Marketing Kids Apps (Part III) – The logic, logistics & politics of pricing apps

| December 2, 2011 | 11 Comments

This is the third and final post in my series about marketing kids apps. [See: Part I: Three Things No Amount of Code Can Fix & Part II: How Consumers Decide to Download] We end the series with some of the stickiest questions in the app world: What’s an app worth? What price point will encourage downloads? Should an app ‘go free’ for a short time? Is it worth it to develop more apps?

I’m not an economist nor do I have a background in marketing, but I’ve been watching the kids app market pretty closely for a couple years now and do have a few thoughts to share on this topic. My expertise is really in social science, so my ideas are shaped mostly by consumer psychology (and basic market realities).

Like many aspects of app marketing, there isn’t a hard, fast rule for any app pricing decisions. It’s complicated and more importantly, a moving target. Things are changing all the time as the app store gets more crowded with new apps everyday. In the category of education alone, I counted more than 750 new apps for the iPad in just the past week! This means advice from a post in 2009 about marketing probably isn’t going to help a developer in 2011 all that much … and this post may not be very interesting (unless you’re writing a history paper) in 2015.

Harsh Reality for App Developers …

Some very nice apps aren’t going to sell. Period. The reality is that even free apps can get lost in this sea of content. There is a point when consumers actually don’t want or need another ‘app for that’. The top 50 free apps in both education and books, for instance, are more-or-less permanently held by several dozen apps that are always free … so even giving away an app can be perceived as a failure if the goal is to get into the iTunes top 10 for an app’s category. Just getting into the top 10 for free apps for a few hours can sometimes be considered wildly successful.

But does that mean a great app needs to get lost in the haystack of apps? What a discouraging message to receive just as you arrive at the AppStore with your shiny, new app. The answer is … maybe, but then again maybe not. Once you’ve come to terms with the challenging reality of the iOS app market, then you can decide what you are willing and able to do about it for a product, like a kids app, that you believe in.

Additionally, for future projects, it is so helpful to have realistic ideas about the return on investment possible for different types of apps. When your programmer can make a six figure income working for someone else, it is no small thing to know how much technical effort you need to employ to simply break even on an app. Many new, small developers are experiencing the current app market as a bit of a shock. Developers are often so totally focused on app programming & design, that the changes in the market since they first conceived their app idea, often 9-18 months earlier, have not been on their radar at all. Seismic shifts can happen in this market in less than six months, though.

One thing to consider is the variety of non-financial rewards that you may have already earned by creating an app. In the process of creating Dash & Ditto’s Playground, a sweet but underperforming 7-in-1 iPhone game app for kids, our team also learned a lot of priceless skills. Our illustrator learned about how to ‘go digital’ after a life of print projects, our programmer literally taught himself iOS and Android programming and I got the idea to start our successful review site, Digital-Storytime, as a result of our marketing efforts. Not a bad payoff, if only we can find a way to calculate this when we evaluate our original monetary goals.

Good News for Book Apps

At this point, maybe you’re ready for some good news? For book apps at least, there is a silver lining here. Digital books for kids represent an app product that consumers still desire and it’s a field that thrives on variety. The desire for good book apps, especially for kids, is still there and of all the categories in the app store, book apps tend to be among the highest priced. Consumers can get some content for free but most of the time do expect to pay for downloads for quality titles for children. For educational apps aimed at this same age group, there are also a lot of specialized areas in the market that remain untapped where paid apps should do well.

The market for children’s picture book apps is guaranteed to grow, too. A recent flurry of news articles lamented how digital kid’s books were lagging behind adult ebook sales, but they failed to take into account the fact that color options for tablet apps have not been around very long, unlike adult ‘text-only titles’ so popular as e-books over the past decade. While some may fight the transition to digital, a lot more new readers will be entering this market rather than resisting it.

Any new developers entering the book app market do need to take some publishing history into account as well. Could you have self-published your title before the digital revolution? If not, then it is important to give this new opportunity a bit of time to meet your expectations. Simply being able to self-publish your children’s book to a large market of readers, even as a free download, is nothing to dismiss as an author/illustrator. If you are simply developing book apps to take advantage of a new opportunity to make loads of cash, I’d encourage you to move on. This is a space that demands good narratives and should reward developers passionate about storytelling. Perhaps picture books simply need to sustain the creators of their content, not make millionaires out of limited development efforts?

And for those already committed to this market … I think there is a lot we don’t know … and I’m hopeful that over time the price for book apps in particular will begin to reflect the cost of producing these titles more accurately. There will likely be some narrowing of the producers of content for the industry, but how this will all play out is anyone’s guess. If you wanted ‘to live in interesting times’ for publishing … consider your wish granted.

So what are the most important factors to consider when pricing a new app?

1. Launch Price … What should you start with when launching your new kids app? Some apps launch as free to gain exposure, expand user base, extend ‘beta’ testing or lay a foundation of happy customers for the launch of a series of apps. Some apps start very high to set a ‘value point’ for consumers. Some start out low and plan to raise the price to show consumers that they are worth more. Some start out in the middle, then do a series of price drops to gain momentum for an app they believe will be popular once it is well-known. No one strategy is ideal, but depending on the app, a ‘best practices’ strategy does seem to emerge.

Digital-Storytime’s Advice: From my limited experience monitoring kids apps over the past two years, my suggestion is to price your app initially high to set a value point unless you have a series of apps ready to launch rather quickly. Then pace yourself for price drops. Don’t assume consumers won’t notice if you have a price point that is constantly changing. Plan your price drops, with quarterly/monthly drops being the ideal to communicate to consumers that it is a sale, not a desperate attempt to wring money from a mediocre app. If you plan a suite of apps, consider a fully functioning free app as part of your series, rather than lite versions of each app built on a similar template.

2. Price Promotions … Regular price drops are expected at this point by consumers of kids apps. Many set up ‘wish’ lists on AppShopper (and soon on our site) that let them know when a price drops on a desirable app. Sure, some consumers are making impulse purchases, but the current economic picture means the consumer culture rewards awareness not impulsiveness. Most consumers have a deep psychological need to feel like they’ve spent their money wisely. Buying an app that was free or priced lower a week ago doesn’t feel wise.

Digital-Storytime’s Advice: Psychologically speaking, the experience of regret for buying an app for more than other people paid is much greater than the boost in confidence that comes from buying during a sale, so be careful to consider how your price drops might affect customers who paid for your app before the sale. Find a way to reward them … personal thanks are worth more than you might realize. Ultimately the best strategy is to try to connect with your supporters and find a way to involve them in future sales (like giving a scoop to your Twitter followers or Facebook fans before a price drop, for instance). Behind every purchase and even every free download is a real customer who may have the ability to drive hundreds of new visitors to your app …

A note about ‘going free’ … There are some distinct advantages to having a ‘free’ price drop on an app. It can impact paid sales over the long term by gaining a lot of loyal users, especially for apps that have in-app purchases or subscription models. Also, small reviewers/bloggers often rely on free price drops to find apps to feature on their sites, so it can result in additional marketing exposure. It can also have downsides, like an increase in negative iTunes reviews. Ultimately, if you decide to do a free promotion, you need to maximize the impact of ‘going free’ by doing as much marketing during the promotion as possible. Alert bloggers and reviewers of your free price drop in advance to give them a reason to promote it as a ‘scoop’ for their readers. Then keep this price drop to no longer than 3 days (72 hours) to maximize exposure, iTunes chart rankings, and to prevent the impression that your app is actually only valuable as a free download.

There is no way to ensure 100% that going free will not change the perception of your app’s value overall … don’t ‘go free’ casually! There was a time in the past when simply going ‘free’ could get an app noticed, but frankly, that day is over. When I hear about services that charge small developers over $5,000 to give away their app for a day, I am a little ill … Trust me, if your app can get more than 5K in value from going free, you don’t need to pay anyone to achieve this benefit … it will happen organically, but only for a small fraction of apps.

3. Price Change Frequency … There is no doubt that dropping the price of an app, any app, can be good for a temporary boost in sales. But can an app change it’s price too often?

My instinct on this is ‘yes, but …’. Yes, most price drops do boost sales and app exposure, but changing the price so often also gives the consumer some other impressions of an app. AppShopper is a very popular aggregator that shows a history of price changes … with an Alexa rank under 5000, I suspect this site doesn’t list this ‘price history’ just to be thorough … they list it because it’s something readers want.

Before I started my review site, I was one of those frugal consumers who watched the price history before buying a new app for my child. And when an app changed it’s price more than once a month, my gut feeling was always that this was a developer that wasn’t sure about their app’s worth or wanted to charge more than the market would support for their content. Many developers say, “consumers don’t pay attention to price changes”, but I think this is a naive conclusion.

Yes, some consumers are oblivious to price, but most consumers will take this information into consideration if it is easily accessible. Once an app has regular (even if unpredictable) price drops, assume that some of your potential customers will value your app based on the lowest price it has been at in the past 90 days.

Digital-Storytime’s Advice: Take pricing seriously and talk with your team about different scenarios based on how your app is performing. Have a few different plans ready before you launch to help guide your pricing decisions. It can be very emotional once an app is in the market to try to be objective about pricing, so have a game plan in advance if at all possible. Also, be realistic. Chances are your app’s profits are not going to look like lottery winnings … reports from the early entrants in the app market have distorted a lot of people’s expectations. Talk to others with apps in the market to see if your daily/monthly/yearly sales expectations for the app are in-line with current realities. If you can get this information before putting development time into an app, even better.

4. The App Pricing ‘sweet spot’ … If an app has a perfect price point, one that spurs downloads but also covers costs, I’m not sure what that price might be. However, I have asked a lot of readers to share the price range that they expect to pay for children’s book apps on the iPad. What I have gathered from consumers is that the magic price point for an unknown developer or story topic is often $0.99 – $1.99 at the most. Some consumers will only try these apps when free. Popular characters and reprints of known print titles can expect to get closer to $2.99. Of all the book apps I’ve reviewed so far, more than 75% are priced below three dollars US.

For apps that are highly produced, with outstanding animation and/or interactivity (in addition to charming story/illustrations), the upper end of the book app market right now seems to be $4.99. Very few consumers are willing to pay more than $4.99 for a digital picture book, no matter how amazing. Of the 380+ reviews of book apps on our site, fewer than a dozen are priced over five dollars US.

This pricing ‘sweet spot’ is also in transition. Development costs for enhanced books in particular are a bit out of sync with potential profits at the current price points and download levels. In the future, we can expect both fewer developers and higher prices, but also much higher levels of market participation. How all of these elements will come into equilibrium still remains a mystery.

5. Other good reads for further research on this topic:

Optimal Price for Apps: http://www.launch.is/blog/whats-the-optimal-price-for-apps-or-is-there-one.html

White Paper on Pricing eBooks: https://docs.google.com/viewer?url=http%3A%2F%2Fwww.vook.com%2Fblog%2Fwp-content%2Fuploads%2F2011%2F08%2FPricingWhitePaper-FINAL-II-2.pdf

General pricing advice for eBooks: http://ibpablog.wordpress.com/2011/09/16/10-things-to-consider-when-pricing-e-books/

Ultimately deciding on a price point for any app is an individual developer’s decision. Many publishers of book apps have told me that they are not anywhere close to breaking even on the development cost of their enhanced book apps, so if your profits are lagging, please know you are not alone.

Profits are no indication of value in the digital space given the current chaotic market. However, profits do drive the ability of a developer to continue offering new apps. While there are no easy answers, there is a large community of independent developers over at MomsWithApps that are committed to working together to puzzle out some of these app issues – if you are a small, independent developer of apps, consider joining!

I’d also love to hear your thoughts & advice for app developers on the subject of price ..

Category: 100+ Reviews ... What I've Learned So Far, All About Apps, Marketing Apps

About the Author ()

Carisa Kluver is the the editor of Digital-Storytime.com, an iPad children's book review site. She has a BA in Anthropology from UC Berkeley and an MSW from the University of Washington. Before starting this project, she was a school counselor, health educator and researcher in child & maternal health.

Comments (11)

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  1. Wow, great post Carisa. I am going to email a link right now to a developer who has been asking me about pricing.

    I agree wit you 100% about avoiding price drops that are too frequent. I too pull together a list of sales and freebies, but in all honesty when I see a developer dropping prices on a weekly basis, I will not include them every week, or at all – it does really devalue an app from a psychological perspective.

    Sales and free promotions should ideally be rare and elusive, and worth catching. I’d like to see app developers taking a page from the book of traditional marketing knowledge – limiting their sales and keeping them rare. To do otherwise makes an app look a bit desperate.

    Thanks for putting this so clearly into words for the larger development community!

  2. I read parts I and II and have been waiting for this one. What a wealth of information and great perspective! I only wish it had come out before we released our first app at appropo. We are in for the long haul though, out of love and with hopes of eventual profit, and will keep all of this in mind as we move forward.
    Thanks so much, Clarisa!

  3. Adam Coccari says:

    Thank you so much Carisa, this was a really insightful and helpful series of posts. I was just at the Moms With Apps workshop, and I think you were there too correct? It is amazing how many different opinions people have about pricing. Even from the experienced developers at the workshop, I got a wide range of opinions about pricing my app. I just launched brand new website and marketing materials, so you can see my efforts in this area here: http://www.mathevolve. I am launching the app for $0.99 for a few days, and then I intend to raise the price. What point do you guys think seems right for this product? I truly believe it is top in its class (games for practicing math), and took around 7 months of development time by a professional game studio. I would love to hear your opinions…

    • Great questions Adam, and excellent point about the wide variety of ideas about pricing. The hard part about answering a question like yours is that while the amount of time spent in development and quality of the app are important in determining the ‘sweet spot’ for pricing, the biggest factor has nothing to do with the app itself.

      I would suggest comparing both the quantity & quality of the other apps in the same area or that meet the same need, then consider how big the audience for your app might be … supply is so large for some categories of apps that consumers are used to finding very high quality free apps to meet their needs.

  4. Carisa, Great article with an in-depth point of view on pricing. My first app was a basketball stat app that was sold as a utility app. I priced it at $1.99 to start where it received marginal sales 1 a day for two months straight. Then I had a dry spell of almost 6 months. About a month ago, I lowered the price to $.99 and now am having my best sales on this app. I have only made one revision to this app because this app was done in Objective-C and I contracted out the work. My other apps, I priced higher and only one did really well at a higher price initially. The first week, I did really well at $5.99. It was a mistake, I thought I had set it at $4.99 but it did so well, I kept it there. Looking back, I strongly believe that if I had introduced it at $.99, I probably would have have sold thousands instead of hundreds those first few days. For me the magic number is now $.99 for the majority of my new releases, and $1.99 for introductory books. With my recent book, “Hippos Name”, I lowered the price from $5.99 to $1.99 and have seen no significant increase in sales. However, I do and will continue to bring more value to the app by adding more features, and increasing the overall look and feel of the book. Our latest app (at Apple for review), was originally going to be a bonus page to a new book app for Christmas, but we ran out of development time. So we’re now just releasing it as a stand-alone app for $.99 and will also add it to Hippos Name eventually as a bonus to it.

    As for making a profit, I can’t quit my day job, but I did cover all of my development fees for Apple and Corona SDK. I also bought a Photoshop plug-in from Kwik that aided in decreasing my development costs (it’s now done in-house). I like to look at it in Steve Jobs’ point of view. Do what makes you happy. Don’t do it for the money, do it, because you love to do it. I love creating and making people happy. And this is why I create apps. The money is the gravy.

  5. Vincenzo says:

    Thanks Carisa this is an excellent post indeed! I can confirm wholeheartedly what you have described about the correlation between price, App exposure and goals. Thank you again for taking the time to share this.

    Vincenzo
    Blue Quoll Digital

  6. David Fox says:

    Excellent article, Carisa! I’ll have to read this every time I’m tempted to participate in an app sale!

    We’re now thinking about how to price our second app in the Middle School Confidential series, coming out soon, as well as thinking about whether to change the price on the first one in the series. Interesting how Bartleby’s Book of Buttons 1/2 handled this.

    • So true, David! There are a few interesting examples of using a free price drop to gain momentum for a new app … Auryn also had a long period of free for Teddy’s Day as Teddy’s Night was releasing last winter. I think this can work as part of a suite of apps but it’s a gamble … then again, so much about this market really is unpredictable. One thing I should have mentioned is that the possibility of a nod from Apple does increase if a high quality app is free. But then that’s a whole other Pandora’s Box of mystery and I wasn’t up for part 4 in this series. ;-)

  7. Alex says:

    I read all three parts, thanks Carisa! It was what I looked for.
    I would add just one thing: It’s very important to reply to all emails your customers send even if you have nothing to say.

  8. Karen Robertson says:

    Carisa, another insightful and hugely helpful article. Thanks for sharing what you are seeing in the market.

    I get the pricing question from authors and developers a lot too and agree with your observations.

    Karen

  9. Elpida Voulgari says:

    Hi Carisa, I just run into this amazing article of yours, while searching the internet for information on apps’ price drops. This is the only article I found that kept my interest to the end…even leaving me wanting more :-) You’ve really helped me decide on the pricing strategy of Beck and Bo…so thank you!!!

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