Someone holding a smartphone.
Someone holding a smartphone.

Sparky/flickr

When building a mobile app, at some point you need to decide if and how you will monetize your product — but today, properly pricing an app can be more complicated than you might think.

There are two basic pricing models for apps: paid and free. The vast majority of apps fall into the latter category — in fact, according to Flurry Insights, back in 2013 over 90% of iOS were free, and just 6% cost a reasonable $0.99.

But there’s yet another pricing model to consider: the word “freemium” — a portmanteau of “free” and “premium” — has entered into the app pricing conversation in recent years. They’re apps that are free to use in their most basic form, but require payment from users in order to unlock the app’s full potential.

This strategy has become especially popular for entertainment and game apps where extra payment provides access to premium content or an advantage over other online players.

Conversely, a lesser known model known as “paymium,” functions like a freemium app, but requires payment for the initial download. According to Dan Counsell, only 2% of apps in the App Store are of the paymium variety.

For those who don’t want to charge for downloads or content, advertisements are a great way to keep the revenue stream flowing without scaring people off at the onset. Just make sure you know your audience and keep the ads relevant and unobtrusive, or your customers probably won’t be you customers for very long.

Which Pricing Model Should I Use?

But being aware of the different monetization strategies is only the first piece of the puzzle. The next step is choosing the strategy that works best for you and your app. Entrepreneur outlines three key considerations that will help you make the right choice:

  1. Understand your audience — this includes your determining your target demographics, the typical usage patterns you’ve encountered or foresee in the future, and any other information your customers are willing to offer.
  2. Consider what your competition is doing — you may be best off matching or undercutting the cost of current apps in your category. If most of your direct competitors are offering your target audience free apps already, charging $3 for your platform might be a tough sell (unless your app is a genuine miracle worker).
  3. Understand your product’s category and the expectations that will surround it — for example, games and entertainment apps are almost always expected to have freemium offers. Business and productivity apps are usually paid, but sometimes fall into the paymium category as well. In general, paid apps are expected to have minimal advertisements, or none whatsoever.

Work With the Numbers

As stated, the most paid apps cost $0.99, yet some are challenging this notion,according to autosend. The traditional approach to building a small mobile app will usually wind up costing well over $6,453. Developers then have to sell exactly that many $0.99 apps to recoup that cost.

By simply raising the price to $1.99, you have reduced that burden by half. And if you ever want to increase your exposure by putting your app on sale, you can still charge the standard $0.99 rate at an actual 50% discount.

Websites like AppSales monitor the app stores for sale prices, and users can track which apps are receiving the most exposure for their discounts.

At the end of the day, which pricing model you choose to adopt will be up to your customer base. By monitoring the performance of your app relative to its price, you can make informed pricing decisions and change your offerings to remain in-step with consumer demand.

Infinite Monkeys allows users to build apps through an intuitive interface and quickly bring them to market for just $9 a month. In addition to viewing usage statistics and trends, app builders can assess how their apps perform on multiple, simultaneous platforms.

When it comes to testing theories and optimizing your app pricing model, trial and error is often the best approach. And luckily with Infinite Monkeys, this idea is no longer cost prohibitive.