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magento & ecommerce

How to Choose the Best Pricing Model for Your App

You’ve spent the past few months designing your app, building it, and polishing it to perfection.

Now comes the most challenging part of your task: releasing the app to popular online stores and getting as many people as possible to download it and use it. This is where the pricing model comes into play. If you get this part right, you’ll have earned the right to call your app a success.

What Is a Pricing Model?

First and foremost, a pricing model is a way to monetize your efforts and establish a steady stream of revenue for yourself or your company. As you’ll learn in this article, there are multiple ways to make your app profitable. Furthermore, a good pricing model can help you boost your brand’s reputation and build a strong and loyal customer base.

There are four different pricing models currently used by different app makers. Some apps are free, whereas others utilize one of the three remaining models: freemium, paid, and paidmium. In this article, we’ll take a closer look at each of these pricing models and explain what they are and what types of businesses they’re designed for.

1.    Free Model

releasing the app to popular online stores and getting as many people as possible to download it and use it.

It’s hard to resist anything that’s free, so it shouldn’t come as a surprise that the mobile apps utilizing the free model are also the most popular ones. If we take a look at two most popular mobile app stores, we’ll see that they’re also in the majority. As of this writing, about 87% of apps on Google Play Store and 90% on iTunes are free.

As the name of this model clearly suggests, there’s no direct payment here. Users can download your app and use the fully functional version with all the additional features completely free of charge. In financial terms, this means that you’re not earning any money from the sales of your app or extra features. But this alone doesn’t mean that your free app can’t bring in revenue.

If your app proves popular enough – and you’re surely improving its chances by making it free – you can sell advertizing space within the app. The more popular your app is, the more money you can get from ads. In order not to alienate your users, you have to find a way to insert ads and banners without them being too obtrusive or compromising the user experience. Ideally, the ads you show should be targeted at your users and somehow be related to the particular service(s) your app provides.

Free model is great for businesses such as food delivery, taxi companies, or online stores that are looking to offer a more convenient way for customers to use their services. It’s also good for first-time mobile app developers that are new to the market and want to build a strong word of mouth. There’s an additional upside to the free model. Namely, users are more likely to rate them and provide feedback, which you can use to further improve your product and remove any bugs that you may have overlooked.

2.    Freemium Model

releasing the app to popular online stores and getting as many people as possible to download it and use it.

Freemium apps are free to download, but free users are only given access to certain basic features. If they want full functionality and all the added bells and whistles, they’ll have to pay either a one-time fee or a periodical (usually monthly) subscription fee.

Most industry experts consider this the best model for app makers – and for a reason. With a freemium app, you get two sources of revenue. On the one hand, there’s the subscription fee money. At the same time, you can sell advertizing space and show relevant banners ads to your non-paying users.

The tricky thing about this model is finding the right balance between the free and paid features. You have to make the free version useful enough for people to download it in the first place, but also ensure that the paid features are enticing enough for them to upgrade to the paid model.

There are also different ways to utilize this model. If you’re offering a free download of a mobile game, you can limit the number of rounds free users can play. Some music streaming services also rely on the freemium model. Spotify is an excellent example: free users can’t download their music for offline listening and are only allowed to shuffle playlists instead of choosing a song they want to play.

3.    Paid and Paidmium Models

releasing the app to popular online stores and getting as many people as possible to download it and use it.

There are two main differences between these models and the two we’ve highlighted above. First, in order to download them and try them out, users must pay your asking price. Second, you can’t show adds within the app, which means that you’re limiting yourself to only one revenue stream.

With paid apps, users only pay the price when they first download it. In return, they get a fully functional app without any additional features locked behind a pay wall. Paidmium apps, on the other hand, do require additional in-app purchases to unlock certain bonus features.

Both of these models are most commonly used by mobile game developers. Some of them ask users to pay an extra fee to move on to the next level. Similarly, different learning apps utilize the paidmium model. The users are initially given a certain set of basic skills to master. If they want to continue, they have the option to pay a small fee to access a more advanced course.

In order for a paid or paidmium app to be successful, it must provide something of value to its users. If other free apps already offer similar services, you need to one up them. Another important thing is the price point. A symbolic download charge is good for starters. If your product is perfectly designed, extremely user-friendly, and free of bugs, you can charge more, as long as it’s reasonable.

Which Model Should I Go For?

Among other things, your choice of a pricing model will depend on how well-established your brand is, how much money you’re expecting to earn, and how high a demand there is for the services your app provides.

Seeing as the price point can pretty much make or break your app, it’s best to start with either free or freemium model. Once you’ve established strong brand recognition and amassed loyal clients, you can consider moving to one of the paid models.

If you’re still unsure about the right pricing model, feel free to contact us. Our team of experts will help you make the right choice for your app to thrive in the marketplace.

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By interactivated • on August 19, 2017

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