The developer on the other hand tends to look at the value of the whole application and prices the premium portion in consideration of this.
I'm not sure that I have a solution, except to say that the developer might be more succesful to discount the value of the free portion to nothing as well and only price the premium portion at a rate that considers the actual value that it adds to the user experience. I think you have to consider the free portion as a marketing expense.
Today it seems to work this way: "We start with free stuff and then we try to find ways to make money later". I think this is part of why we have the customers we have today. They expect everything to be free and then give you 1 star reviews if the background color is off a shade.
If you are trying to create a viral app, then giving your software away for free increases your chances of hitting the jackpot. But it decreases your chances of achieving steady cash flow in the short to medium term. If you charge upfront, then you probably aren't going to go viral. But you might be able to pay your costs. Freemium is an each way bet.
Everyone dreams of virality, but this dream might be sabotaging your nice, niche, steady earning app. You need to choose between your ego playing the app lottery or making small steady gains with real money. Sometimes going after virality is the right decision, but you have to look at your app and its target market and choose your charging model carefully.
As for the customers having low expectations, if the developers don't think that their software is worth anything, then it's probably not surprising that the customers agree.
Devs/VCs. Or, rather, a VC is looking for a big sale down the road, not a company that makes steady income with low priced transactions.
Someone has to emotionally decide to put X amount of hard earned money on something before hand. The rationalization of this affects the overall experience. When an item is free their commitment to the app was zero.
There was a fascinating study about this.
Festinger, L., & Carlsmith, J. M. (1959). Cognitive consequences of forced compliance. The Journal of Abnormal and Social Psychology, 58(2), 203.
Where participants were given a task to convince other people to perform a long and boring task. One group was given $1 to convince people while another group was given $20. They found the $1 dollar convincers actually believed what they were saying where as the $20 group shrugged off their actions to convince people to perform the boring task as, "I did it for the money." $1 was too low to rationalize away.
This is something I wish more people understood. It explains so much of human behavior when you realize that all (most) rational reasoning is merely a justification of their already decided upon stance.
I think you should always charge something - even $0.99 - just to filter most of the casual users and get a more qualified (and invested) customer.
I look at it like the old shareware titles. I get a free demo that's either time limited or where I need to pay to unlock the full version. That way I can test the software or play the game or whatever, then if it's something that meets my needs, I can pay $1-10, secure in the knowledge that I won't be disappointed or surprised after buying something that turns out to be unwanted.
I'd say that the vast majority of apps and games I've purchased worked that way. Free download, mess with the app or play the first 5 levels of the game and then when I run into the limit where I need to pay, it's not a big deal because I know what I'm getting. The plague that is pay-to-win or other microtransactions in games is awful but that's probably not too relevant to this thread and is just as big a problem on iOS.
When I see the comments on the Play store or the App store, full of people complaining that the dev has the gall to ask for $1 or $2 for some useful or entertaining bit of code, it is very disappointing. That's the sort of money people pay for a Coke or to have someone drive a pizza 10 minutes to your house. I feel like if I get more than a day or two's use out of a mobile app, it's easily worth at least a buck or two and I'd vastly prefer to pay once than to deal with popup ads or recurring subscriptions and microtransactions.
The customers are then stuck with an app that might have been good but decays over time.
The real problem is that we just don't need 80 gazillion apps. The "app" market is extremely competitive, that's really what people are complaining about, profits have been driven down to basically nothing. Normally you would expect some developers to drop out of the market, which would help the situation, but two things are stopping that from happening, in my opinion.
First, the platform companies (Apple and Google) have been incredibly successful at promoting app development as a gold mine. For every developer who gets sick of it and moves on to something else, two people become "app developers".
Second, there's a startup bubble and the wisdom out there says you need an app or your startup is nothing. This partly relates to the first point, the hype around "apps", even years after Apple launched the app store, is deafening.
Or the reverse, pay $100 to pull your app from the store after its first year.
I almost think devs would be better off if it was per app. At least any devs planning to make a living off the store. It would cut down on a lot of the crappy spammy apps out there.
But let's just look at how things were for a second. If you sold an app for 4.99 you making a promise to the consumer that you would deliver value equal or greater than your price. And you if you didn't keep that promise it was up to the consumer to get a refund or suck it up. This was largely a pre-internet thing. The internet has made distribution a non-issue. Now you can get your products and ideas out there for little to no cost.
What we are seeing is an opportunity to show initial value to our users and offer higher value at a premium. This increases the reach of our work and helps us to find those 1000 true fans. Of course, we have to nurture those relationships. It's a lot of work.
I don't think there is anything wrong with premium pricing. People are use to it still. Why aren't we just focusing on the value we bring to people and whether it's premium or freemium none of it would be an issue.
Other times these are utilities. The Philips Hue lamps have an official app that's passable but the third party "Hue Pro" adds functionality. The free version does basically what the Phiilps app does or you can pay $2 and unlock all of the "fun" addons like music sync and lava lamp mode. Once I know that the app works and isn't buggy, I'm glad to pay. Same for launchers like Nova. Free version is a nice launcher that I vastly prefer to the stock launcher but I can pay a few bucks and get several more options. I probably wouldn't have paid $3 times 4 or 5 launchers just to find the one I liked but once I tried all of the free versions, I paid for the full version of the one I liked best.
It's like shareware. With the glut of options, you don't want to pay every time you try several solutions to find the best one so you try a bunch then buy the best. If I had to pay $1-10 to try every app on my phone, I'd just install less apps (or, to be honest, I'd probably try cracked copies to find the best option, then buy the best one).
As long as the quality of mobile apps is so varied, it really is hard to convince potential customers to pay any amount of money sight unseen. I've installed so many iOS and Android apps that lasted a total of 10 minutes on my devices it's not even funny. If I paid even $1 for each of them to learn those lessons, it would've turned me off to buying mobile apps at all.
It's hard for me to see how they're anything but a form of unregulated (yet) gambling/exploitation of people vulnerable to gambling.
Who in their right minds think that tens, hundreds of dollars is a good price to pay for virtual gemstones?
At any rate, for others that where unfamiliar with Supercell, I'm assuming parent means the makers of:
A somewhat related article:
(And there's of course been a number of articles on "predatory" game design, based around compulsive/addictive behaviour)
This basically never works with the mass market, because the mass market, by definition, contains all those people who can't afford to pay more. To make a mass-market product work, you basically need a vision as to how everyone on earth should be doing things differently than they're currently doing them, and the sales and product skills to convince users of that vision.
I've not seen any studies on this wrt app stores, but my impression is that you can be completely free (and it helps with a brand name, like Autocad or Adobe) -- or you can be a little pricey with no free trial -- and still be perceived as being "high quality".
Note that big companies offering great apps for free is most likely a case of predatory pricing -- they might not have any ambition of making money from the apps ... ever. But if it funnels a certain percentage into their for-pay other apps/services that might be an acceptable price to pay for marketing.
Add a free trial, freemium, or low price point -- and your app is likely to be judged more harshly.
The price points/perceptions are likely a little different in the various app stores too, and vary a bit from country to country (eg: median salaries (and median prices for a cup of coffee) are likely to affect what people think are reasonable value for money).
I do think many developers dream of getting a big number of users, and tend to overestimate how quickly success should come. I would guess that getting a hundred paying users should be an important milestone, and depending on the app, one might need to keep those around for quite a while (a year?) before one might really start to see an effect of word-of-mouth in terms of sales. This isn't nearly as sexy as getting to one billion users in a year, but probably more realistic?
Technically, developers have to underprice their software to be successful. This is true for any product or service that you want to sell. Particularly for productivity focused software, the end user has to derive signficantly more in value than they pay in direct costs to the developer. In general, in my experience involved with b2b software/services, people want to being saving 20-30% of their time or money to strongly consider changing their existing habits.
The reason for this is that there are also indirect costs that the end user incurs that developers don't always take into account in their cost models. End users incur costs in learning new software products, there are ongoing cognitive load costs in remembering how to use the product and there are opportunity costs in choosing your products over something else, not even necessarily in the same market. There is a cost that the user incurs in taking a risk that your software will solve their problem before they really understand its full capability. Even taking up an icon space on their phone/tablet/desktop has a cost to the user as it's a place they can't put a different app. Your app takes up harddrive space that the user has paid for and your app uses up some of their bandwidth. Finally, you aren't just competing against other software vendors in your market, you are competing against every other thing in any market the end user might want to spend their money on. End users have a limited amount of money and time and there are a huge amount of things they can spend their money on.
You can't accurately measure any of these indirect costs, but you know they are there and you can estimate them. When you take into account the indirect costs suddenly there aren't as many dollars left on the table that developers aren't charging for.
Another point is that the closer you price your software to its marginal utility to the end user, the more likely the end user is going to shop around looking for alternatives. You open yourself up to competition which could increase your marketing expenses. You could also suffer more churn, which is expensive to you.
The point is, you want your users feeling like they are getting amazing value from your product. You don't want them feeling like your product costs just a bit less than the value they derive (which may seem like the most efficient price to you) because if that's the case your business is actually teetering over a precipice and any sudden shock could push you over the edge with many customers leaving all at once. Loyal, happy customers paying you recurring revenue buffing up your cash flow is worth more than anything.
I think you could solve this by having two distinct websites, apps or even brands. It's not going to feel like a ripoff if they are perceived very differently from each other.
If you did this, why would you even have the free version? The whole point of the free portion is to act as feeder for the paid version. If the branding is completely separate then how are the users going to know they can have the same level of confidence in the paid version as what they do in the free version? May as well not have the free version at all.
You are going to tell them. Kind of like this: "Need more space? Try our paidapp."
A more suitable change would be to offer the app for free, with 10 free articles and 1 per day, and offer a one time purchase of 1.99 to lift the limits entirely, turning it into the equivalent of v1.
The way you did it is you changed it so that the act of sending an article cost money, instead of paying a small one time fee and sending as many articles as you wanted.
That said, as a developer I don't understand why the server is involved at all. Here's the relevant part of the article:
> The server would then fetch the article, format it, package it into a .mobi file the Kindle can deal with and send it to Amazon for delivery to the device.
I understand all this, I really do. What I don't understand is why the computer that I'm holding in my hand when I ask for the article to be converted, which is probably as powerful as the $20/mo Linode instance, can't do this conversion itself.
Surely it can fetch the article, convert it, and pop up an Email sheet with the attachment ready to go and the "to" address filled in. All it would require is for me to tap the Send button and it would get emailed to my Kindle without having the developer's server involved. This way if the developer decides to discontinue the app and take down the server everyone who purchased it isn't left out in the cold.
Another reason is specific to this use: Amazon distributes a Linux command line tool called KindleGen that converts HTML to .mobi formats. You could install KindleGen on a Linode box in seconds and have a proof-of-concept converter running in hours.
I suppose you could reimplement KindleGen yourself for iOS if you had unlimited free time, but it likely wasn't worth it for this particular project. Just look at the release notes for a single version of KindleGen:
-) Enabled support for JP vertical rendering and multiple page writing modes (L to R, R to L)
-) Enabled support for facing pages (left or right)
-) Enabled support for double page spreads
-) Enabled properties to support spine for fixed format content
-) Added KF8 and M7 file size stats that will be displayed after conversion
-) Added Mobi7 support for HTML tags with multiple classes (e.g., class="class1 class2 class3")
-) Data URI support for images and embedded fonts so that they can be referred directly in HTML and CSS files
-) Multiple bug fixes and enhancements.
And remember the author of the linked article wrote that the purpose of the app was to "experiment with various revenue models on the App Store..."
Their best bet would have probably been to just add the new features to the existing paid version behind a $1-2 IAP (One time).
NOT ENOUGH LASTING VALUE
If your app doesn’t offer much functionality or content, or only applies to a small niche market, it may not be approved.
This certainly suggests that the more you cut back, the more likely you are to end up rejected entirely at some point when you submit some unrelated bug-fix upgrade for approval.
It also suggests that iOS developers can't create useful apps that are just for their own family and friends. If Apple doesn't see the benefit to their other customers, your family and friends won't be allowed to have your app.
I've seen my revenue triple when switching from 3.99 to 9.99 for a very niche app that was almost without competition. And that was on Android where people are even less likely to pay.
1) App that solves a trivial problem, no viral potential, lots of competition: free (or don't do it at all). Apps that fall into this category are things like distance measurement, to-do lists, etc.
2) App that has viral potential but lots of competition: freemium (games fall into this category)
3) Niche app that solves a hard problem for a small number of users: paid, with the price as high as possible.
There is a fourth category, but it's illusory: app that solves a hard prolbem for many users and has viral potential. If you're an individual dev, the odds are in those areas you'll be facing competition from players with much deeper pockets who are often giving apps away free to drive their core business.
This person's experience tends to validate this general analysis.
Or you could just go back to your original price, since that was working out. It's hard to say which would do better.
But the OP was experimenting, so I guess that's all good :)
What's to stop an unscrupulous developer selling an app for, say, $1.99 with the (implied) promise that the app will work forever and then, once people have bought it, turning off the backend so it no longer works?
Is this illegal? Would Apple shut down the developer's account?
Many companies do this with games that have a strong online component.
I suppose a relevant study would be Microsoft Zune/music store, and/or Yahoo(?) Music that shut down and killed the DRM servers, effectively removing music people had "bought"?
An earlier Microsoft DRM that was used by a bunch of services (PlaysForSure) was indeed shut down, but it's not the same thing as Zune.
The other model might be $1.99 for unlimited use, and then release V2 of the app with new UI/features, and do an annual release model. It works for many apps, eg developer tools like IntelliJ. Would be interested to know if it works on app stores without getting grumpy user feedback though.
However, there are some apps that do have a model of $xx for unlimited use, even where there are ongoing costs.
This is sustainable if the app continues to gain new users, hopefully at an accelerating rate. It works like a pyramid scheme where the new users coming onboard subsidise the cost of the existing users.
For me, it's a bit like mobile phone data charges. When I used to pay per mb, I hesitated to use cellular data at all, but now I have a (high) monthly allowance, I now use my phone a lot more, even though the cost is higher.
Perhaps the developer should try switching to a pay-monthly kind of subscription, at least then the users aren't having to make that 'is it worth it?' decision each time they want to use the app.
The business model changed from a one time purchase model to a micro payment model. My recommendation would be to try a monthly payment model for v3. Let the users pay to access the service (setting an expectation to pay for value) but allow them to pay less than what you perceive to be the cost barrier (the amount you believe is the maximum amount they would pay to give it a try). I'm going to agree with others that you are priced too low. One of the best lessons I've learned is that it's not what you think it's worth, it's what your customer thinks it's worth.
Selling an app is fine, but never sell the promise of something (a service) forever.
If the service is continuous make sure there's a recurrent charge. This is not about nickel-and-diming, this is about keeping your service profitable (or at least covering its costs)
I was hoping that I could mostly wing it and just make a nice video and send out some review copies to people who might be interested. The music app market seems small enough where this might be possible. But this is just me guessing, and it would be great to hear from someone who's actually had some success in the space.
Anyway, loving your design aesthetic! Will give Sythe a download as soon as I charge up my phone.
(And, obviously, if this is information you're not willing to share, then no hard feelings! Just thought I'd ask.)
One thing I would do differently if I started from scratch on Scythe today though is make the base app free and make up the difference with IAP preset packs and additional features.
There's been a lot of talk recently about the iPad languishing, and it seems that Apple is taking notice. Would not surprise me if they made more of a marketing push towards promoting iPad apps in the coming years, especially with the possible arrival of the iPad Pro.
Crazy that the VST market can be so lucrative! It makes me happy that some people are still willing to pay a fair price for their "workhorse" software.
As for myself, as much as I enjoy writing music software I enjoy making music more and it seems like I only really have the mental energy for one or the other.
This sort of thing is a one off purchase (if my device does the work) or fixed monthly fee (if your servers do the work)
Perhaps it is that we know the article limit isn't related to any real-world costs that make the difference.
If I have to ponder any one of these questions I'd just switch to a different app, there's a fair few that provide this functionality
 In this case the main worry is what if I accidentally somehow send every tab I have open to this service through a bug or something? Do I pay or does the app maker take one for the team?
What you really want to see is a freemium version where you get:
1. 3 total articles for free
2. A 1.99 in-app purchase that gives you infinitely more articles.
The current free limits are high enough to support the majority of casual readers.
My guess is that I'd only use freemium when network effects matter. The app described in the article doesn't rely on network effects at all but it's nice to see my gut instinct corroborated experimentally.
I'd be interested in seeing this repeated for Android because I'd suspect iOS users are generally more likely to buy stuff.
In this case, the people who paid for the app self-selected themselves by the act of paying, but the barrier to install the free version is much lower than that.
You have to consider:
1. The number of users that would never pay for your app, but are happy to download it for free.
2. The number of users that would never pay for your app without trying the free part first.
3. The number of users that would pay for your app without trying it for free.
You then have to consider the amount of revenue you lose from Type 3 to support Types 1 and 2. Hopefully you come out ahead, but you may not.
Also probably worth making it a subscription ($1/month?) instead of credit-based - subscriptions can give dependable revenue, and users wouldn't feel nickle'd and dime'd.
Anyhow, the simple lesson here is that freemium isn't a magic bullet - probably takes some time to figure out the right place to put the paywall to get growth / usage via free users, and revenue from not giving everything away for free.
I felt like I had a few choices seeing as I'm foolishly doing this full time and need some kind of revenue:
1) Free + Ads
2) Free + Freemium for "pro-features"
3) One-time fee
4) Subscription fee
I have a distaste for ads so I really didn't want to go down that road.
I don't like freemium because looking at "pro features" and valuing them based on them alone it seldom seems worth it. Also keeping useful features away from non-paying customers seems lose-lose.
I could go with a one time fee but then I won't be able to support it over time and the API fee's will eat away any revenue, no matter how small, over time.
So I've decided to launch with a subscription yearly fee (through a in-app purchase). From all examples I've seen of changing revenue model to subscription model after you've launched it seems almost impossible without the mob getting out their pitchforks. It also seems more honest to have the subscription carry over than launching a separate new app that you have to buy for future OS versions.
Still, mentally users aren't really used to paying subscriptions for an app so it remains to be seen if its successful. Also since most people don't pay for this service itself already there's another mental barrier.
Actually if the app wasn't dependent on a service I'd rather see you'd own the app and subscribe to updates, it seems like a much better model since you never lose "ownership" even if you don't pay, but unfortunately app stores don't support that model.
I think my app is better than the competitors but will people choose a competitor because of the subscription model? It will be interesting to see.
I've a free API that allows people to build clients for mobile apps (some are free, some are one time fee, etc) and the costs of running this free API are starting to worry me.
I will risk to say that there is a Cognitive Load inbalance. Fremium induces people to track the economics behind the usage of the freemium app. If the problem it solves is less painful than the Cognitive Load of tracking its fremiumnality, then why bother?
It would be interesting to do tests about models without "risking the 1.0s"
We have a product that is ready for paying customers and we have a landing page (only) that is to collect sign ups. We get 100 sign ups a week & up to 15% of those express interest in being customers, but once we get to talking ... after a few emails these talks taper off and even a follow up email leads nowhere.
We have had talks with small parties no one has heard to huge Fortune 50 to 500 companies (this week a VP from Lowes started talks, previous Black & Decker, Motorola, Samsung, Beats, etc).
It seems most people want to use our unique WEB technology for free, though once we put it on the web these potential customers may just show their true motives of wanting to know how we accomplished X and copy it.
Thus, I've been thinking of doing a freemium model myself where users can use part of the product that is not our secret sauce yet have to pay X amount of money to add our secret sauce into the product for their specified use.
What do you think is a better sales channel then we have it now and or does my next sales channel idea sound solid?
With a paid app, the same users would have to make a decision to buy based on just a picture, description and reviews.
Many freemium apps work really well by selling in-app currency. The most effective ones, sadly, were games that made it increasingly difficult to progress without spending said currency, making people addicted and choosing to spend money instead of time, which they valued more after a certain point.
Angry Birds found out two years ago just how much freemium beats the pants off them.
Look up pricing tricks online. One is when people see a too-low price that looks out of place next to the others. They think they caught a good opportunity.
1) Unlimited usage or unlimited usage per month -> Managing credits is an annoying experience for when I just want to share an article: I'll have faster ways if the actual transaction is a hassle. Paying once and forgetting about it adds a lot of value. This could work with your original paid model or with a freemium model that includes an unlimited tier.
2) Better analytics to calibrate the use cases: How many articles were people using. Did you have a way to detect how many of the articles were actually being read? I suspect that 1/day might be a very high free tier if people are switching to a mindset of: is this worth being my 1 article a day? Or converting the cost of a paid article and asking "do I want to pay X for sharing this to my kindle?"
Other have made the point that a key aspect of freemium is viral growth. Do you have any social sharing features that people would want to use -> Could you share an article to Kindle and/or Facebook + Twitter? Could you get shares of your app in exchange for additional article shares to kindle?
If freemium was the right model it might end up at something like:
10 Initial Free shares
1 share/week free
3 shares/week free to device if also shared to a social network
A Paid credits/usage tier
A Paid Unlimited/time tier (monthly or weekly unlimited use pricing?)
And Possibly a paid outright unlimited tier.
You'd want to measure and track analytics on how you get users. Something like web bounce links through your own analytics package on the way to the app store.
Here you actually have an interesting tradeoff: You get less money per user which you hope to balance out by driving down CAC through large amounts of organic growth.
The purpose of freemium is seldom a try before you buy value proposition that makes sense for the company, it's the ability to generate viral growth even out of users who never spend money. If the app won't get substantial viral growth then freemium is almost always wrong.
Anything that has low retention should be charging up front.
There is no reason the app store should not allow developers to offer free trials. This is the one thing that Microsoft got right with the failed Windows phone.
Free trials are only necessary when you want to sell solutions to problems that people don't know they have.
A time limited trial seems like the perfect fit for productivity apps, not sure entertainment based apps would want this model. You have a day/week/month to use the app in its entirety, if after the trial you value the product you purchase it, otherwise it no longer works.
The same thing happened to the music industry. The total amount of revenue has dropped 10 fold since 1999. I know a few independent artists and they can't really make a living on just music anymore. They need to sell t-shirts or have a day job. So in the end, free music and file sharing has decreased the overall cost of music, but it really only hurt the small and independent artists.
Even look at things like Spotify. 1,000,000 plays nets an artists something like $100.
It has forced many artists to go with large labels because the large labels will take all of the risk and actually pay them some sort of a living while they are touring.
Software is going the same way. With all of the open source out there (and more coming out every day), it has allowed companies to hire software mechanics for pennies instead of software engineers for a living wage. Why? Because all of the parts that need to be engineered are given out for free. Development now in most businesses is mashing frameworks and libraries together. It really doesn't take a computer science education to get the job done.
Business owners are also becoming more tech savvy as the older generation retires.
I've never seen so many smart communities of people put themselves out of a job so quickly.
To me, apps are just an interfaces to a paid service, not the actual service itself. So, I might have a service that you pay X amount of money to use and the app is something free that is thrown in as a benefit.
If many businesses can now get by with "mashing frameworks and libraries together" then that is a good thing - it means problems have been solved in a repeatable way that many people can benefit from, and the real software engineers, rather than doing the same old work over again can refocus on new challenges and create the frameworks and libraries of tomorrow.
Is that really a bad thing? The only people putting themselves out of a job are people trying to earn a living working on problems that were solved a long time ago.
Suggesting there are fewer jobs now for software engineers than any time in the past is a bit of a stretch!