In the Apple iTunes world, you will receive 70% of the sales from your app, Apple will take a 30% share right off the top. Most other app stores including the Google Android Marketplace and Amazon Appstore have adopted this model as well.
The other thing to know is that Apple only allows you to set your price on fixed tiers. The tiers are (in USD): free, 0.99, $1.99, $2.99, etc. As you look through the various App Stores, you will notice that an astounding number of Apps are free! How can this be?
One simple answer has been coined Freemium. The idea is to keep your customers happy and still asking for more, a classic marketing strategy. This seems to be especially popular for monetizing games, Angry Birds being a great example of how this can be wildly successful. What they do is offer a basic app for free. To get the premium version with cool extra features you have to pay. Hence Free + Premium = Freemium.
This is really a monetization strategy for what I call mass market apps, it relies on big numbers. If only 1 in 5 people pays for the Premium version, and a million people are downloading your App for $4.99 then you’re living the good life to be sure. If you are selling a Niche App then you are depending on the unique features of your App — you probably can’t afford to be giving away your work for free. I have also noticed that there is less expectation in the market that specialized apps will be available for free. This is another case where you need to know your target audience.
Your first question is, do I want to do the Freemium approach to pricing for my app? Is my app amenable to this sort of strategy?
Another popular strategy is the use of in App advertising, what Apple calls iAd. The idea here is to make your App free, but allow Apple to place ads in your app. Apple then pays you money for the ads. Google is a wonderful example of how this monetization scheme can be extremely profitable. As you might expect, Android Marketplace offers a similar service.
iAds combined with Freemium can be a very successful strategy: simply offer an ad free version of your App for a price. Many customers, including myself, will pay for an App that they like in order to get rid of the annoying advertisements. Either way you win!
The next question is to decide how much you want to charge for your app. As with any product, you should research apps with comparable features and target audiences. This should help you determine what your competition is and what people are willing to pay for the type of app you want to create.
Your pricing may also be determined by the content of your App. If you look at our own Guided Meditations by Ahnalira Apps, we determined our pricing based on comparable content in both digital and hard copy formats. This is a case where you are paying for the content (guided meditations) more than you are paying for the App, which is primarily a delivery vehicle for the content.
You will also want to set your pricing according to the expected cost of building the app. Obviously you will want to make a profit in most cases.
One exception would be Apps which are provided for internal use within an organization. In this case, pricing is completely irrelevant and the app will most likely not be provided on the App Store at all. Apps can be created and distributed “adhoc” to as many as 100 users directly from the App Developer.
Conclusion: there is no hard and fast rule for pricing your app. You really need to do your homework, research the market, plan out your strategy, get to know your target audience. Many developers, including Laughing Place Apps, will help you through this process.
Don’t forget, having fun with your app — and making your app fun for your users — is just as important as making your profit!