How to Dynamically Price In-app Purchases

I’ve implemented a pricing scheme in my iOS app Pump Log over the last month. It’s not a unique concept, but I haven’t seen it done like this in the App Store before, so I wasn’t even sure if it would be approved.

This simple pricing tweak has led to a 23% increase in revenue.

Some background: Pump Log is an app for mothers who are pumping their breast milk and need to track production. It’s a free app to download, and I earn money by selling in-app purchases (IAP).

pl

Pump Log for iPhone

Like many independent developers, I’m not a marketing expert, and I’ve found it difficult to earn money in the App Store. Apple basically gives you 2 ways to earn money from apps: selling the app for a fixed price, or selling IAPs inside the app. I guess selling advertisements would be a third way, but the volume needed to make any decent money is not typical for the indie developer.

Selling apps up-front for a fixed price is a poor choice for 2 reasons. First, most people want to try before they buy. Apple doesn’t allow timed trial periods for apps, but there are other ways you can limit an app, and then sell IAP to unlock all it’s features.

Second, if you sell for a fixed price, that means every customer pays the same price. Except that all your customers (and potential ones) are willing to pay different prices, some lower and some higher. When you sell at one price, you only get a fraction that revenue.

Here’s what I did with Pump Log: offer it free, fully functional, but with a limit of how much data the user could store. Because of the way the app is used (entering records every day, several times a day), this limit functioned just like a timed trial. After a few days of use, the user gets an alert that they’ve reached the data limit, and to either purchase the upgrade for $5.99 or delete records.

Of course the problem is there are people that won’t spend $5.99, but would buy at $4.99, $3.99, all the way down to $0.99. I’d like to capture those sales without losing my “premium” sales at $5.99 (or higher).

What I did was retarget users who didn’t buy the upgrade and stopped using the app. These are people who either hit the record limit, or saw that the app required an IAP to use and were not willing to buy.

These people have already downloaded and used the app. They are my best chance for a sale, they want what I have. As Blake from Glengarry Glen Ross says, “A guy don’t walk on the lot lest he wants to buy.”

I did the retargeting with local notifications. Every time a new record is saved, I schedule 2 local notifications: the first is 24hrs from now and the second is 48hrs.

If the user hasn’t opened the app in 24hrs, they’ve probably stopped using it. Maybe they’re trying out competing apps. But if they haven’t deleted PL yet, they will receive a notification that says “Pump Log: LIMITED TIME SALE. Upgrade today and save $$!”. If they open the app they’re presented with the upgrade screen and a the new price.

upgrade

If they don’t upgrade, tomorrow they’ll get another offer: “Pump Log: ANOTHER price cut! Last chance to upgrade at LOWEST price.”

Local notifications

Local notifications

This technique, combined with raising the price of my most expensive IAP has increased my revenue by 23%.

I didn’t add any features or spend money on advertising. I just tinkered with my pricing. And I’m sure it’s not optimized yet.

How did I change the price of the IAP? I didn’t. I just created 3 identical IAP, but only allow the customer to buy them at different times.

iaps

In fact, I could’ve create a dozen different IAPs to target various customer segments. I don’t have the volume of installs to justify it, but maybe you do.

You could create offers based on:
– the frequency of use of certain features
– the geographic location of the user (every brick-and-mortar retailer does this!)
– how often your app is opened
– coupon codes
– if the user does something, though Apple is cracking down on incentivized actions

You may not realize it, but you have access to a bunch of information that can help you determine how much your users value your app. You shouldn’t be afraid to use that.

I’m not claiming to be a marketing genius. Anyone who’s studied pricing strategies recognizes these techniques as they’ve been used forever. I just want to share my experience in hopes that it will help you experiment with pricing.

If you’re an iOS developer using clever pricing strategies in the App Store, I’d love to here about it. Find me on Twitter @steven_stefanik