For each App entrepreneur, building a great mobile app becomes the overwhelming focus. Since the application development process has been more than just software development, a lot of time and effort is spent on discovery, design, and development. Of course, providing value to the end-users is the prime objective behind any application however pricing a digital product is an equally important aspect, one that should not be overlooked. It should be carefully determined to build a beneficial and scalable mobile application business.
The product pricing strategy plays an important role in getting your application the initial traction and visibility in the app store. How you determine the cost of your product decides the success of your application in terms of the number of downloads and user retention over the long haul.
However, it resembles walking on a tightrope- applications that are offered for free or at a generally lower price accumulate more market share and can enter in the market flawlessly while applications that are offered at a greater price have the potential to garner a good ROI.
So, how would you choose the appropriate pricing strategy? A lot of factors are important while choosing the price for your app, market research, the value and usefulness of your application, and the market competition. This combined with an understanding of customer psychology is a must to run a successful mobile application business.
If you plan on building an application, or your product is in the development process and you have not given much of an afterthought to this equally essential aspect, don’t worry, we will separate what is a product pricing strategy, the popular pricing models for mobile applications and help you strategically decide the appropriate price for your application.
What is a product pricing strategy?
Pricing strategy is the manner by which you make money from your mobile application. Each breakthrough idea has some business model behind it. While at first, you may only be concerned about rapidly launching a Minimum Viable Product, having a pricing strategy in place will just help you with building a robust product. Pricing a digital product may appear to be a simple task, yet it isn’t. Play Store and App store are sprawling with a huge number of mobile apps and the types of pricing strategies have evolved over time. But, before we dive excessively deep into the types of mobile app pricing strategies and discuss their advantages and disadvantages, we would like to share some significant insights that will help you to take the appropriate choice.
Product Pricing Strategies for your Mobile App-
1. Human Behaviour and psychology-
Human psychology plays a major role in deciding the cost of your product. Consumers are aware of the rapid development in technology. It is the growing rise in consumerism that steers the extent of advancements. Customers today are all well-read, well informed and they generally strive to make a conscious decision. For each product, there are ten different choices available in the market, so how would you assure a customer will choose your product? Simple, you must ensure that the perceived value of your product is greater than its cost.
A customer should consistently feel that the cost of your product is correct and taking advantage of this becomes more simple when they don’t have a reference point, to begin with. Before taking a decision, we humans will in general compare products and their alternatives available in the market and assess them for their advantages and disadvantages. In this way, while deciding the pricing strategy you should consider other products available in the market, characterize your value proposition and ensure you are offering greater value than your rivals.
2. What the market is willing to pay-
The perfect pricing strategy should revolve around what the market is willing to pay. And, to confirm that, you should test your product at different price levels and see how the market responds. An application has a recurring revenue stream. To stay competitive you have to use new functionality and offer regular updates. So it is necessary to holistically see the recurring revenue model and not worry about the revenue per price point.
Mobile app developers offer a product for free to accumulate a huge user base and generate revenue from advertisements. But later on, when you offer an updated product for a specific cost you had just devalued the product and can’t generally sell it for more because the perceived value is low. Hence the better approach is to test your product at various price levels and analyze the market reaction towards it.
3. Build a product that users want-
A product should be built with a goal to address user concerns and it must solve their concern. When you build something that users really need, it is easier to decide the price. Search for factors that can improve the value of your app: a stellar design, an awesome user journey. To determine the mobile application pricing model you need to know the application development cost, which includes factors like the actual cost, the value the product offers and the money required to flourish it. Having a basic knowledge of the present market trends is similarly significant and rolling out new updates and improved functionality is the key while deciding on a penetrative pricing model.
4. Study the market and competitive landscape-
Market-driven pricing is an extraordinary way to deal with an optimum price point for your mobile app. Considering the competitive landscape and analyzing your user base can assist you to discover opportunities where the competition is lacking. For example, launching your application at a generally lower cost than your competitors gives you an advantage in the market. Understanding the market demand for a product and viewing it from the customer’s viewpoint helps a lot in deciding the appropriate price. It is important to establish early on what makes your product special and what value does the competition in the market demand for your app.
5. Robust marketing strategy-
In this fast-paced environment, the power and reach of social media is growing each day. In such a situation, backing your pricing strategy with a robust marketing strategy is more like a need. Having an understanding of the present market trends along with a marketing strategy helps in maximum user acquisition. To retain users over the long haul, rolling out upgrades in each quarter is a good strategy. So, use the power of social media to make the buzz around your product and gain initial traction. Try not to be focused on the highest point of the funnel, it is ideal to look at things comprehensively. Curating rich content for social media platforms ensures the word about your application reaches far and wide and creates the maximum number of downloads. You can also know- Tips and tricks to increase your mobile app engagement.
Other than offering the ideal functionality, your application should be affordable for customers. It is not fair to offer value to your customers at a good price. Penetration pricing strategy helps businesses to attract new customers because of the low cost. It is viewed as an exemplary strategy since it uses behavioral psychology to drive customers to buy the product. The pricing for any digital product should also consider the sustainability of your business.
7. Understand what your product and target customers demand-
It is significant to realize early on that no one size fits all. What may have worked for another person, would not really work for you. There will be new open doors that you can take advantage to build an effective mobile application business. Think out of the box, be unconventional in your ways, and look out for alternate models to generate revenue. For example, the wide pool of data generated from your application could be of value to someone. Healthcare applications generate a large amount of data that is helpful for doctors and researchers.
8. Paid vs free-
Deciding, whether to launch an application for free or paid, includes some factors, similar to the necessary number of users. If you need to get a huge user base at once, free is the go-to decision. With paid applications, users anticipate more features and functionalities. They surely don’t like paying every time a new upgrade is rolled out. Additionally, when the clients pay to profit in-application buys, you should guarantee it offers adequate worth.
Also, when the customers pay to avail in-application purchases, you should ensure that it offers sufficient value. Analyzing from what the competition is doing is a good way to establish yourself in the market. You can’t choose a paid pricing model when others in your tech environment are offering similar functional applications for free. However, if your application has advanced functionality and a unique recommendation which isn’t found in similar applications, users can be happy to pay more.
Types of Mobile App Pricing Strategies-
Generally, we don’t get a lot of things for free. The ‘Free’ tag isn’t only a pleasing surprise but also a great tool to attract a large pool of customers. The same applies to the free application pricing model. As the name recommends, these applications are allowed to free download, and in most cases, the basic source of income is through promotions. Free applications are often observed as a great tool to attract in a huge pool of users and retain them over the long haul. They are intended to encourage communication and customer service. Depending upon the purpose of your application, there are two types of free pricing strategies to choose from.
The previous is a Completely free strategy, which is used when you already have a well-established product or a service in place. In such a case, the application is an add- on tool for the users. The objective behind totally free applications isn’t to make money directly from the application but redirect potential customers to other revenue streams. For example, free applications include features such as coupons, discount notices and other pertinent information that encourages users to take action. The application is used to spark interest, support the marketing strategy and drive users to other revenue channels.
The latter is an In-app advertisement strategy. In this strategy, applications are offered for free but users see adds while using the app. Primarily, gaming applications use this strategy to create ad revenue. With in-application advertisements, the key is to ensure that the advertisements that are being displayed are important to the users. There are benefits through which you can easily sort out the ads by user relevance and format and ensure the ads in your application actually pique the users’ interest.
The freemium pricing model is a modified version of the free pricing strategy. This model is more popular and generally used by organizations. Freemium applications can be downloaded for free but include limited functionality and features. To produce revenue from these applications, in-application purchase opportunities are created. There are three freemium strategies to choose from depending upon the levels, features, and incentives.
- Two-tiered approach – It includes applications that customers can download and use for free but there is a premium functionality that must be benefited upon payment. This strategy is widely used in gaming applications where users need to buy in-application currencies, extra lives or upgrade to additional levels.
- The second model includes applications which offer full functionality but just for a limited timeframe. The thought behind this strategy is that users can see the vision and get familiar with the application’s utility, and after a while, they will benefit the services.
- The last model includes applications where all the features and functionalities are free except it accompanies built-in advertisements. The catch here is that a small amount is charged from users to offer an advertisement free app.
The name clearly gives it away, for paid applications, customers need to pay to download the application. Because of the tremendous popularity of free and freemium applications, the paid model is considered the least effective. In case you choose a paid pricing model, it is essential to back it up with a convincing promoting effort. To drive users to buy your application over a free equivalent, you should have a successful marketing strategy in place. Besides the description of the application in the application store, a potential client must be equipped with the value you are offering with your product.
With a paid application, users will, in general, have higher expectations. But, when you manage to attract a user, they will turn into a loyal customer if your application offers the perceived value. To use the paid pricing strategy, numerous brands go with seven days of free trial. It is a decent strategy to move toward potential long term users by showcasing what your application is about and allowing them the opportunity to make a choice.
Paymium is the combination of freemium and paid model. For paymium applications, the users pay for the application as well as pay an extra cost to avail an added functionality. Although it’s not a broadly used strategy, it has the potential to generate great revenue streams. This pricing model functions admirably for music and social networking apps. This strategy can rapidly gain traction if exciting content, unique functionality, and useful features are introduced on a regular basis.
The app market is growing rapidly. To easily enter in the market and carve a niche, you should choose the right pricing strategy for your mobile app and take the above insights into due consideration. The pricing model plays a fundamental role in determining an application’s success. It is necessary to choose the correct monetization strategy as early as possible.
Your product pricing strategy should meet market and user expectations, offer the perceived value and help you with achieving business objectives. If you are facing any difficulty regarding mobile apps development, consult with solace experts. We have dedicated experts for mobile app development and consultation. You can hire android developers of the Solace team for app development. Connect with solace and get a free quote effective mobile apps development to boost your business. We will be happy to help you.