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Selecting The Right Pricing Strategy For Your Mobile App Business
minti • 26 November 2016
Starting any new business opportunity requires a great deal of planning, decision making and execution to increase the chances of success. With so many decisions and factors to consider, one of the most critical decisions any business owner can make revolves around selecting the right pricing strategy.
There are many factors that contribute to selecting the right pricing strategy for your mobile app business and they include market research, the features contained within the mobile app as well as having an appreciation for your competition. Recent research suggests that over 30% of all worldwide e-commerce comes from mobile; therefore selecting the right pricing strategy is crucially important for every business.
With that being said, the focus of today’s blog is to highlight the many pricing strategies that you could choose to adopt within your mobile app business and how different prices signal different things to your potential clients.
Penetration based pricing
As the name suggests, penetration pricing focuses on setting a low price to attract an initial surge of customers and to build a local profile. With a steady number of customers, you can harness this goodwill by creating case studies or testimonials which can be used to secure more clients. While this method is very effective in the short term, it can be difficult to build a long term, sustainable business this way as it becomes difficult to increase prices over time.
Reactive based pricing
This pricing strategy centres around having a fluid price that fluctuates based on the decisions made by competitors. For example, if your competitors offer a similar product/service to you and reduce their sales price by 20% to attract more clients you may choose to price match to remain on a competitive level. However, this is not something we would advocate as it results in not only devaluing your product/service it also makes your mobile app business more susceptible to competitors.
Market driven pricing
Conducting market research to analyse both your competition as well as customers is crucial to determining an optimum price point for your mobile app business. For instance, having an appreciation for the market conditions can help you deliver a price that is not only competitive when compared to other providers but also positions you as offering value for money to your clients.
Premium pricing
Pricing decisions are often perceived as reflecting the quality of the product or service being sold. For example, think how many times you have seen similar types of products/services with significantly different prices and because of human nature, you naturally assume the higher priced product/service is of better quality. By having a higher selling price your mobile app offering automatically commands more respect and prestige in the eyes of your clients.
Variable pricing
A sensible approach to pricing strategies is to use the variable pricing method as it allows you to tailor your price around the needs of your clients as well as factor in other elements such as location, demand and cyclical trends. By having a variable pricing approach, you can create bespoke pricing packages that can match your business objectives with the expectations of your clients.
Cost-plus pricing
This is a relatively simple pricing method that adds a percentage or ‘mark-up’ on the cost to determine a profit on each mobile app sale. For example, determining how much it will cost you to create a mobile app for a particular client and then adding a profit to arrive at a sales price. While this method is relatively simplistic it lacks accuracy and effectiveness as it generally ignores the client as well as the market forces that drive many pricing decisions.
Conclusion
As we have seen throughout this blog, there are a number of pricing strategies that you can choose to implement within your mobile app business. Each methodology has its merits and drawbacks but it is important to be appreciative of the market, the types of clients you wish to work with and the functionality that is available within each mobile app. By analysing the different characteristics and stakeholders that impact your mobile app business you can create a pricing model that works for your business.
To find out how Eazi-Apps can help you join the mobile app industry contact us today.
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