Avoiding the Race to the Bottom - 360iDev 2012

929140ab388de5849c0221b86242aa12?s=47 Joe Cieplinski
September 10, 2012

Avoiding the Race to the Bottom - 360iDev 2012

We all know that the going rate for iPhone apps is 99-cents. And the 'freemium' model is even more the rage nowadays. But not all apps fit neatly into this business model.
Apple sells millions of iPads and iPhones to new customers every year. And some of those customers are perfectly willing to spend more on an app than they did on this morning's latte. Many apps appeal to a smaller audience, but can command a much higher price.
Companies have found a great deal of success in the premium app market. Take a look at the top grossing lists on the App Store, and you'll find many iPad apps priced $9.99 and up. The OmniGroup, to give one excellent example, sells OmniFocus for $39.99. And no one who pays for it ever complains. This app is consistently in the top-ten selling productivity apps.
At Bombing Brain Interactive, we've managed to stay in the top 50 grossing Productivity apps for over a year now, at a price of $14.99 for our iPad version of Teleprompt+. When we raised the price from $9.99, our sales INCREASED. The app may not be making Angry Birds money, but it does a heck of a lot better than the average app.
Some of the benefits to selling premium priced apps we'll cover in this session:
* More money per customer - obvious, but worth pointing out
* Fewer overall customers, which leads to fewer support requests
* Fewer one-star reviews - You avoid the people who download your app for free and then complain about it not having the one feature they wanted.
* A smaller audience that's easier to target for ads and other marketing efforts
* Fewer competitors - Usually, you'll have three or four, as opposed to thousands if you're building a game, or hundreds if you're building yet another Twitter client. And it's often beneficial to charge MORE than your competitors, not less, as that will make your app appear more serious. (As long as it is actually better than the competition.)
* A loyal audience who is far more likely to tell their friends and professional collegues about your app.
* An app that you can grow and build over time - rather than building an app, putting it out there, then abandoning it for the next idea because you can't afford to keep it up, you get to continue supporting and adding great new features, building a community of users over time
* An opportunity to build ""complementary"" apps. Make other premium apps that appeal to the same audience, and you have a built-in customer base of loyal fans who you know are willing to pay for your next creation.
Obviously, not all apps should command a higher price, and this model is not necessarily right for your app. But if you have an idea for an app you want to build, consider who the target audience is and what sort of price that audience will pay before assuming you have to go to $1 or free. And don't be discouraged because your idea is only appealing to a small audience. If it's something you want to use yourself, chances are there are others who would want it, too.
Of course, if you're going to get into the premium business, there are some things to consider about making higher-priced apps. In this session we'll talk about:
* The premium app experience - design, stability, features; these apps have to sweat the details even more than the average app. Word of mouth works both ways.
* World-class support - people who pay more won't write 1-star reviews, but they will write to your support page. And they will expect fast responses.
* Documentation - offering customers professsional support documents, a users manual, etc. The more you look like a professional organization, the more respect you'll get
* An organized branding effort - you'll want to invest in a web site that is more robust than a single page with a link to the App Store. Promo videos, instructional videos, detailed explanations of the app's features that go way beyond what you can fit in the App Store description area. People will want to inspect every nook and cranny of your app before coughing up a high price for it.
It takes more to produce and maintain a premium app, but if you are willing to work at it, the rewards are great.


Joe Cieplinski

September 10, 2012


  1. “The problem with the race to the bottom is that

    you might win.” —Seth Godin 1
  2. AVOIDING THE RACE TO THE BOTTOM Success at Selling a

    Premium Priced App Joe Cieplinski 2
  3. avoidingtherace (glassboard) 3

  4. image: radio france Internationale 4

  5. $0.99 FREEMIUM FREE 5

  6. 6

  7. What’s going on? 7

  8. Who is this guy? 8

  9. Teleprompt+ Setlists bombingbrain.com 9

  10. AVOIDING THE RACE • A little history • Available pricing

    models • Why not 99¢? • The alternative • Making the case • How to succeed 10
  11. A LITTLE HISTORY 2007-2012 11

  12. JANUARY 2007 12

  13. MARCH 2008 • App Store Announced • iPhone SDK 13

  14. “Even the big developers would have a hard time getting

    their app in front of every iPhone user. “Well, we’re going to solve that problem for every developer. Big to small.” —Steve Jobs 14
  15. JANUARY 2010 15

  16. APPLE’S APP PRICING iWork: $9.99 16

  17. TELEPROMPT+ • Released on iPad launch day (04/03/2010) • $9.99

  18. AVAILABLE PRICING MODELS At the risk of being too obvious

  19. Free Free with Ads Freemium $0.99 Premium (Fair Price) 19

  20. WHY NOT 99¢? A little analysis 20

  21. 21

  22. COSTS MORE THAN $1 cup of coffee iTunes song bottle

    of water one-hour parking meter slice of pizza Box of Kleenex ride on the bus side of fries newspaper Episode of a TV show movie rental ream of paper can of veggies spool of thread can of cat food dry clean a shirt 22
  23. Customers have been conditioned 23

  24. MAKE A LIVING AT 99¢ Yearly salary for programmer $100,000

    144,300 per year 395 per day 24
  25. MAKE A LIVING AT $14.99 Yearly salary for programmer $100,000

    9,530 / year 26 per day 25
  26. MARKETING CAMPAIGNS Small Marketing Campaign $2,000 2,866 to break even

    at 99¢ 191 to break even at $14.99 26
  27. HOW WILL YOU GET THOSE SALES? • Massive marketing campaigns

    • Venture Capital • You’ll wait it out and hope to get bought 27
  28. A future where true indies are locked out, truly innovative

    software is nonexistent, or both. 28
  29. “I also worry that this low price point for applications

    is going to limit innovation on the platform. …when are we going to see the utility of the platform taken to another level, like when spreadsheets appeared on the Apple ][ and desktop publishing appeared on the Mac? …It would be great if the killer app for the iPhone cost 99¢, but given the numbers above I can’t see it being very likely.” —Craig Hockenberry, Dec 2008 29
  30. REVENUE PER CUSTOMER Start thinking about it 30

  31. CUSTOMERS COST YOU MONEY • Support Inquiries • Negative Reviews

    • Word of Mouth 31
  32. You can’t make it up in volume if you’re losing

    money on every customer. 32
  33. APP ABANDONMENT • 400,000 of the 650,000 on the App

    Store are “zombies” • Almost two thirds of all apps • Savvy customers have begun watching release dates • Zombies are not good for your reputation 33
  34. “…a few companies with a lot of experience, brand recognition

    and marketing money are able to catapult their products up into the Top 25, where they’re usually profitable as long as they can sit there.” —Mike Schramm, TUAW 34
  35. “There’s also a thriving market for apps that address specific

    business verticals rather than aiming at the general consumer.” —Mike Schramm, TUAW 35
  36. IN SHORT • Cheap or Freemium apps a legit business

    • Extremely high risk • Competing with Goliaths • Most time not spent making apps 36
  37. THE ALTERNATIVE Apps at a Fair Price 37

  38. 38

  39. PREMIUM APPS • Charge a fair and sustainable price •

    Make a decent enough living to keep working for yourself • You’re not gouging your customers by charging a reasonable price • You are letting them rip you off when you place a low value on your work 39
  40. “The day nobody thinks my games are worth the price,

    I will fold up shop and go get a real job. But I will never, ever be shamed into charging less than what I feel is a fair price for my labor.” —Jeff Vogel, Spiderweb Software 40
  41. MAKING THE CASE For Higher Priced Apps 41

  42. IS PRICE YOUR PROBLEM? • Visibility and discovery • Lack

    of marketing • Better available options • Lesser available options that are better at marketing • It’s not about price; it’s about trust 42

  44. TELEPROMPT+ • Debuts on the App Store in April 2010

    (iPad launch day) • Opening price: $9.99 • Sales somewhat modest, but better than anything we had seen • Increased over time, despite competition 44
  45. TELEPROMPT+ • Momentum builds • Version 2.0 - new features,

    new design • Price increased to $14.99 45
  46. More money per customer and Continued Sales Growth 46

  47. Teleprompt+ Sales Price Raised from $9.99 to $14.99 47

  48. Teleprompt+ Revenue Price Raised from $9.99 to $14.99 48


  50. A DIFFERENT KIND OF APP Long-term Usefulness 50

  51. Time Customer happiness Throwaway App Bill Van Hecke, Omnigroup 51

  52. Bill Van Hecke, Omnigroup Time Customer happiness Throwaway App Premium

    App 52
  53. A DIFFERENT KIND OF CUSTOMER In Search of the True

    Fans 53
  54. PREMIUM CUSTOMERS • Not overly sensitive to price • Sees

    value in saved time and better experience • More likely to sing your praises to others • Less likely to publicly complain about petty issues • Actively seeking to get more value out of his or her device 54
  55. HOW TO SUCCEED In the Premium App Market 55

  56. Label 56

  57. Label 57

  58. MAKE A KICK-ASS APP Goes without saying 58

  59. FIND A PROBLEM • Not solved to your satisfaction •

    The sweet spot • A few competitors • None of them is unbeatable 59
  60. SWEAT THE DETAILS • Focus on the user • Do

    it the hard way if that makes the app better • Become a student of apps • Work at simplicity 60
  61. GET A DESIGNER • Not just for your icon •

    UI will make or break the app • Get the designer involved early • If $ is a problem, consider profit share 61
  62. PRICING CONSIDERATIONS • A critical decision - don’t take it

    lightly • Estimate audience potential • Estimate startup development costs • Factor in long-term maintenance 62
  63. MEET CUSTOMER EXPECTATIONS People who pay more expect more 63

  64. CUSTOMER EXPECTATIONS • 99¢ is a WTH price • $9.99

    is more of an investment 64
  65. “Overall, this is a good application. However, for $9.99, I’d

    expect to see a lot more down the road.” —Customer email 65
  66. UPDATE Early and Often 66

  67. APP UPDATES • Can’t do it all in version 1.0

    • Have a road map for version 1.1, 1.2, etc. • Have a plan for version 2.0 • Frequently updated apps get more attention 67
  68. SUPPORT Needs to be top-notch 68

  69. PROVIDING GREAT SUPPORT • Get a ticketing system • Use

    support for marketing • Engage on Twitter and Facebook • The more “human” you are, the more you avoid bad reviews 69
  70. FEATURES MATTER Balance usability with usefulness 70

  71. FEATURES • Don’t get obsessed with features • Don’t neglect

    the importance of features • The app has to solve the user’s problem 71
  72. The era of apps that just do one simple thing

    really well is over. 72
  73. 73

  74. 74

  75. 75

  76. 76

  77. COLLATERAL MATERIAL It’s a lot more than just the app

    itself 77
  78. REQUIRED • Web site • Screenshots for iTunes • Text

    Description • Keywords 78
  79. 79

  80. 80

  81. OPTIONAL BUT RECOMMENDED • User guide • Yes, even for

    an iOS app • Cuts down on support requests / time • Helps users take you more seriously 81
  82. OPTIONAL BUT RECOMMENDED • Videos • Promotional • Instructional 82

  83. 83

  84. MARKETING Who needs it? 84

  85. WHY YOU NEED MARKETING • 650,000+ apps • Discoverability sucks

    • Apple favors those who already do well for themselves • Press favors whoever Apple favors • Need to help your audience find you 85
  86. BLOG • Helps you make your case • More than

    just announcements • Tips, tricks, guides • Other interesting content • Helps with SEO, etc. 86
  87. TWITTER AND FACEBOOK • Can’t be merely an “ad” •

    Be worth reading • Be a source of interesting content • The “soft sell” 87
  88. PRESS RELEASES • For major announcements, yes • Don’t expect

    much • Mainly for SEO • Do learn how to write one properly 88
  89. EMAIL • Apple’s customers, not ours • Get an email

    list of your own going • Web site contact form • send out occasional email newsletters • Not spam 89
  90. PARTNER WITH HARDWARE ACCESSORY MAKERS • Feature on each other’s

    web sites • Affiliate links • Cross-promotion opportunities 90
  91. ADVERTISING • Target whenever possible • Consider more than just

    the web 91
  92. MINGLE • Go to meetups and conferences • Actually talk

    to people • Become an app consumer • Become a part of the community 92
  93. Word of mouth starts with you. 93

  94. REVIEWS On the App Store, more like Rants 94

  95. HOW TO HANDLE REVIEWS • Ignore the blatant negatives •

    Encourage more positives 95
  96. You need a decent number of reviews, and more of

    them have to be good than bad. 96
  97. COMPETITORS Pay attention, but lead rather than follow 97

  98. COMPETITIVE APPS • Buy them • Note differences in approach

    • Be honest when they did something better • Don’t feel pressured to match price • Just make a better app 98
  99. RECURRING REVENUE An inevitable necessity 99

  100. REVENUE PER CUSTOMER • No upgrade pricing on the App

    Store • In-app purchases, where appropriate • Companion apps • Subscription features • No nickel and diming - provide real value 100
  101. BUILDING A BRAND Reputation is a big deal 101

  102. “When people trust a brand and see real value in

    it, they’re willing to pay more for it. If you have a strong brand, as Apple does today, you can charge a premium price, and people will line up to pay it.” - Ken Segall, Insanely Simple 102
  103. Your pricing strategy is part of your brand 103

  104. CONCLUSION Let’s Recap 104

  105. AVOIDING THE RACE • A little history • Available Pricing

    Models • Why not 99¢? • The Alternative • Making the case • How to Succeed 105
  106. “You might make a few more bucks for now, but

    not for long and not with pride. Someone will always find a way to be cheaper or more brutal than you.” —Seth Godin 106
  107. joecieplinski.com @jcieplinski (twitter) @joec (app.net) avoidingtherace (glassboard) 107