I love the mobile apps business. If done right, there’s a lot of money to be made here. At Collectorz.com, we’ve been selling apps since May 2009 and it’s a big part of our business now.
However, from a software marketing perspective, I keep running into 3 main problems of the current mobile apps biz (one of which is App Store specific):
- No customer information (App Store specific)
- No ways to do coupon or bundle discounts
- Low pricing levels
Here’s the full story on all three, including my suggested workarounds:
1. No customer information (App Store specific)
Email marketing is an important tool to sell more stuff to your existing customers. Email is a great way to tell them about your other products, or simply about new versions of the product they purchased.
However, when selling iOS apps through the App Store you don’t get any information about your customers, no name, no address info, not even an email address. You can see how many apps you sold, by day and by country, but that’s it.
For instance, I have no idea who has purchased our CLZ iPhone or iPad apps. So how do I notify them of a new version? How do I cross-sell our other apps to them? Or, if we forget the selling for a minute, I can’t even send them usage tips, or let them know about known issues or server problems.
For us, at Collectorz.com, this sucks. Email is very important for us. Building a list of customers you can actually reach means building a solid foundation for your software company. Without being able to cross-sell and up-sell to your existing customers by email, you’ll have to attract new customers every day and can only sell to them once.
This seriously reduces the life-time customer value, which also makes it next to impossible to do paid advertising for iOS apps (especially combined with problem #2 below).
Imagine if Rovio could send a simple email to everyone who purchased earlier Angry Bird editions, and tell them about the release of the new Angry Birds Space? I am sure they’re doing fine now, but don’t you think they could easily sell twice as many copies of Space if they were able to reach their existing customers by email?
At Collectorz.com, our mobile apps are add-ons to our desktop software, so all app buyers are already on our email list. So at least I can reach them, but to do so I need to email my entire customer base. Which means I am annoying non-app-buyers with my iPhone related news. Or, the other way around, if I want to do a special half-price promotion for my mobile app, I have no way to email just the people who have not purchased it yet. I would have to email my entire list, also reaching users who already own the app. And you can imagine their reactions…
BTW: the next version of our mobile apps will be stand-alone cataloging tools, which means we will be attracting new customers. And I will have no way to reach them at all.
To solve this Collectorz.com “list segmentation” problem described above, we have created “interest clubs”. By clicking a simple link in a “broadcast-to-all”-email, my customers can join special our “iPhone Club”, “iPad Club” or “Android Club”. Club members get more regular updates about their app. Not ideal, but it helps.
Another solution used by app developers is an optional or even mandatory sign-up. This is a good solution for apps that require some kind of cloud account anyway, e.g. apps like Evernote. Another example is the popular DrawSomething, from whom I received a great email this weekend about their recent app update. DrawSomething requires an email or Facebook sign-up before you can play with others.
2. No ways to do coupon or bundle discounts
In the App Store or Android Market, there is no way to do coupon discounts. Coupons can be an effective way to do a special promotion to a specific group of users (not everyone), e.g. only to users of your other software, only for trial users, etc…
Also, it is not possible to do bundle discounts. A bundle discount can be a great way to entice people to buy multiple apps from you in one go. Or, in the case of apps that are add-ons to desktop apps: create a bundle of the desktop software with the mobile app for a small discount.
I am surprised at the lack of flexibility in doing promotions for mobile apps. At Collectorz.com, we like to be as flexible as possible with discounts. We do coupon discounts, bundle discounts, volume discounts, special software bundles, temporary discount sales, etc… and these are all very effective in selling more software. But for our mobile apps, we can’t do any of these.
The only workaround here is to do temporary price-drops. Just lower the price of your app for a fixed period of time and let your target audience know about it.
However, this way the low price is for everyone, not only your target group of users.
Also, if you’re thinking off making your app free for a while, be careful! The Android Market does not allow making your app free and then later make it paid again!
3. Low pricing levels
Pricing of desktop software is tough. Pricing of web-based subscription software is even harder. But at least you have the freedom to choose a pricing level that works for you, your specific software and your specific audience. No such luck for mobile apps.
The mobile market place, at least the most visible part of it, is dominated by the highly popular games and utilities. The ones that sell hundreds of thousands of copies, or even millions. And these apps can get away with $0.99 or $1.99 pricing. Because of their sales volumes, these apps generate lots of profits anyway. One might even argue that the low pricing is part of their success.
However, as a developer of highly specialized niche applications, your volumes will be much lower, maybe a couple of hundred copies each month. With a $0.99 price tag you will never earn back your development costs, or make any money. Your price will have to be higher, say $4.99, $9.99 or even $14.99, to have a reasonable chance of being profitable.
The problem is that with all popular and highly visible apps priced below 2 dollars, the pricing level expected by mobile app buyers becomes lower and lower. Users have come to think that paying $1.99 for a useful utility or a great game is a normal price. And developers asking $4.99 for a niche time-saving tool are even called greedy.
IMO this problem is caused by all mobile apps being sold in the same place, either the Apple App Store or the Android Market. In these stores, there is a direct comparison between the prices of totally different application types. High volume apps (games and popular utilities) are listed next to very niche and specialized applications.
Users are comparing a $0.99 Angry Birds app to a super-niche wireless barcode scanner app costing $7.99 (just a random example ). And rightly so, the emotional value of these apps for them may be about the same. And because $0.99 apps dominate the market, users expect the niche application to be priced around $0.99 too. Not the other way around…
The funny thing is… for desktop apps, being sold on the developer’s own website, the expected and accepted pricing is much higher. Windows or Mac editions of games like Angry Birds can easily be sold for $14.95. I mean, we’re selling our Canasta card game for Windows at a $19.95 price, without any problems or complaints. In contrast, a similar Canasta card game for iPad would probably need to be priced at $3.99, maximum. IMO, the price expectation for mobile apps is seriously messed up.
If you’re selling niche mobile apps, my first suggestion would be: stick to a pricing level that would be normal on the desktop, based on the value for users, expected sales volumes, your development costs, etc… Don’t allow yourself to be influenced by users complaining about your pricing. If your app really is of value to its users, they will buy it. At least start pricing high. You can always lower prices later.
This is what we do at Collectorz.com and, judging from our sales numbers, we seem to get away with it (although we do get regular complaints about the price of our apps). Note that our situation may be a bit different because we’re selling the apps as add-ons to our existing desktop customers.