app, or whatever. The point is to create opportunities for a purchase to be made.

Once you've got 4 or 5 available purchases, you can implement this strategy.

2. Change the price

Now that you've got some purchasing options in your app, you can go ahead and start testing out different prices.

Go into iTunes Connect or Google Play's developer console and try making the price of your second-tier purchase very close to the top purchase. You'll soon see a big swing up toward the top option as the main one that people purchase.

Remember, this is a proven strategy not only in the app world, but in the wider business world itself.

3. Drive people to in-app purchases

This is where you really focus on actually getting users to make those in-app purchases.

If you have an ad network – Admop, Chartboost, etc – you can put your own apps in the ads that users will see. Sometimes people even cross promote their other apps from within their own apps.

You can also advertise your own in-app purchases in the ads that users see in your app. It sounds a bit Inception-like but it works! People see the ads and become aware of the available options, leading to more purchases.

4. Test the price

Now that you've got your in-app purchases out there in the world and people are buying, you can really play with the price levels to see just how much profit you can make.

The stakes are lower for in-app purchases, so get a little experimental. You never know – you could jack the price up to $50 and maybe people won't buy, but maybe they will. A higher price than you think is safe just might work.

So test out your low, middle, and high price ranges and see what combination ends up getting the best response. It's your app, your playground. Try it out!

(p.s. these aren't my ads, the song owner gets paid so I can use this jam)

So now that you've learned a little bit about optimizing the prices of your in-app purchases, I hope you go out there and do something with it. The risks are low and the rewards are high. With just a little finessing, you could turn your existing app into a goldmine!

Rock & roll,
Carter

How to Make An App

 

COMMENTS

  • StillUntitled May 24, 2016

    Hey! glad you’ve made a more extensive post about it! I was looking forward to read it since blogpost on diverse ways to make money in apps.

    I’m wondering how much of an impact on in-app purchase the visual side has. If you confront user with too much of content to buy, you might end up with people getting disoriented and withdrawing.
    in other words, how to make the decoy even more tempting (let’s say that gems are not top idea here)

  • Carter Thomas Carter Thomas May 24, 2016

    @Untitled – the visual can be blatant or subtle depending on how much the user wants the in-app purchase. I think on average, most developers (and app marketers), underestimate how important it is to tell people to do something very explicitly. It’s easy to assume users are as smart as you are when they’re using the product.

    The decoy effect is more tempting when there is a clear benefit of getting more of something. In a situation like Clash of Clans, for example, having more coins means you can speed up more parts of the game. That’s very attractive to a user. On the flip side, if you are selling 100 photo filters to a user that only wants 2 filters, that’s not attractive.

    It all comes back to showing the user how to have a successful experience with your app and buy purchasing more, they will have MUCH better experience.

  • Corey May 24, 2016

    Good stuff, Carter. Quick question: I know how to change my IAP prices in Connect, but don’t I also have to release a new binary to update the prices (ie labels) shown in my app? Or is there some way to dynamically show the current price from Connect? Thanks!

  • Carter Thomas Carter Thomas May 24, 2016

    @Corey – that depends on your app design. If you hard code the prices in, then yes (you put the prices on the actual images).

    You have two options to fix this:

    1. You use text to display the price of the In-app purchase and you pull that text dynamically from a Plist file or XML file on your server. When you change it on your server, the app updates the new text, then you change in Itunes.

    2. Use a visual representation for small, medium, large. One thing I do in Casino apps is show 1 coin for small, 2 coins for medium, 3 coins for large. Then when they click on the IAP the price is displayed.

    For the decoy effect, #1 is probably more effective because then they see the clear “discount” of the large IAP.

    Thanks for commenting!

  • priyal June 1, 2016

    how much money does average ad supported game apps
    earn daily from video ads and internet offers with
    in app purchase?
    eg-(nazara games-chota bheem jungle run,
    chota bheem race game,chota bheem the hero ,
    virat cricket)and baby hazel game series etc
    this games mostly earns from video ads and other offers
    on internet so how much they earn daily if downloaded
    million times ? Is there any such website where it tells
    there daily revenue estimate other than sensor tower ?
    Here this game apps strategy is to earn from video ads
    and internet offers so how much they earn daily with
    in app purchase(for name sake ) ?

  • Muhammad rehab June 4, 2016

    Hello Carter, i would like to take your opinion in something regarding developing a new app idea. Can you send me your number on my mail, or any other way to call you.
    Appreciating your support

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