How to Determine a Price for Your Android App
You can set a price for your Android app. If you publish on Google’s Play Store or Amazon’s Appstore, you pay a 30 percent commission. That’s not bad considering that Google paid seven billion dollars to app developers between February 2014 and February 2015.
If you decide to charge for your app, what price should you set? Here’s some advice.
Consider the competition, including the free competition
Check other apps with functionality that’s similar to your app. Look at the prices for those apps. Ask yourself where your app fits in. Does your app have more features? Does your app present a smoother user experience? If so, you can charge a bit more. If not, you better lower your asking price. If you find free apps that do what your app does, ask yourself why a user would choose your paid alternative.
Use psychological pricing
Studies have shown that, as far as consumers are concerned, whole numbers aren’t equidistant from one another. In a consumer’s mind, the price $0.99 is much less than the price $1.00. Here in the United States, you probably don’t remember ever seeing a gasoline price that didn’t end in nine-tenths of a cent per gallon. This phenomenon, where prices are best set a bit less than a round number, is known as odd pricing.
Odd pricing is just one form of psychological pricing. Another psychological pricing principle is that users don’t like spending amounts that seem to be strange or arbitrary. What do you think if you’re asked to pay $1.04 for something? Why are you being asked to pay four extra cents?
Vary your price
On Google Play Store, you can’t turn a free app into a paid app. But there’s no rule about increasing or decreasing the price of a paid app.
There are two competing strategies for evolving your pricing, and you might want to use a combination of these strategies.
Start high; eventually go lower.
If your app has little or no competition, you can start high. Attract users who think of themselves as high rollers, and get the highest price from these users that you can get.
As a variation on this strategy, consider premium pricing. With premium pricing, you intentionally set a high price in order to convince users that you have a high-quality app. (Of course, if you try this trick, you better not disappoint your users. You must maintain the perception of high quality. If your app is truly a high-quality app, you have a leg up.)
If you start with a high price, your sales eventually slow down. This can happen because you’ve found all the people who are willing to pay the higher price, or because other developers have started undercutting your price. One way or another, you can lower your price.
And then, there’s the competing strategy …
Start low; eventually go higher.
Start by undercutting the competition. Then, when you’ve developed a good reputation, raise the price of your app.
If your app is popular (so popular that people might notice a change in price), you should consider the timing of your change. Decrease the price when the change will be noticed. (For example, if your app has a seasonal aspect, lower the price very conspicuously as that season’s purchases rev up.) Increase the price in small increments when users are least likely to notice.
Alternatively, you can coordinate price changes with other changes. You can increase the price when you release a new version with new features. Or, when you increase the price of one of your apps, you can announce loudly that you’re decreasing the price of another app.
Look for statistics and other hard data
A chart posted at appbrain.com indicates that, on Google Play Store, about half of all free apps have fewer than 500 downloads. Compare this with the paid apps where between 80 percent and 90 percent of all apps have fewer than 500 downloads. Interestingly, for paid apps, these percentages don’t vary directly in proportion to price.
For apps priced less than one dollar and for apps priced more than ten dollars, about 90 percent have fewer than 500 downloads.
For apps in the middle (apps priced between $2.50 and $5.00), the percentage of apps with fewer than 500 downloads drops to a more comfortable 80 percent.
There’s some aspect of psychological pricing that’s operating favorably in the $2.50 to $5.00 range. You might not understand why this happens. Even so, the fact that there’s a sweet spot between $2.50 and $5.00 is worth noting.
One way or another, it never hurts to search for statistics. Trends change, so look for pages that are updated frequently. Be skeptical of facts and figures from years gone by.
When you look for hard data, lots of good things happen. At best, you learn that your preconceived notions about app pricing are wrong and that you should modify your pricing strategy. At the very least, you become aware that what you intend to do isn’t backed up by the facts. So you keep doing what you intend to do, but you do it with your eyes wide open.
Search the web for information about pricing strategies.