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What to charge for your app and what’s the value of it?

We all want to see a return on our investment, especially when creating applications, which require significant resources.

You spent money, your time, put in a lot of effort, and finally, your app is ready. Now comes the new challenge: what to charge for your app?

The decision depends on many factors. The number of working hours, testing costs, marketing and promotion, purchase of any licenses are some aspects that define the overall cost of development. Calculate the costs first, then set the price for the app.

To put an adequate price tag on your product, first, let's look at the different pricing models.

Understanding the pros and cons of pricing models will help you choose the best option for you.

Pricing Models

It is essential to find the balance between the price that customers are ready to pay and the amount you are hoping to receive to cover production costs and costs of future maintenance. The pricing model you will be prepared to adapt will entirely depend on the nature of your app.

Free

Who doesn't like getting things for free? Everybody does. Offering your app for free can be a good starting point. Lots of customers will be willing to try the app as long as it costs nothing.

It is a working model for mobile apps. Because stores are full of options, people usually start looking for the solution from the "free" tab.

Another reason for making the app completely free is if you are not planning to generate profit directly from it, rather than use it as a booster for other revenue streaming platforms. For example, redirect users to a website where they can make a purchase.

In other cases, you need to figure out additional ways to generate revenue. And a profitable way to do so — run in-app advertisements.

In-app ads

Running advertisements in the app generate ongoing revenue. You can implement many different formats for serving ads within your application: video ads, banners, pop-ups, etc.

Still, you need to be very precise when picking the advertisement's format, periodicity, and subject. Otherways you may disrupt users with irrelevant, aggressive content.

Use online services, such as Google AdMob, for filtering and sorting in-app ads.

What else can you do? Offer customers to make a one-time payment to turn off the ads.

In-app purchases

We bet you saw many examples of this model. According to this structure, a user can download an app for free, but it offers them some additional features for the money. If it's a game app, you can refill lives or unlock a photo filter in the editing app for an extra price.

This is generally the most using model as it doesn't have any noticeable flaws and allows users to access the significant app functionality.

Freemium

The term freemium comes from two words — free + premium. Like in-app purchases, it lets your customers download the app for free and then charges them for a premium feature.

You can try several options:

Offer two versions of the app — free and premium with broadened functionality. After downloading a free version and testing it, users themselves can decide whether to upgrade to premium or the free set is enough for their needs.
Provide a free trial. Set a limited free trial for your app, and once it expires, customers will have to pay to continue using the app.
With the freemium model, your goal is to allure customers with the app's functionality and compel them to switch to the paid version.

Potential pitfalls

This pricing model can cause a lot of work for developers as they will be required to provide continuous updates and improvements and manage two different apps.

Subscription

Subscription is another good strategy to consider for your app. Everything is simple: users have to pay a monthly/annual fee to continue using the app.

It is a general approach for streaming platforms and music apps. We all have an active subscription to Spotify, Netflix, or Apple Music.

Even though you may not gain new users, you are still generating revenue from subscribed customers. Look at this as an opportunity to build loyal and long-lasting relationships with your customers. Keep in mind that you still have to provide updates and improvements, so you will not see a lot of subscription cancellations.

Paid

This one is the simplest pricing model. It requires customers to pay a one-time fee to download the app and freely use it.

More importantly, users can't get a feel for the app, and you ask them to pay you money right away. Your potential users need to understand that this app is worth purchasing. Use marketing to convince people that your application is one of the best to help them solve their problems.

A short description in the app store is not enough. Users will want to know as many details as possible to make a purchase decision. So give them this information, create visual content to show how everything works, launch a website, and use related platforms for the promotion.

What's the value of your app?

Let's assume you analyzed all the pricing models and picked the most appropriate one. Whichever option you are considering, you still have to put a price tag.

To make the right decision, you have to consider many things. Among them:

  • The purpose of your app
  • Your business goals
  • Your target audience
  • Market demand
  • The cost of building and maintaining the app
  • Your competitors
  • Where you are going to display the app

But most importantly, identify the value of your app. You and your team are the first people to understand the value of your product. Only with a clear idea, you make people believe that they will get something worthwhile in return after the purchase.

How to identify the value of the app?

First, specify the problem your app solves: a dictionary translating verbal speech, an editor improving your photos, or a task tracker organizing your workday.

Then, identify how it delivers the solution and is better than thousands of other similar apps. Your dictionary may have a higher translation speed; an editor provides a broader range of manual settings.

Prove to your customers that if they pay for your dictionary, they will get a pocket translator providing instant service and keeping translations in separate text documents. So it can replace interpreters and reduce expenses that you most likely spend to pay for their work.

Nonetheless, try to be honest with your customers and respect their choice. You don't want to exceed their expectations. Built your relationships on trust, only this way you can earn loyalty and retention of your customers, which is key to ongoing revenue.

Last but not least — make a competitive analysis. Look at the rates of similar apps and analyze the market you are entering in. Again, you can follow some strategies. Get your advantage by undercutting competitors on the price. If your app is on the same level, selling it for a higher price won't do any good. However, if your app is more complex and advanced, you should charge more.

Many suggest when releasing your application to set a higher price and lower it over time. Be practical, and don't put more than average users will pay. If we are talking about mobile app stores, users expect the cost of the apps to be around 0.99 cents, if not free. And they hardly pay an amount more than $6.99.

Conclusion

Considering these facts, stores now contain more free apps, and paid ones continue to decrease. The best way to go, release a free app with in-app purchases. It gives you a field to be creative; you may include more options of purchasable features and service, providing customers with a choice: whether to pay or not, for what to spend money. If you decide to sell your app aside from the store, go with the subscription model. The pricing strategy should reflect the value of your app. A quality product will always find its customers.

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