If you think you have a winning idea that has a great business potential and which offers a product or a service that customers would value and hence are likely to pay for it, then one of the faster way to roll your business is by developing and launching a mobile app. Customers the world over are increasingly using their mobiles to make purchases now and that is one medium that companies, especially start-ups can ill-afford to miss.
However, actually making money from mobile apps is not as simple as developing and launching the app. The pricing model for your app requires strategic thinking and understanding the customer psyche around purchasing from mobile apps.
Free App vs. Paid App
Technically speaking there are four types of app monetization models, with one of them being an absolutely free app that is built without any intention or inclination of making money from it. Such apps could be the informative apps from local government with an aim of providing emergency numbers and related information to the citizens at no cost. However, since such apps are not the focus of this blog, we will not delve deeper into such apps for now. Next we look at the three prevalent options for app monetization.
These are the apps that are downloaded and installed for free. But when the user starts using these apps, he finds simplistic banner advertisement at the top and / or the bottom of the app screen. When the user clicks on the advertisement, the app maker accrues a certain amount.
In-app advertising is perhaps one of the most popular and fastest growing monetization strategies for the free to download apps. While the advent of app monetization technology is helping develop more visually pleasing and easy on the eye advertisements, the app developer needs to wisely balance the number of advertisements. A high number of advertisements can serve to irritate the users and pull them away from the app, especially if it prevents them from having an ideal experience. On the flip side, fewer advertisements will hardly make any money for the app developer.
In-app advertising is best suited for the following types of apps:
These are also the apps that are downloaded and installed for free. But these apps work in three different ways.
- One is where they have restricted access for the free user, which does not allow the user to access certain advanced or premium functionalities, thus making the user pay for them.
- Second is where these apps are available as free for a few days with full functionality, thus giving the user a complete feel of its utility. Then when the user has experienced the utility, they ask them to pay for using the app further.
- Third category of freemium apps have all its features available for free along with built in advertisements. These apps charge a small amount to upgrade to an advertisement free app which the users highly appreciate.
Freemium apps allow the user to experience the app before taking a decision on purchasing it. However, if it is a type one freemium app that restricts certain features, then the app developer needs to strike a good balance between what functionality to include and exclude in the free version. Too few free features may hinder the user from getting an adequate feel of the app while too many free features may again dissuade the users from paying for additional features.
In-app purchases are most popular with businesses that sell virtual or real goods to the app users. Real goods sellers could be retailers or restaurants that home deliver. Virtual goods are popularly sold by gaming apps that provide the user with in-app credit, currency or some fancy accessories to add on to their avatars.
This pricing model is highly popular. 76% of Apple app store revenue came from in-app purchases, says a research by Distimo. While its popularity has research backing, there are certain considerations that developers must think about before app launch, especially for a gaming app: these include the fact that users will expect to see all the features of your app for free to begin with so they could see the value. Then you need to ensure that what you offer to them through in-app purchase is really something that would enhance their experience and excitement about the app.
So which pricing model to choose?
As you can see, the pricing model of choice depends on many considerations along with strategic planning. However, you can also mix and match some of these options and launch them in combination rather than isolation.
The monetization strategy will determine whether your app will start a new trend or die a fad. If it becomes a trend, then you will have created a wonderful source of income for yourself.
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