I view the pricing of iPad apps as something akin to pricing the first flat screen TVs. Whenever a new technology comes out, there is an opportunity to sell the new product at a higher price[el]for a time. There are a number of reasons why this is true. First, early adopters of new products are charged a premium to have the latest and greatest. Second, new technology costs more to manufacture. From the newest chips to other internal hardware, these new products cost more to manufacture. Not to mention the research and development costs must be factored into the price of the new technology.
Now take flat screen TVs. For decades, the market for regular TVs was fairly stagnant with prices dropping to crazy low levels. Older TVs were bulky and heavy and were not easily mounted on walls or other spots within homes and businesses. It seemed like the television market would languish forever. Enter flat screen technology, which changed all that. With flat screens, a TV could easily be mounted on a wall almost anywhere. The flat screens were much lighter and provided a much clearer image because of advanced flat screen technology and new broadcast options.
The problem with flat screens at first was their cost. A large flat screen could set you back $5,000 to $10,000. Sure, there were buyers who wanted the early technology, but sales really started to pick up when prices descended below $3,000. Now, years later we see that all TVs are flat screen and prices have dropped considerably.
The iPad phenomenon is similar. As a developer, and for a limited period of time, you have the opportunity to charge higher prices for your iPad app than your iPhone app as long as you add additional value not found in your iPhone app. And the reasons are similar to pricing for the flat screen TV. The iPad offers some additional value over the iPhone, with a much larger screen being its most desirable feature. Pricing is as much an art as it is a science, and you have to employ several techniques to arriving at a reasonable price. There is no doubt that pricing is a challenge, especially with iPad applications being so new to the App Store, relatively speaking. Also, whenever there is a new market for a good or service, it takes some time before the market achieves a sense of equilibrium, and the iPad market is not there yet.
Don't follow the herd by pricing your iPad app too low with the hope of gaining acceptance and market share. You should focus on delivering value instead of only concentrating on price. Understanding your audience and delivering value can help you price your app appropriately in this challenging market. Regardless of the current economy, iPad app developers would do well to carefully examine all aspects of pricing as it pertains to their audience, make careful pricing decisions, monitor and measure sales results, and make adjustments as needed to maximize their revenue.
Let's get one thing perfectly clear, though: You must provide additional value for your iPad app if you intend to sell it for a higher price than your same iPhone app. You must clearly communicate the differences between your iPhone and iPad apps and justify the higher price for your iPad app.
The right price for your iPad app is where your profits are maximized, and there's no better opportunity than right now with the iPad app market. Knowing the exact price to charge is as difficult as pricing any product, but you can get fairly close to the right price based on how steady your sales are and customer feedback via reviews and comments that are posted on the App Store.
Consider the following factors when pricing your iPad app. For starters, look at competing apps in your category for the iPhone and iPad and then ask yourself the following questions:
- How much do my competitors charge for a similar app? Take a look at the App Store and review how many apps are similar to yours. Have you produced a game that is similar to other game apps for the iPad? Do a search on the App Store to find out how many competing apps there are. The good thing about the iPad market is that there are still fewer apps for sale than for the iPhone.
- What are the differences between my app and someone else's? Do you have more features? Do you have more levels of play if it's a game? If you are offering a new medical app, does it offer something more than the other medical iPad apps do on the store?
- How does my app rate against the competition? Your app should have better graphics in that you can split the screen or do things that other similar iPhone or iPad apps can't. You should confirm that your app is better by talking to your reviewers, friends, followers, and early test customers.
- How does my app compare to free iPad or other iPhone apps? If there are many similar free iPhone and iPad apps, you will need to strongly communicate (and market) the value of your iPad app. Overcoming objections to free is a high hurdle and it takes time and effort, but it can be done with the right marketing and the right feature set. Remember that the old adage "you get what you pay for" applies to anything, including iPhone and iPad apps. Many free apps are downloaded and never used.
Additionally, ask yourself the following questions from a costing perspective. These questions will help you get some context on how much you need recoup:
- What were the actual development costs or time involved for my iPad app? Knowing your development costs is very important in helping set sales goals for your app because you'll need to first break even and then start to make a profit from your app. If you have already developed the same iPhone app, count the incremental costs for iPad development here.
- How much would the app cost to develop by another company? Larger development firms can often create an app less expensively than a small developer because they already have developers and graphic designers on staff and can redirect their efforts to that iPhone and iPad app. If you know someone who works for a development firm, ask them how much they typically spend to develop an app. Sometimes independent developers have to outsource some of the development for graphics or other complex requirements to outside agencies or other developers.
The iPad market is still in its infancy, you now have a golden opportunity to charge a higher price for your iPad app than on the iPhone. However, you must also provide additional value for the higher price by making use of the additional iPad features. Customers will pay a higher price if they perceive they are gaining additional value not found on the same iPhone app. Don't let the customers down on this point or else you'll hear a lot of grumbling, and your app won't sell well at all.