As the market grows, mobile app development is becoming tougher day by day. And in this tough competition, developers have to come up with influential…
There are billions of devices and millions of apps for end-users to choose from. Thus, it would be an understatement to say that the app development industry is booming right now. Clearly, we have surpassed that stage and reached a level where every week thousands of new apps come to life.
A study by App Annie Finds that people spend most of their mobile usage time on apps. This signifies apps have taken over mobile browsers. Another study by Statista reveals that revenue from App Store and Google Play store would reach an estimated 270 billion USD by 2025.
That’s a staggeringly high number and shows the potential of mobile apps. However, as apps are becoming more and more valuable, it’s also becoming hard for new players to infiltrate the market. That’s why app developers need to understand customer psychology along with pricing strategies.
Before we get into how you should choose a suitable pricing model, let’s understand different pricing models.
What are App Pricing Models?
App pricing strategy or a model refers to different ways to monetize your app. They help mobile apps get a better position and ranking on the app stores and generate revenue for app providers. Deciding on the app pricing strategy is a crucial step of mobile app development for the success of your app. Here are the different types of mobile app pricing strategies:
1. Free Pricing Model
These apps are completely free to download and use by anyone from the app stores. Here, app providers offer all their services without charging a penny & generate revenue from showing advertisements. This pricing strategy is the most popular one as 90% of the apps on iTunes are free and the same is true for Google Play Store.
The biggest advantage of this model is it can attract users in mass. Also, it’s a great business marketing tactic that aids in establishing brand image and increases customer retention. However, the disadvantage of this model is your earnings depend on the number of downloads the app gets.
2. Freemium Model
Freemium comes from adjoining two words “Free” and “Premium”. Apps with such a pricing model offer free as well premium services to end-users. Such apps are free to download but offer limited functionality. With in-app purchasing, companies charge a premium amount from app users to use advanced features. Such types of apps fall into the Freemium pricing model.
The advantage of such a pricing model is companies can generate revenue through several options such as advertisements and subscription models. And as it’s free to download & install, it can attract a fair amount of downloads too. However, if the free features aren’t good enough, users may get irritated and give a negative review, affecting downloads and customer retention.
3. Paid Pricing Model
Paid apps, as the name suggests, ask users to pay upfront before downloading and installing the app. Such types of apps have lost their essence because of the increasing amount of free and freemium apps. No one wants to pay an upfront amount to just download and use an app without experiencing what it offers and can do.
The advantage of such a pricing model is owners get paid immediately for offering top-notch features. However, the disadvantage is it is the least effective pricing model when it comes to attracting new users. And if the app fails to gain download, the app providers may have to bear higher losses.
4. Paid Premium Model
Paid premium or paidmium pricing model is where users pay a certain amount for downloading and installing the app and then pay again for unlocking the additional features. It is one of the least powerful pricing strategies out of all. But if placed and marketed effectively, such apps open up new streams of revenue for your business.
Paid premium enables owners to receive recurring payments for their apps in addition to the upfront payment for download. Users of such apps tend to be loyal and committed to your brand. However, the biggest disadvantage of such a pricing model is apps become pricier and attracts only a few downloads.
How to Choose a Suitable Model for Your App?
The selection of the best pricing model for your app demands analytical thinking, so you must not go for a popular opinion. First, get to know your target audience and what specific purpose will the app fulfill for them. Here are some tips for you to get acquainted with:
1. Learn From Your Competitors
There’s no harm in analyzing and learning from your competitors because all along we all strive to beat them. And to do so, we can’t invent & implement a new pricing strategy. Get to know what your competitors have done with their app pricing strategy. For instance, if competitors have utilized the free or freemium model, there’s no sense to go for a paid or paid premium model.
However, one size fits all doesn’t apply here as there’s no perfect pricing model that works for all different kinds of apps. And when it comes to your mobile app, consider the goal and purpose you have created the app for and decide which pricing strategy will do the work for you.
2. Understand What Market Demands
If your mobile app comes with a fresh and unique approach, the pricing for such apps depends upon the potential users and how much they are willing to pay for it. Understand what market demands and how your app can fit into perfectly to fulfill those demands.
Let’s say, you already have a popular app in the market for which you can set a pricing model based on the users’ demand and expectations. Doing so will help you know how valuable your apps are for your target customers. Think from the customers’ point of view, how your app helps them save time and money and based on that set the right price.
3. Offer More Value Than the Price
The thumb rule here is to offer more value to your users than you are charging it for. Pricing your apps is not only numbers but also relates to human behavior. There can be many different prices for your apps but the value & quality of the product should always exceed the price.
Offering quality over price helps your app gain customer attention and downloads that it deserves. Once you establish that your app offers value & quality, customers will pay whatever the amount you have set.
4. When to Go For Free & Paid
If your goal is to get customer’s attention and increase the retention rate, you should opt for the free pricing model. But if you are planning to offer advanced features out of the box, quality service, and have a good reputation, then going for a paid pricing model is recommended.
However, the paid model is not recommended if you are new to the market. Also, it’s not true that paid model is only for gaming apps. You can offer medical, legal, and other business apps at a premium price. While the free pricing model is best suited to target a large audience and let them know about your project on a larger scale.
5. When to go for Freemium or Paidmium
Let’s say, you have an app that offers amazing features, unfortunately, not many users know about it. For such cases, freemium is best as users can download the app for free and upgrade later to unlock advanced features. This pricing strategy is highly competitive and also the most effective one in the paid category.
On the other hand, Paidmium is not so popular pricing model. That’s why you must think twice before opting for paidmium apps. Such a model is only recommended when your app is one of kind and has low or no competitors. Also, it should provide top-notch features and rank higher based on the quality and value it provides.
Setting up a pricing strategy for a mobile app before launching it on the market is a crucial yet important step. The pricing strategy you opt for determines how successful your venture is going to be. Before opting for any pricing strategy it’s essential to know how many are there. And once you have such information, you can go for deciding what pricing model suits you better.
Need the help of an expert mobile app development company? M-Connect Solutions has a dexterous team of Android as well as iOS developers to help satisfy your bespoke needs. The subject matter experts will not only help to design and develop the feature-rich app but also help you decide on a pricing model & submit an app to app stores. Contact us with your requirement for further discussion.
About Hemant Parmar
Hemant Parmar is an eCommerce expert and a keen Magento consultant who specializes in meeting the needs of businesses in the e-commerce space. Years in the eCommerce market make him a perfect choice for sharing his expertise on eCommerce and Magento 2 development. He believes that customers need to be met no matter how challenging it might be.Read More