Matt Gemmell

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iPad App Pricing

development & tech 4 min read

Since the launch of the App Store, there’s been continuous discussion (and quite a few complaints) about the very low average price of apps. The complaints have mostly come from software developers, who find themselves confronted with an impossible situation: investing weeks or months of work to create useful, compelling apps, then needing to price those apps at only a handful of dollars because customers have come to expect it.

The iPad is now with us, and the issue of pricing once again arises, more relevant than ever. I want to share a few thoughts regarding app pricing, with particular reference to the iPad platform.

First, let’s acknowledge a few (hopefully obvious) facts:

  1. People want things to be as cheap as possible.
  2. People want to be paid fairly for their work.
  3. Customers are people.
  4. Developers are also people.
  5. Every developer is also a customer (we buy a lot of apps).
  6. People decide whether prices are fair based on what they think the product is worth.
  7. The actual price of products is a balance of the cost of creating them, and what will seem reasonable to customers.
  8. Apps on physically smaller devices feel like they're worth less than apps on bigger devices, because we instinctively associate size with value.
  9. Fear of over-pricing (or desire to compete based on price) often leads to under-pricing; i.e. hoping to profit on sheer volume rather than a balance of unit price and units sold.

This leaves us in a very interesting position. There’s been a “race to the bottom”, price-wise, which has resulted in an iPhone App Store that in many categories resembles the Windows shareware ghettos of the last ten years. Not a nice place to be. The iPhone app market (and we must include iPod Touch here, too) has already bottomed out with regard to pricing, and I don’t believe that there will be any significant future shift to a more sustainable pricing model there.

But then there’s the iPad, and a different value-perception. Bigger screen, nominally more expensive device (whether that’s actually true or not), luxury device category (we all have a cellphone, we don’t all have a tablet) - these things all contribute subtle psychological nudges towards placing a higher unit value on the software for this platform.

The truth is that an iPad app is neither easier nor harder to make than an iPhone app (or a Mac or Windows app), in any general, reasonable, defensible way. Software doesn’t work like that; we don’t have to work twice as hard to cover twice as many pixels on screen. It’s all about the elusive quality factor.

I’m deliberately talking about quality, rather than effort. I might expend twice as much effort as you would creating an identical app; should mine cost twice as much? Probably not. But then, what exactly is quality? For software, quality means things like:

  • Allowing you to accomplish tasks efficiently.
  • Having a user interface that helps rather than hinders.
  • Doing just enough of what you want, but not too much.
  • Being stable and reliable.
  • Minimising the inherent discomfort of using a computing device.

This is exactly the same as for physical products in the real world; it’s not about how long it took to make, but rather about the quality of the product. Every car can be driven, but not every car has the same ownership or driving experience. Software is no different.

If you’re a “race to the bottom” developer, you’re probably not reading this article, and you’re dismissed in absentia. The person I’m addressing is the developer who wants to provide quality for a reasonable return, and who’s perturbed by the low average prices. Try to relax. Price your product based on the quality and value proposition it offers; don’t compete on price. Try to consider who your ideal customer is, and target them.

Generally speaking, and making a huge generalisation, there are two types of consumer: those who understand the value of their own time, and those who don’t. Those who have built their own businesses are almost exclusively in the first group, and/or those who actually bill their time. Professionals in general, on the whole, are also a bit more likely to be in the first group than the second.

In the second group, you have people who don’t really understand what it is that you do. You also have people who, for whatever reason, genuinely place a very low value on their own time - notably, children/adolescents/students, the unemployed, the more radicalised “free software” supporters, and so on. This second group is very vocal. Try to ignore them.

Consider the following scenario. A man called Jack buys a $1 app, and gets a total of 5 minutes of entertainment from it (or it saves him 5 minutes of work). That’s 5 minutes ever. Was it worth the price? If his answer is no, Jack values his own time at less than $12 per hour.

(Since he wanted more than 5 minutes of value for $1, he wants more than an hour of value for $12, so $12 equates to more than an hour of his time, by his own estimation.)

Now, granted, that’s a huge piece of hand-waving and isn’t really how it works, but it is somewhat indicative. Jack has an inflated expectation of the value of a dollar, and a correspondingly reduced perception of the value of the app his dollar bought. Do you want to sell to Jack? Or would you perhaps prefer to sell to Jill?

Jill buys an app like OmniGraffle, for $50. The app allows her to easily create professional diagrams and charts, right there on her iPad. The value proposition of the software isn’t just its raw functionality, but also the care and attention that went into designing the user interface and interaction, choosing the features, writing the tutorial information, testing the software, and so forth.

There’s also the significant value of being able to use its features on the iPad, anywhere she goes. Jill is a professional and understands that the actual net value she’ll derive from the app is far, far in excess of $50. She understands the value of her own time, and she’s delighted to be able to obtain the app for just $50.

Wouldn’t you rather sell to Jill?

The iPad is a different market from the iPhone, but more importantly, in any situation you can choose where and how you want to compete. If you need to compete so aggressively on price, or exclusively play the profit-by-volume game, there’s a good chance that your product and/or marketing aren’t up to scratch. You’re also potentially damaging the platform’s long-term sustainability for its life-blood: quality.

Don’t race to the bottom. Make a great product, price it fairly, and target those who understand the value of things. After all, they already bought an iPad.

Footnote: I expect plenty of pushback on this article. The position I put forward is necessarily a simplification, and there are legitimate reasons for exceptions. Nonetheless, as a developer who relies on these platforms for my income and the health of my own business, my primary concern has to be their sustainability. It's from that perspective that the article was written. I welcome all feedback, especially opposing views.