Since we made the decision to change our monetization model, we’ve been experimenting a lot with prices, searching for the best conversion and profitability. All developers (and deep inside, all users too) know that at the end of the day the business side of your project has to work like a well-oiled machine in order to keep working on it.
This article details our research, experiments, findings and advice.
But before we start, we need to clarify what this article is not about. This article is not about choosing a monetization model for your app. We are assuming you already have a one-time payment model (either through a paid app or a single in-app purchase like TimeTune), but not a purely ad-based or subscription model.
And this article is not about games. Games have a specific audience and can combine other strategies besides a single payment, like heavy advertising or multiple in-app purchases, so the pricing strategy may differ in many ways (and frankly, this is not our… game!). Some tips may still apply though.
FIRST, CHECK THE COMPETITION
When you first publish your app, analyzing the competition is a must. You need to search for similar apps (or apps in the same category) and see what (and how) they are doing. Look primarily at well-established apps, they have been there for long and they know best. Then, think about choosing a similar price (providing you offer a similar level of functionality).
Don’t price your app cheaper than your competitors’ just to attract users, this is not how your app should stand out (and in fact this may work against you). Users are looking for quality and, since mobile app prices are generally low, differences in price are not so important. They will pay one extra dollar for a well-established app before choosing a new one just because it’s cheap. Stand out with quality and not with price.
DON’T SELL YOURSELF SHORT
Your work is valuable, and sometimes we developers are the first ones who need to be reminded of that. Don’t price your app based on your modesty or your subjective opinion. Choose the price according to the value you are providing to the user. Ask yourself: ‘How much would anyone pay for these functionalities?’ (you can always make a small survey if you are not sure about your estimations).
Psychology plays a very important role as well, because the price will reflect the perceived value of your app. A cheap price will subconsciously transmit the idea of a simple or poor-quality product, and a too expensive one will convey the notion of an exclusive or luxury product. You need to find the optimal middle ground. Like it or not, our human mind works like that.
Remember, users have some expectations about the quality of your app, and going for the wrong price may form a preconceived idea in their minds even before they download it. So aim for a price that conveys a notion of quality.
When we started with TimeTune, our Pro version had only one feature: removing the ads. We had the strong temptation to set the initial price at 0.99$ (‘after all’, we thought, ‘we are just removing the ads…’). But deep inside we knew this was too cheap, in all senses of the word, and finally we decided on 1.99$. Complaints about the price? Not a single one. Users expect quality. And they are willing to pay for it.
EACH COUNTRY IS DIFFERENT
One of the best tools you’ll find on the Google Play Developer Console to increase your general revenue is the ability to set a different price for each country. This is can help you raise your profitability in very powerful ways.
If you set a base price and make an automatic currency conversion for all countries, you’ll be missing an important -or should we say- many important income opportunities. One dollar may be a weekly salary on another country, so you need to set your prices according to the strength of each currency.
There are different sources where you can find out about currency strengths and purchasing power, like Wikipedia. But one of the most used (and recommended by Google) indicators is the Big Mac Index. If you don’t know what this index is all about, it could even sound like a joke to you: making a currency comparison based on the price a Big Mac has on each country.
But surprisingly, this index has proven many times to be more reliable than other renowned indexes and it’s widely used because of its simplicity. If you start applying it to your estimations just remember to use the Adjusted index instead of the Raw index, as it takes into account the purchasing power in each country.
One nice trick when studying your competition is this simple way to find their prices on other countries: when browsing an app from Google Play on a desktop browser, just add ‘&gl=xx’ at the end of the URL (after the package name of the app), where ‘xx’ is the ISO Alpha-2 country code for a specific country (you can find the list with all codes here). Scroll to the bottom of the page and you’ll see their price in the local currency.
USE PSYCHOLOGICAL PRICING
We all know about this. A buyer will find more attractive a price of 1.99$ than a price of 1.73$. In fact, buyers expect this kind of pricing. Not making these adjustments in your prices for all countries may convey the wrong idea to the user (for example, that you are a sloppy developer and don’t care much about them or their country).
Google recently introduced on the Developer Console automatic price rounding, and this is certainly a great addition. Even if you don’t use the default converted prices (because of your currency strength adjustments), you can see which is the best way to round a price in a specific country. So use psychological pricing in all countries in order to attract the buyer’s attention.
A curious experiment we tried is the comparison between 1.49$ and 1.99$ (or their currency equivalent). Surprisingly, even though the first one is cheaper and uses psychological pricing as well, the second one is the one that performs better overall. To the buyer’s eyes, it’s more appealing. In consequence, we try to avoid these middle prices as much as possible.
TRACK YOUR RESULTS FREQUENTLY
On the Google Play Developer Console, check the ‘User Acquisition / Performance (Measured by country)’ section frequently to see how all countries are performing and how your tests are doing. After updating a price, give it enough time to gather up significant data (for example, a week might not be enough). In TimeTune, when we change a price, we let it run for a whole month. Then, we analyze the conversion and decide if the price has to be readjusted or not.
Remember, cheap prices don’t translate to more revenue. A low price can bring more purchases, but it doesn’t mean you are making more money overall. In fact, all studies tend to agree that the relation between price and revenue generally follows the shape of a parabola:
When the price is too low the overall revenue decreases fast, as all purchases combined don’t add up to much. If the price is too high, users will get scared and the conversion will not be enough to bring a better revenue. The goal is to find the optimal price that will bring the revenue to its peak.
One could think it would be possible to calculate that optimal price mathematically, either by solving the parabola or finding the formulaic relation between price and user conversion. But our findings (because we certainly tried too!) tend to disagree a bit. We don’t think it’s impossible but, as all statistics problems, you would need a huge amount of data (daily downloads, months of tracking) to find a truly reliable solution. If you are just starting, this is something you don’t have yet. And besides, your optimal price may change each time you make an update and add new features.
In any case, with or without mathematical calculations, finding the optimal price will require a lot of testing. To get closer to your optimal revenue sometimes you’ll need to increase the price in one country and sometimes you’ll need to decrease it in another.
In order to know where these adjustments need to be made, keep an eye very closely on the conversion percentage to final buyers on the same User Acquisition section we talked about. If the conversion percentage for a specific country is lower than the average, it means people may find the price a bit expensive and you should decrease it. If the conversion percentage is higher than the average it means people are buying a lot and you can increase the price a bit.
Just remember not to change prices too abruptly, especially when you’re going up. You could risk missing the mark of the optimal price. Besides, it would be a sign of disrespect for your users if your prices start to change in huge amounts. Always respect your users, they are the base of your business.
STAY ALERT ABOUT USER FEEDBACK
Keep an eye on user feedback and stay alert about references to the price. If people start complaining a lot about the app being too expensive, maybe you missed the mark and it’s time for a readjustment (but don’t do it just to avoid complaints). Double-check the buyer conversion and review your prior tests. And remember that when someone leaves a review, many others may stay silent but think the same way.
One funny thing that happens in TimeTune from time to time is that someone leaves a complaint… about the app being too cheap! This is a great indicator that you are providing a great value compared to the price you’re asking in return. This, added to the fact that conversion in some countries is really good, is why we have been slowly increasing the price in some places.
For example, starting this September we changed the price in the US from 1.99$ to 2.99$. Complaints? None. Conversion to buyers? Almost the same. Nice.
EXPERIMENT, EXPERIMENT, EXPERIMENT
This is the great advantage paid apps have over subscriptions. As people only pay once, you can experiment with prices for as long as you like. In a subscription, you can’t tell a user to pay a different amount each month because he’ll run away as fast as he can.
So don’t be afraid to experiment and don’t give up too early either. Finding the optimal price and revenue takes time. But each experiment will get you closer to your goal. In TimeTune we review all prices at the beginning of each month as a norm. It’s a perfect time to see how the previous month performed, gather statistics, find where we need to adjust the numbers and make new tests.
Take into account where you are on the lifecycle of your app too. If your app is very young and not fully polished, you can start with a smaller price. Then, every time you add new features can be a great opportunity to increase the price a bit. Remember, the price of your product must reflect the value you are offering, it doesn’t have to reflect any other subjective thinkings.
HAVE A BUSINESS SPIRIT
As a final advice, we’d like to recommend getting more into a business-oriented mindset. Many developers have great programming skills but hate the business side of the project or simply don’t know how to address it. Search and read articles about app monetization and follow the blogs of companies you like, there are many people out there who want to help you succeed.
Being profitable is not against being a well-intentioned and skilled developer. Avoid modesty (or grandiosity!) when considering the value of your app. This is your business and profit is the only thing that will allow you to take your project further. Besides, users will be glad to know your business is doing well, because they won’t buy a product if they know it comes from a business which is having problems.
Users look for quality, and they will be more than happy to pay for it.
Wow, what a long post! We hope you could find good advice here and benefit from our experiences. If we achieved that, that’s more than enough for us. Thanks a lot for reading it! 😉
Did you like the post? Do you have other tests, ideas or findings that could help the developer community? Leave your comment below and tell us what you think!