Apps: What Are Yours Worth?

App developers could be unwittingly under-pricing their offerings to the market, according to the conclusions of a recent study issued by global strategy and marketing consultancy, Simon-Kucher & Partners, writes Martin Conway.

Citing what it describes as a culture of “established psychological price thresholds”, the study, entitled Smartphone Apps 2010, argues that the prevalence of free apps, constituting approximately 80 per cent of the apps market, has caused many developers to shy away from determining their products’ true worth. Subsequently, a number of developers have come to depend on trial-and-error pricing techniques – an approach potentially preventing them from claiming hundreds of thousands of dollars in revenues, especially given the notable trend for increased mobile app browsing, as opposed to web browsing, on mobile.

According to the study, which surveyed 220 US-based mobile apps customers, 85 per cent of respondents who downloaded an app in the past three months did so to access a service they previously only accessed via a web browser. This is particularly true for users of social networking services, of whom 63 per cent claimed to now use the mobile app more than the website, with 26 per cent stating that they use the app exclusively. Given the obvious blow to website advertising revenues, it is crucial, the study urges, to develop a viable strategy concerning app pricing.

One approach, the authors suggest, could be to resist the short-term lure of cheap pricing for the mass market and a slot on the app store Top 25 lists, and to focus on targeting users who are willing to pay extra for more functionality and features. For instance, while cheap and cheerful apps can be sold for $1.99, a more detailed news app with strong demand could be priced at $4.99, generating $300,000 in additional revenues for every 100,000 sales of the app.

Certainly, the demand is there; the survey highlights the fact that 90 per cent of Apple and 60 per cent of Google Android users who have downloaded free apps have also purchased an app at some point.