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.