Race to the Bottom: iPhone App Store Pricing

I’ve had a notion for some time that the price wars on the app store may be detrimental to the community. I know I’m not alone in this feeling, and have found others online who would agree. Finding like-minded developers isn’t my goal. I’m wondering when, or if, the App Store will begin to resemble something a little closer to desktop boxed software prices.

I think it would be wrong to assume that mobile apps will reach the cost of boxed software. However, I do believe we’re shooting ourselves in our proverbial feet by pricing perfectly good applications at free or even $0.99. Admit this – comparing a $0.99 app to a $2.99 one, both with similar features, ratings, and quality user interface, which one are you more likely to buy? If you were the guy selling the $2.99 app, wouldn’t you feel compelled to lower your app’s price even just a little? I mean, some money is better than none?

Assumptions

You’re going to make a few assumptions, be it good or bad, but one way or another they will affect your sales. These probably fall into two or three areas, 1) lowering your price will communicate better value; 2) lowering your price will increase sales; 3) more sales means more profit.

Better Value?

That’s open for debate. Customers may think they’re getting a great app for cheap (high value), or they can see a lower price (whether your are lowering the price or setting a low initial offer) and think nothing of it because everything else in the category is priced roughly the same.

Increased Sales?

This might also be true. It almost goes without saying – people can buy more cheap apps on the same budget than pricey ones. I’ll give you a +1 for remembering the concept of supply-demand curves you learned in your high school econ class. There is, unfortunately, a wrench thrown into your increased sales equation – anecdotal evidence points to the best sales occurring right after launch and eventually falling off after the 60-day mark. We’re working with a limited time frame to make the most we can.

More Sales, More Profits

All things being equal this becomes a matter of math. Cutting your app’s price in half means you need to double sales to make the same amount of money. Do you think you can do that? Realistically? In the 60-day window where most developers see the largest chunks of their sales?

Closing Thoughts

I’m going to finish up with one thought that should bring this full circle. Before pricing your app consider the cost of the downward price war. You may make more sales, but you won’t make a decent income off of it. Should this trend continue, our users will become spoiled enough that they will hardly tolerate higher priced apps unless they are truly unique and worthwhile. This price war is only hurting ourselves and something will have to change or the App Store will end up a wasteland of low-quality apps because the true developer dollars will go elsewhere, thus making the iPhone/iPod Touch platform much less appealing for everyone.




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