
7 Reasons our app costs $99.99 - ryanmcdonough
http://blog.httpwatch.com/2014/04/15/seven-reasons-why-our-ios-app-costs-99-99/
======
hawkharris
I appreciate the developers' honesty, but if the goal is to justify the price
to customers, they shouldn't blame external costs and delivery challenges
(e.g. Apple's take from App Store sales).

Think of it this way: while asking your boss for a raise, you wouldn't mention
the cost of rent or your other bills — even if those are prime motivators. You
would instead focus on how you bring value to the company.

Several of the article's points focus on the value that this app brings to
customers. The post would be stronger if all of the points had that tone.

~~~
danielweber
I've known a number of people who have successfully gotten raises by talking
about their personal expenses. It's not a rational appeal, it's an emotional
appeal, but emotional appeals can and do work.

Rationally your labor has a market value. How you negotiate your way into
getting paid that (or a little over that) is up to you.

~~~
ekianjo
> I've known a number of people who have successfully gotten raises by talking
> about their personal expenses.

Like that photographer dude on HN a while ago who defined the cost of one
photograph by the equipment cost, and the plane ticket required to go there?

With this kind of logic, you should bill your customers your years of
education, from the time you started to read, and effectively charge them
millions of dollars per product. This is so ridiculous I don't even know if
there's a name for this kind of fallacy.

~~~
pjmlp
Why do you think university degrees get paid better than learning at home kind
of thing?

Of course the investment in certain skills needs to be paid.

It is easier to understand why software is "expensive" when one factors in all
monthly costs involved in paying bills, office personal, developers, sales and
marketing to produce the said software.

~~~
ekianjo
> Investment in certain skills

I think you get it wrong. You are not being paid for the years of studies you
did. If you learn about petrol extraction in a country that has no oil and if
you are not willing to move, your market value is exactly zero. The market
defines your value, not your education. That's precisely what tons of students
don't understand and get severely pissed off when they don't get the job and
the salary they expected.

~~~
coldtea
> _I think you get it wrong. You are not being paid for the years of studies
> you did._

Not only you do, but in a lot of countries it is mandatory too.

People with university degrees earn X more than people without, by law. This
for example happens with civil servants in lots of countries (different,
published pay scales if you have a university degree). In some places it's
also encoded in the minimum wage a profession commands.

(I worked at the salary department of a major ministry in my country, and I
know of similar laws elsewhere too).

~~~
ekianjo
> Not only you do, but in a lot of countries it is mandatory too.

Great, you just defined one of the root causes of unemployment. Artificially
fixed value. The same thing occurs when you artificially define minimum wages:
home owners stop renting their properties because it does not make sense for
them anymore.

~~~
coldtea
I don't believe in some magic "market equillibrium mechanism" that always
reaches some optimum and doesn't need intervention.

If people and especially employees, can screw other people, they will. Laws
against slave and child labor, and women inequality in pay, are also some ways
in which we introduced protections against those abubses. For some people
those protections were "artificially defined" too (e.g "why take the children
out of the labour pool and artificially inflate the value of adult labor").

> _The same thing occurs when you artificially define minimum wages: home
> owners stop renting their properties because it does not make sense for them
> anymore._

The correlation doesn't make much sense. As long as there are people willing
to rent their properties, they'd rent them. If anything, with people getting
some guaranteed minimum wage, instead of being paid less, there even be more
people that can afford to rent.

Or is the idea here that people would not be employed because of the strict
miminum wage? In actual life I haven't seen that. It's more like employees are
paying people less just because they can, than paying them less because they
cannot afford to pay them more. Minimum wage at least puts a cap to that.

~~~
ekianjo
> The correlation doesn't make much sense. As long as there are people willing
> to rent their properties, they'd rent them. If anything, with people getting
> some guaranteed minimum wage, instead of being paid less, there even be more
> people that can afford to rent.

Wrong word used up there, it was not "wages" I was refering to, it was "rent
prices".

------
leephillips
When I was in grad school in the '80s living on my $430/month stipend I bought
TeXtures, an implementation of TeX for the (new) Macintosh, for $400 so I
could use it to write my thesis (in plain TeX) on my Mac Plus ($1400 with a
steep educational discount). Reading the comment of a company that thinks $99
is too much to pay for a tool that they would like to use in their work is
pretty funny. I can understand balking at software because the source is not
available, but $99 for something to be used as as a professional tool is
trivial.

~~~
Someone1234
I suspect they wouldn't need to if that same "app" was sold on the PC, Mac, or
similar. The problem is that app-store apps have a price pinned to around the
$.99-9.99 mark, so anything more than that is seem as abnormal and needs to be
"explained."

I suspect people are used to buying app-store apps at those prices because it
requires no commitment. You could spend 99c on an app, use it just once, and
not really regret it because it was "just" 99c. However if it is more than $10
then you have to actually consider the app's relative value and people aren't
used to that kind of value proposition on the app store.

~~~
slantyyz
>> I suspect people are used to buying app-store apps at those prices because
it requires no commitment.

"No commitment" on the buyer's side, that is. There's still a high expectation
of long term support on the seller's side regardless of whether the app has a
very low price. Remember how many people freaked out over the sale of Sparrow?
IIRC, that app only cost a few bucks.

------
jblok
It's a shame that a company even need to write an article like this. The
venture backed economy in most technology companies really warps pricing
models and allows companies with huge funding to disregard the actual 'making
money' part

~~~
soundlab
Agreed- all the more reason to not apply mass market, VC-backed product
economics to your niche technical application. We are working on a niche
desktop OSX app that we will price +200 USD. It's for business users with a
budget and has a demonstrable ROI for exactly that kind of buyer, why cater to
the $.99 or free crowd?

~~~
slantyyz
Part of the problem is the App store itself. It's primarily a consumer store,
and price expectations are set accordingly. Sadly, Apple hasn't really done
much to prevent the race-to-the-bottom pricing.

If the app was a sideloaded app only, the OP would be able avoid the
questioning from the more frugal app store audience completely (and could
conceivably cut his price by 30%).

The "even my company won't pay" comment was a bit shocking but also reminds me
of Kalzumeus' experience with teachers and the already low price of bingo card
creator.

------
captainmuon
When an app is so expensive, and is targeted to niche/technical users anyway,
I wonder why they (or other companies) don't also sell it outside of the app
store (and avoid Apple's cut)?

Users would get a $99 developer license, download the binaries and a little
installer script, and the script would install the app via XCode on the
device. For one app alone it would not make sense for the user financially,
but I could imagine that some power users or people wanting to use censored
stuff already have the license. Any reason why this wouldn't work (I'm only
superficially familiar with IOS development)?

~~~
xenophonf
I believe that's a violation of Apple's developer license. There was a company
using a similar trick to bypass the app store, and they got in hot water for
it a while back. (I remember it being reported here but can't find the
posting.)

~~~
eddieroger
Yup, it is. If you're remembering what I was remembering, there was a
developer who created a adhoc profiles and would distribute their app 100 at a
time, then remove the device and start over. This was before Apple's rolling
hundred devices was implemented.

~~~
captainmuon
But if I understand it right, in that case the developer was distributing the
app, signed with his own developer's account, abusing the 100 devices you have
for testing.

What I meant was to let the users be the developers, and sign and deploy it
themselves.

If you didn't care about selling it, you could just dump the source somewhere
with a little installation script. I can imagine many IOS users who would like
to use emulators or other banned apps would happily pay $99 and compile their
own stuff.

------
TamDenholm
The problem with mobile apps priced at $99 is price anchoring. If every other
app on the app store is $1 - $10, then putting yours at $99 is going to make
you seem really expensive.

Its like here in the UK, Marks and Spencer Food (a premium food supermarket)
doesn't compete on price with ASDA, Tesco, Sainsbury's etc, because they'd
lose, instead their ads are Dine in, for two, £10 [1], which is meant to make
you compare it to a restaurant, because then it feels like a very good deal.
Its all about context.

Search for Rory Sutherland on YouTube [2], absolute genius, he talks about
this kind of thing as well as other absolutely brilliant ways to apply
behavioral economics to advertising and business.

[1]
[http://www.voucherexpress.co.uk/volatile/ProductBannerImage/...](http://www.voucherexpress.co.uk/volatile/ProductBannerImage/M&S_6_months.jpg)
[2]
[https://www.youtube.com/results?search_query=rory+sutherland](https://www.youtube.com/results?search_query=rory+sutherland)

~~~
alextgordon
> Its like here in the UK, Marks and Spencer Food (a premium food supermarket)
> doesn't compete on price with ASDA, Tesco, Sainsbury's etc, because they'd
> lose, instead their ads are Dine in, for two, £10 [1], which is meant to
> make you compare it to a restaurant, because then it feels like a very good
> deal. Its all about context.

It "works", but I've never found those adverts convincing. People don't eat at
a restaurant every day, and the food from a restaurant will be better than
whatever M&S is offering.

It's best not to try and trick your customers into spending more money for an
inferior product. It tends to backfire over the long term.

------
sbarre
$100 for a professional app that helps you in your day-to-day work is a
completely reasonable price.

Assuming their (rather low compared to North America) rate of $40/hour for a
developer, if this app saves you in aggregate more than 2.5 hours of work,
you've already made your money back.

~~~
joshcrowder
The average iOS dev in the UK is not $40/hour that works out to be £187 a day!
From what we see the going rate is around £300-500

~~~
lmm
For a freelancer or a consultant via a full-service agency, sure, but you're
paying for other things there. For a conventionally employed professional I
rather doubt you'd pay 300/day (and if you are, tell me more!)

------
edwintorok
What is missing from the article: why you should pay for the app _at all_.
What features does it offer in addition to what you get for free when using
Firefox/Chromium and built-in tools or plugins?

As it stands the article didn't even convince me that the app would be worth
$0.99, not $99.99. Or maybe I'm just not the target audience.

~~~
danielweber
What are the dev tools for Firefox and Chromium like on the iPhone?

~~~
AlyssaRowan
IE, Firefox and Chromium all have great debug/developer menus, Chrome even has
specific developer menus for mobile device tethering/debug.

Why would I need extra performance optimisation data on iOS that those
wouldn't already show me, for zero cost?

------
kenrose
I'd argue that the charts in Section 4 are _the_ reason to price high. Your
overall revenues are higher.

Joel Spolsky has his article on market segmentation

[http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...](http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html)

that provides a more thorough treatment of why increasing the price to "near
absurd" levels is actually beneficial from a revenue standpoint.
Unfortunately, Apple's app store as a channel makes it difficult (impossible?)
to provide differentiated pricing (unless you do the classic free / paid with
two apps).

------
rdez6173
When the app is forced to coexist with cheap/freemium applications in the App
Store, it can be easy for consumers to make an apples-to-oranges comparison.
That is, Angry Birds offers a lot of value at $0.99; does this app offer 100x
the value? Is the value comparable? The user comments presented in the article
seem to indicate unreasonable expectations set by the App Store market as to
the value of software.

Perhaps they need to focus more on operating within the constraints of the
market rather than fighting against them. There are several business models
that work, and it doesn't need to be advertising based. They could offer tiers
of functionality that that are priced accordingly. They could make it a
subscription service. They could make make the functionality modular and offer
a la carte in-app upgrades. In addition to all of these, they could offer a
lifetime "platinum" version at $99.

~~~
uxp
> Perhaps they need to focus more on operating within the constraints of the
> market rather than fighting against them.

It's also amusing to look at the number of Chrome Extensions that do the same
exact thing as this app that exist on the Extension Webstore. Granted, making
a native iOS app can be arguably more expensive than a Chrome plugin, but it
also shows where the market is pointing for this particular niche. Not many
people I know of would willingly purchase this app to solve a mobile http
connection issue they normally would solve with a free plugin for their
desktop browser, especially when it's going to be a rarely used utility.

I think a tiered approach would be a fantastic way to ease consumers into the
product. Not only would these developers get a much larger install base, but
it would also help the entire app store economy grow more accustomed to more
expensive apps, countering the "race to the bottom" effect the author cites as
a reason they charge the amount they do.

~~~
JohnTHaller
There's also the fact that iOS locks out 3rd party browsers... only permitting
3rd party 'skins' with UI over the hobbled mobile safari with JIT disabled.
So, you can't even write a full extension that'll work properly on an iOS
browser like it would on an Android browser.

------
mootothemax
Let's not forget reduced support costs as well; vastly fewer customers means
vastly fewer tickets.

I'd also bet that a $0.99 price attracts a lot of unreasonable customers, and
those paying $99.99 would be an awful lot more reasonable.

This has been my experience with SaaS and consulting: higher prices mean
_noticeably_ more pleasant customers.

------
dotnetkow
Refreshingly honest, happy to see more developers sticking to their guns. If
you are creating software that truly provides long lasting value, you should
get paid for it. I wrote a post with some similar reasons why I charge for my
mobile app ($2.99 though as opposed to $99):
[http://netkow.com/post/89053877550/why-i-charge-for-my-
mobil...](http://netkow.com/post/89053877550/why-i-charge-for-my-mobile-app-
fitwatchr)

------
moron4hire
What is very interesting is the number of people who get _angry_ over apps
charging essentially anything. I can see disappointment, sure, if you really
think you can't afford a particular app, but anger?

Where does the anger come from? What must this user expect out of the app
store that asking for remuneration leads to flaming comments in the reviews?

The only things I can figure is that there must be some sort of default
assumption of freeness. Does the user believe the apps to be coming from
Apple/Google/ATT/Verizon/etc, and feels jilted that they are paying for their
service and an "incomplete" device [1]? Or does the user believe the apps to
be coming from other users, that apps are no more complex to develop than
images are to share on Pinterest? Even that feels like a stretch.

I don't know. Have there been any studies on this? Any insights from
experienced app publishers here? I think this is a really important question
to answer, because otherwise I don't think we're ever going to properly
monetize apps, if there is such a fundamental disconnect between developers
and users on how the app ecosystem is viewed.

[1] default builds are pretty underwhelming.

~~~
dotnetkow
Very well said. Completely agree on the "angry" part - I've experienced that
with my own app ($2.99). The hateful things that people write are mind
boggling! It costs less than a Starbucks coffee yet they feel like I've robbed
them blind. My theory is that the "race to the bottom" that occurred years ago
when the app stores began are to blame - as developers/companies we had a
chance to establish appropriate expectations but blew it. From here, it's an
uphill battle but I think sticking to our guns (charging for apps) and
educating friends/family about the true costs/work effort behind apps is a
great first step.

~~~
moron4hire
Is that enough to account for anger, though? What is going through these
folk's heads to skip right past dismissal and go straight to hate? Hate and
anger are usually reactions out of insecurity.

And unfortunately, I think "sticking to your guns" on this subject just puts
you in a sort of prisoner's dilemma with the other app developers.

------
fmavituna
This is a quite bad blog post from marketing point of view.

"Tell me the ROI not that you need to make money, I don't care about you. Tell
me why your application will make my life easier and why it's better than
other cheaper alternative solutions"

Classical case of someone is taking user feedback personally.

~~~
prawn
If their target market is made up of software developers and this sort of list
appeals to under-appreciated software developers, then it's likely to help
more than hinder their efforts. It made it on to HN after all and I don't know
that the other approach would have.

~~~
fmavituna
Fair point, I don't know whether they guessed the HN or not but certainly
results are quite good :)

------
Shivetya
The constraints of the app store lead me to believe there has to be a better
solution for developers of professional apps. However that cut Apple takes
really needs to have limits, its almost begging for someone to step in but I
doubt its even possible with Apple's ability to lock it down

------
EGreg
Through experimentation I think we've come to believe that a free app with
upgrade features available for a recurring monthly subscription, and an in-app
trial of those features, will generate the most revenue.

That's because people have more chances to make a decision, and you can
influence that decision with the free trial (try before you buy). Otherwise
they are deciding based purely on a picture and description, and maybe some
social proof (a blog article that brought them there, the reviews, etc.) With
the above scheme, you get all that + the actual visceral experience of the
trial, and a low monthly payment.

What do you y'all think? Have you tried this scheme?

------
Bill_Dimm
The charts are interesting, but I wonder how meaningful they are. For example,
does the sales volume at $9.99 reflect what long-term sales would be, or is
the number artificially high because people saw the price drop and thought
they should buy immediately in case the price went back up. Since the $19.99
price followed the $9.99 price, is that number artificially low because the
$9.99 price already drained potential customers from the market? Of course,
none of that argues against the conclusion that $99 gives them more revenue
than $9.99.

------
rpdillon
I find it difficult to believe that dropping the price by 80%, from $100 to
$20, resulted in no increase in demand. Another post mentioned some possible
confounding factors related to the sequence of price changes ($100 -> $10 ->
$20) that might explain it.

Although a very different market, I'm still amused that online gaming portals
like GOG and Steam consistently get me to buy games I would not otherwise buy
by running sales more-or-less continuously. I wonder if HttpWatch could
capture the lower end of the market in a similar fashion.

------
gtirloni
One idea is to develop the full-featured app for the desktop (you know, that
productivity machine we've been using for a while and that we know works) and
make a skinny/thin app for tablets/smartphones that you can charge $5 and
users will be happy to "have that added functionality for just $5, awesome!"
while paying the full price for the desktop version (like they always do with
business apps, which much complaining).

------
joshvm
I think one of the best advantages of pricing high is that you have fewer
customers and they're all 'useful' to you. Their feedback is far more valuable
and you can spend the time to interact with them individually and tailor
service towards them. 'Cheap' users spend more a lot of time complaining and
demanding support that you can't afford to give them.

If the product is good, people will pay.

------
prottmann
I agree absolutely!

Such software are working tools that save hundreds or thousands of dollars.

It is like the old discussion about the price of Microsoft Windows, or an
Apple Mac, or Adobes Photoshop - oh my good, i call them all in one sentence
;-)

Yes they are expensive, but from the viewpoint of productivity, you make money
with them and much more than they cost you.

I hope more developer have the courage and sell their work at reasonable
prices.

------
callesgg
9.99$ would make me happier as a customer, if it was good and worked like is
wanted i would recommend it, if it was buggy and bad i would just ignore it.

99$ it it was good i would recommend it. If it was buggy and bad i would do
screaming rants and blog posts about it.

My initial thought on the subject when trying not to only think about final
revenue.

------
joeblau
Great post, especially the graphs comparing sales and revenue. In regards to
this comment

> 5\. There’s no Upgrade or Maintenance Pricing on the App Store

You can use in app purchases to add features feature upgrades to the app.
Games do exactly that. The only challenge is that you have more maintenance in
code and in iTunes connect.

------
danielweber
It would be purely performance art on their part, but they should release a
"free" version crammed so full of ads they start leaking out the sides of the
screen.

This fear of paying for software is _exactly_ why the Google/Facebook model of
selling all your private data to advertisers is so popular.

------
channikhabra
Why don't they sell a locked demo version which hides most of its
functionality and ask for a key to be obtained by opening a paid account on
their website. They can make a subscription model then.

Do Apple make that illegal too?

~~~
FireBeyond
Absolutely they do. As is bypassing IAP, if you're going that route.

------
subudeepak
Thanks for the insights. I wonder if a feature by feature in-app purchase on
the app would have fared better.

------
samirmenon
The price limit in the App Store is $999. I wonder why they chose $99, and not
something higher.

~~~
aluhut
Because crossing over to 3-digits would make even more people look for
alternatives.

~~~
unction
On the Australian app store it is $129.99. The Australian market is small
enough that it's unlikely to be worth optimising for but I though I'd mention
it all the same.

(For the curious AU $129.99 is about US $121 at the moment.)

~~~
httpwatch
Australia has been one of our best markets for the app. Perhaps a 3 digit
price is better :)

Does the Australia app store include VAT (or equivalent) that can be claimed
back by businesses?

~~~
unction
Yes it includes GST (10%) and that can be claimed back.

Also it's not uncommon to soft-launch apps in Australia before the US and the
rest of the world as a large scale public test. (The market is considered by
some to be very similar to the US.) So it might makes sense to roll a
different line just for Australia. Maybe. Just throwing the idea out there :)

------
robert_tweed
Really good article just for the sales vs income graph alone.

------
spartas
“Because if we could reasonably charge more, we would”

------
taytus
#6 shouldn't be #1 or #2 instead?

------
personZ
Has anyone on HN actually bought this application? It seems to have no reviews
or ratings for any version, which is somewhat strange for something costing so
much (that price motivating feedback). Even the basic version has no ratings
or reviews (sorry the US basic version has 9 ratings, but no reviews).

It even includes a rating shortcut in the app itself.

I actually flagged this story when it first appeared because it seemed to be
spam, and what I suspected was a fictional narrative to pitch it. e.g. a nice
chart isn't necessarily backed by non-fictional numbers, but can as easily be
manufactured numbers to fit the narrative.

I appreciate that I am being horribly cynical, but such is the nature of
promotion today -- the story that gets you some attention often needs to be
propped by a fiction about attention. I have no idea if that is the case here,
but some of the signs are there.

~~~
httpwatch
The app store is optimized for mass appeal apps. It only shows reviews for the
latest version in your country's app store. The HttpWatch app has had a
reasonable number of reviews but it is a relatively niche app.

Getting app reviews is very hard unless you have hundreds of thousands of
downloads. This post suggests that only 10% of all apps have one or more
reviews:

[http://blog.appfigures.com/a-deep-dive-into-app-store-
review...](http://blog.appfigures.com/a-deep-dive-into-app-store-reviews-
distribution/)

------
leorocky
These may be reasons why you cannot sell lower than $99 but they are not
reasons why someone should pay so much. The stated plan to keep updating the
app reveals a fear that they are not creating enough value despite the cost to
develop. The plan to update is also a shitty thing to say as this is no
guarantee and light on specifics about what the updates will feature. $100 for
an opaque primise that more is to come is a shit sandwhich usually served with
a nice heap of disappointment. xscope 4's price of $50 is another one of these
niche narrow doodads that while clearly provide value do so at questionable
prices and the user has no idea when they will have to pay for a new version.
Apple's lack of an upgrade price sucks but that's not the users fault but they
are the ones that get the shit end of the deal with limited time price
reductions that you have to know about.

~~~
wmt
They most definitely have the right reasons for why someone should pay what
they're asking. The reason #1, "we need to make a profit", is the biggest
reason for the price. In reason #4 they clarify that reason by having tested
that out of $10, $20 and $100 prices they made the biggest profit with the
highest price.

The flimflam about updating the app just means that they don't wish to fire
everyone now that they have a selling app, but instead will keep developing it
with the hopes that it would sell even better.

~~~
hawleyal
> right reasons

Maybe the right reasons for stakeholders.

Not the right reasons for customers.

~~~
danielweber
The right customers -- professional developers -- would want the tool to stick
around for a while, but of course there is a free-loader problem.

Paying $100 a year, let alone $100 once off, for something that improves
productivity ought to be below the level of even caring to do the cost-benefit
analysis.

If your employer won't let you spend $100 on a productivity tool, he's very
foolish. (NB: Most employers are foolish. I've always got hemming and hawing
about spending that money; can't we just do without?)

------
ekianjo
"7 reasons our app is overpriced" should be the right title for this post. I
love the last point :

> A good programmer in the UK costs about $ 40 an hour. If an app sells for $
> 10 that only pays for about ten minutes of a programmer’s time. Therefore,
> spending more than ten minutes interacting with a customer who bought a $ 10
> app effectively results in a loss on that app sale.

So you define the price based on how much time you interact with a single
customer? It just doesn't make any sense at all. And that kind of logic does
not scale if you have thousands of paying customers, since your time with each
of them drops to zero.

~~~
jbardnz
While I somewhat agree with your post I guess they answer this with number 3.
Windows is a mass market app, this is not, you can't really compare the
pricing of the two.

~~~
ekianjo
In the online world you never know if you product is a niche unless you sell
very few numbers of it. It's not clear in their post how many sales they are
making, so the definition of "niche" is not very clear here. Is it 10 ? 100 ?
1000 ? More ? Every of these numbers would give a very different picture of
the situation.

