The Psychology of App Pricing

May 09, 2013 by Gabe | [mmd] |

Lex Friedman and Dave Addey both have thoughtful articles about app pricing. Go ahead, you really should go read them if you care about apps or developers.

I can't disagree with their premise. There's a common perception that apps should cost next to nothing.1 The low cost of software is changing the traditional business model of software.2

While I don't disagree with Lex and Dave's fundamental premise, I think that neither article recognizes a basic sea change taking place in software: The average computer user is losing their fear of software and that means a bigger market for everyone.

If You are Reading this, You are Not "Mainstream"

It's so easy to think that the world I exist in is the same world that the rest of the population experiences. I'm accustomed to paying a lot for software. I'm accustomed to upgrading my computer on a regular basis. I'm accustomed to controlling my computing environment. But I am not part of the mainstream.3

The mainstream user buys a computer and uses the apps already installed. The shared experience with computers has been Crapware, preinstalled software and frustration. Back when Egghead and CompUSA were still in business the aisles were filled with terrified "normal" users trying to figure out how to make their Dell computer print birthday cards for their nieces.

Fast forward to the decade of mobile devices. Apps are cheap and iOS has created a sense of ease with software. In the past 3 years I've seen my non-computer centric friends installing, trying and deleting more apps than ever before. One of the most significant contributing factors is price.

The Problem with Demos

Dave Addey:

Certain kinds of apps just need a fully-featured, time-limited trial in order to prove their worth.

Lower prices create lower risks. Demo software is not a solution because Windows users know all too well that a demo still comes with a price. That price is Crapware installations like browser bar logos and unwanted antivirus software.4 With over 1M apps in the App Store, the easiest solution is to just purchase the cheapest app.

The future App Store market is not existing Mac users, it's current Windows users. Those users are going to need some convalescence time and most of them do not trust computers or people that know about computers.

Perhaps a demo is still the only way to express the value of an expensive app.

Death by Dimes

In my experience, most computer users NEVER upgrade their software unless they buy a new computer. This behavior is shared between Windows, Mac and iOS users. They just do not understand the reason for upgrading something that already works. However, we now know that they are willing to buy a shit-ton of Smurf Berries through IAP. Whatever bit of psychology explains this behavior is outside my understanding. Maybe it's just easier to directly measure the value of a Smurf berry than an app upgrade. That does not change reality: IAP is a revenue model that works.

Yes, this is sad news. I hate IAP. I avoid apps with IAP. But this model works and I suspect it will become a key software design principle in the future. I will softly cry as I purchase each new paintbrush and theme pack.

The Magic of a Dollar

Lex Friedman:

Spending money on great apps means not only do you get great apps now, but you’re also essentially investing in great apps later. Let’s fix the App Store economy, and let’s start by paying for apps without shuddering at $4 price tags.

I completely agree with Lex, even though he is wrong. There is something magical about 99 cents. $4 is cheap in the grand scheme of computer pricing and cellular subscriptions but the reality is that many people immediately dismiss apps above $1.

I've experienced this many times. I'll be asked for a recommendation for a specific type of app. If I recommend a $0.99 app they usually buy it on the spot. If I recommend a $1.99 app, they cringe slightly and "think about it". If I recommend a $4.99 app, they go into spasms and grab a free alternative.5

We can argue about what people should think. We can try to educate people that do not share our value system. Or we can just accept that our model does not fit the rest of the world.

Conclusion

This conclusion is unsatisfying. The commoditization of apps has already occurred. The genie is out of the bottle. The question is, which market is the right target for a small developer. Not many new developers will move the needle with an app over $10.6 Cult favorites like the OmniGroup, Flying Meat and Panic could pull it off because they have a legion of dedicated and experienced fans. But their market will be predictable and small.

Some of us will pay obscene amounts of money for good apps from good companies. Then there's the majority. For the majority, applications have never been a joy and buying apps has been a novelty brought on by Apple's App Store and the $0.99 app. I say embrace that market and understand it. Roll the dice and hope for the next Camera+ or Doodle Jump. But understand that the $0.99 market is also fickle. You will rarely make a fan of those customers.

There is a market for apps over $5. That market is extremely small when compared to the the rest of the app store customer base. We will not change that reality through rational arguments. We can not hold back the ocean with blogs.

It hurts to sell something good for cheap. While the App Store creates uncomfortable limitations and price pressures it's also opened an unprecedented market opportunity for small developer shops. The novice market is the really big market. That's the rich vein waiting to be tapped...$0.99 at a time.


  1. The average price of an app on the iOS App Store is $1.53. The perception either drives the pricing or is caused by the pricing. The origin is irrelevant. 

  2. I am sad to see some of the developers I appreciate and like struggle to make a living. I'd love nothing more than for these tradesmen to drive around in pink electric cars. But the circumstance of the world are rarely influenced by desire. 

  3. I make some gross generalizations throughout this article. Our brains require generalizations to understand complexity. Just like I generally assume all comment trolls masturbate to videos of Hitler, I assume the majority of computer users do not read blogs. 

  4. Go ahead and argue that Apple could keep those sort of demos out of the app store. There's still a stigma associated with demo software and that's hard to overcome. 

  5. This is not condescension or judgement. I blanch at a $10 app purchase as well. There is always an intrinsic value judgement when making a purchase. I have yet to meet an honest person that will eagerly purchase a $40 iOS app without any hesitation. We all have our threshold. 

  6. $10 seems ridiculously low to me. But just look in the Mac App Store and iOS App Store. The apps in the Top Paid category or amazing works of engineering. Even those apps are only selling for a little over $10. 

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