iPhone App Prices: How Much is Too Much?
iPhone app developers are pushing the patience of some users with apps priced at $99. But what's the "right" price for an iPhone app? While users like free best, three sweet spots are emerging -- all under $20.
CIO — The booming Apple App Store, which just surpassed a whopping two billion downloads, has witnessed a wild ride in app pricing. Today, more than 85,000 apps are available on the store's virtual shelves, with prices ranging from free to TomTom's new $99.99 iPhone app ($139.99 for the Western Europe version).
When the App Store launched on July 11, 2008, most of the popular apps were games and simple tools that were either free or cost $.99 or $1.99. Thanks to rising prices, market research Yankee Group foresees a bona fide $4.2 billion mobile app "gold rush" within five years.
One in four downloads will be a paid app that costs on average $2.37 by 2013, Yankee Group predicts.
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The rise in prices owes much to the iPhone's maturation as a more serious gaming and application platform, says Gartner's Van Baker. "Now we see free trial versions paired with a $4.99 price in the gaming space as a pretty common tier," he says.
App prices, however, are hitting a critical juncture as developers test the limits at the high end. "I personally think that the TomTom price is probably too high and they will likely have a challenge moving beyond the early adopter segment at that price," Baker says. He believes that a $19.99 price point will become commonplace at the high end, while $1.99 will continue to be the low end. Three middle tiers will emerge, he says: $4.99, $9.99 and $14.99.
So what do iPhone owners think about these pricing tiers? Create with Context, a researcher and designer, sought out these answers by bringing iPhone users to its lab in Silicon Valley. Here's what the users had to say during focus group conversations:
Free trial versions are still popular, yet iPhones users differ on how free should be implemented. Some users felt that $4.99 apps should have a free "lite" trial version, while others want the full app for free but with a timeout. "Light versus full creates confusion," an iPhone user told Create with Context researchers.
The $.99 pricepoint that helped launch the App Store out of the gate, as well as make software purchasing a non-risky impulse, now signals cheap, sophomoric, and even dangerous apps, some users say. The $.99 price, says an iPhone user, "means it's been around a long time, or there's a promotion going on, or it's not a complex app." Another user says: "Anything sub-$5 may not be a money-making enterprise or has malware."
