Jun 24, 2011
Lemonade Stands and Mobile Applications: pricing
As in the saga of my kids' lemonade stand, Mobile Application development is the sum of its parts. It must be the result of a clear understanding and definition of the Mobile Application Product. What is the value that the user will be purchasing? The User must be clearly understood demographically and with regard to their expectations. If your user base expects a feather duster and you deliver a hammer, the consequences will be catastrophic for you. Finally, determine what your Return on Investment will be and how you will measure it. If your product is a marketing hook to increase brand recognition, how will you validate increased brand recognition? A brief thought on monetization. Pricing an application for sale on an app store like iTunes should pragmatically follow the principle of "whatever the market will bear." Meaning that if there are 10 similar applications that range from $2 to free, market price is in the $2 range. If your product offers a significant and differentiating value proposition, then be more aggressive in the pricing of your application, but it would likely be a stretch to go from a $2 price point to a $10 price point. Additionally, investigate how In-Application Purchasing, a plan implemented by Apple using the App Store commerce model to allow a consumer to purchase additional content within an application, which enables you to offer more value over time to your user base while continuing to monetize the application. I spoke with a partner last week, who had an entertainment app that was originally $1.99, with $.99 add-ons available through In-App Purchasing. The app has had a great run over about 18 months, but had declined to almost zero in downloads. Our partner dropped the application price to zero and made the game a free app. Within a week they have been downloaded over 100k times and had a concomitant spike in add-on downloads (each at $.99.) Advertising. The implementation of ads in applications can generate additional revenue stream for an application. However, this should be thought through thoroughly within the Lemonade Stand model, because there can be repercussions based upon the User's reaction to that advertising. Positive acceptance by the user base, can mean clicks and revenue. Negative response can literally kill an application. When considering advertising, protect the sanctity of your product. The Lemonade Stand strategy does not specifically address marketing, launch strategy, in app advertising or a number of other issues that have become a part of the mobile application world, but these issues should be ancillary to determining the core purpose and value of your application. Its simplicity may not live up to Harvard Business standards, but following these principals will ensure your organization has determined a practical roadmap for developing a mobile application.