What is the right price for your app?

This is a the first part of the post on price, focusing on short term experiments. Read the second part for the longer term analysis

You want to know how to increase your sales by up to 40% without any development nor marketing ? Read on ! The secret is simply to set the right price.  And to determine what the right price for your app should be, the best thing is to … test for it !

1st test of price change from $0.99 to $1.99

Here is the result of an experiment that I conducted for my iPhone /iPad app, PicItEasy. 

1. Initially priced at $0.99, I tried to price it at the second tier level at, $1.99, starting January 7^th, 2013. Sales volumes decreased by more than 20%, from an average of 65 per week to 50 per week (the increase around Dec. 24th is most likely linked to Christmas and has nothing to do with the price change)

2. However in the meantime the Sales Amount actually increased by 40% from approx 35€/week to more than 50€/week and remained at that level the weeks after.

The volume decreased less than the price increase. The simple experiment led to a 40% increase on sales and did not cost me a dime in development :-)

2nd test of price change from $0.99 to $1.99 and to $2.89

6 months later, PicItEasy had become quite successful in the App Store and the sales increased by 500%. So I decided to see if the price was still right, after the significant increase in popularity and launched a new experiment:

• ·      Week 1 (Aug 12-18) : control week, at $1.99
• ·      Week 2 (Aug 19-25): decrease the price from $1.99 to $0.99
• ·      Week 3 (Aug 16-Sept 1st): increase the price from $0.99 to $2.89

Results : 

1. In volume, again the higher the price, the lower the sales volume. The week at $0.99 was boosted by the websites / bots that advertise for price drops in the App Store. The first days saw a big increase in app sales, which tended to wear off at the end of the week. Volume decreased very sharply (-55%) when price increased from $0.99 to $2.89. Price remained at $2.89 the weeks after (Sept 2^nd and Sept 9^th) and volumes stabilized at around 180 per week.

 

2. Again, the picture is very different on Sales Amounts. Although less strong than what was observed in December, I see a confirmation that at $1.69 (260€), I earn significantly more than at $0.99 (220€). The difference would probably have been even greater without the « promo alerts » that many website sent to their audience and that boosted the first days of the $0.99 week. Another great insight, at $2.89 (320€) I observed again a strong increase in revenue for the first week, that is not so apparent the 2 weeks after. I probably hit the limit after which the price will start to decrease. From this data, it becomes likely that $2.89 is the optimal tear level. Increasing too much the price will eventually lead to too strong a decrease in demand and in turn decrease the revenue.  

  

I hope this post convinced you that you cannot know if the price is optimal until you actually test for it.  My conclusion, that $2.89 is the optimal price, is true only for my app PicItEasy, given its audience and competition. A very different conclusion might be reached for your app, and $0.99 might very well be the optimal price. 

So start experimenting!