Putting Your Mobile App On Sale Boosts Revenue, Study FindsBy: Drew Bowling - January 27, 2012
If you’re a developer who doesn’t want to shell out money for ads, there’s one reliable tactic you can employ that will not only boost your notoriety but also improve your revenue: put your app on sale.
Despite the concept sounding counter-intuitive – lower the price of your product and then make more money – the numbers have been crunched by people in the know. In a study across the three main app stores – Apple’s App Store for iPhone and App Store for iPad, and Android Marketplace – Distimo found that despite selling an app at a reduced price, the “surge in downloads makes up for the loss in price,” enough to actually turn a profit on the less expensive app. Selling an app not only encourages more downloads from users, but being on sale will also get you a featured spot within the app store.
But before you run off on a price-slashing frenzy, don’t think you can reduce a price on your app and immediately see a boost in your revenue. For instance, while apps on sale generated an overall increase in revenue, only two-thirds of iPhone apps gained rank in the first three days after being featured. Lesson: having an app featured doesn’t automatically guarantee a boost, but it still is likely to help.
Even then, the average revenue increase for iPhone apps was 41% on the first day it was on sale. Anything will sell expediently on the first day of a discount, but Distimo found that within the entire period that the app was on sale (which they defined as a maximum of 15 days) the revenue generated by the app was up 22%. A similar trend was observed among iPad apps and apps downloaded from the Android Market. Android apps, in fact, generated the greatest revenue during the entire sale period despite having lower first-day increases.
Although developers can benefit greatly from putting their apps on sale, you can’t just slap a sale onto any old app and expect it to haul in money like gangbusters, Distimo warns. 44% of iPhone apps, they found, lost revenue during the sale “and 23% actually saw a decline in revenue by more than 20%.” Distimo offers an explanation as to why some apps did not benefit from being on sale:
Offering a discount of one dollar on an application that normally costs $7.99, lowers the revenue, whereas offering a discount of three dollars on average increased the revenue by 131%. In general, we noticed that the tipping point happened when the price was cut in half or the application was offered in tier 1 ($0.99) or tier 2 ($1.99).
As you can see below, there’s a refined matrix involved when predicting whether putting an app on sale will produce an increase in revenue:
So putting your app on sale will general higher revenue, but only if you discount it a certain amount depending on what the standard cost of the app is. Got it. So now the question you’re probably wondering: how much should the app be sold for?
It all depends, Distimo says. You have to take into consideration what type of app it is, work invested into the app, how much demand there is for the app, and so on (what, you didn’t expect a singular Midas answer, did you?). Given all of this criteria, the table graph below should give you an idea of how much the top grossing apps cost among different categories.
Again, though, there is not one magic bullet to put a hole in the wallets of all of your customers. You still have to use that organ between your ears to benefit from discounting the price of your app.
Other fun observations made by Distimo: