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Revenue = X

  Oliver Reichenstein      2011-11-17 02:31:58      1,485    0    0

We've been experimenting with app prices for quite some time and again and again we've noticed a funny effect:

No matter what price we choose, we always make the same revenue.

I attached two charts to illustrate that. I recently lowered the price of the iPad app ( from 5 to 1 Dollars. At first the sales spike, then they even out to previous levels. Meaning: By cutting the price by factor 5, I am selling exactly 5 x more apps. 

Then we lowered the price of iA Writer for Mac ( from 10 to 5 Dollars. And the exact same thing happened. There was a short initial spike, then the curve fattened out to previous revenue levels. We cut the price in half and are now selling 2 x more apps. The same happened when we lowered to price from $17.50 to $10.

What I expected was that at a certain point the price change would impact the sales profit positively or negatively but it never did.

I'm happy to be able to offer iA Writer to more people without losing too much money (see below), but I'm still puzzelled: It seems that cutting the price is a way to increase exposure without affecting profit. Either the app store is rigged, or the market seems to magically decide in it's invisible head quarters how much money is going to be spent on an app. (I don't think that the app store is rigged).

Sure, you can make some more money with the initial spike, but... 

1. support costs
2. the probability of super rare bugs
3. negative comments (not just on the App Store)

...will also grow by the factor of growth. So, unless your goal is to grow a big user base, cutting the price is not a recipe to increase revenue but to inflate your app. 

The only thing I haven't tried is making the app free, but, unless we add advertisement, we'll have 0 revenue, which is not really what I'm looking for...

For now, we'll keep both apps on the discounted price level ( and for another couple of days—until the next versions (both with iCloud) get approved.

Did I mention that the more I know about the app store, the more I get confused about digital economics? Have you had similar experiences? Do you have better explanations?




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