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Pricing Strategies for Location Based Apps November 4, 2009

Posted by pannet in Mobile & Gadgets.
Tags: , , ,

INTERVIEW: Mobile app stores are proving to be extremely valuable channels for getting products to market – whether you’re a big name navigation brand or an unheard of independent with a cool new location-enabled application. But a key element to maximising revenue opportunities is adopting the correct pricing strategy. GPS Business News spoke to Peter Farago, vice president, marketing, for Flurry Analytics, the mobile applications development services provider, about factors that determine pricing strategy. The number of navigation and location-aware applications added to the iPhone App Store just keeps on growing. At the latest count there were over 3,000 location apps on offer. Throw in Google’s Android Market, Research In Motion’s BlackBerry App World and the app stores of Microsoft, Nokia and Palm, and the range of applications becomes even larger.

With such an abundance of choice facing the consumer it’s vital that developers select the right pricing strategy for their products. For apps this generally requires a few basic decisions: apps can either be given away for free, with revenue generated through ads, or be paid for. Brand strength is seen as a key factor in going down the paid for route, while less-recognizable brands frequently go to market with free trials to entice consumers to try-and-buy.

Peter Farago, vice president, marketing for Flurry, said much of the learning in the market has centered on whether ad-supported apps earn more revenue than paid apps, what price to charge and when to drop price. He said navigation applications tend to remain on a consumer’s handset for a long period of time. Unlike “gimmick” apps, they are perceived as having sustainable value and therefore consistently revisited over time – making them better suited to subscription. “If it were me and I were a product manager, I would charge for a navigation app,” he said.

Flurry recently analysed over 2,000 applications for usage and frequency of use over a 90-day period, breaking them down into 19 categories. The findings showed that user retention for navigation apps is 73% after 30 days, but falls to 30% after 90 days (the average for all apps is 25%). Overall, the average navigation app is used six times per week.

Farago compares navigation apps to a valuable tool – like a hammer – that you really need but don’t use very often. “You’re going to hang on to it but not use it very often. That averages out in giving you decent repeat useage but the frequency of use doesn’t help you build a total sustainable audience that you can advertise against,” he said. […]

He said broadly speaking developers need to give consumers the minimum amount possible to get them to maximum happiness – and then take it away. “The way I think of it is have enough of a ‘wow’ factor right away in the first 30 to 60 seconds of the experience, but at the same time hold back on a couple of other very interesting things that the consumer would want,” he said. “If you have four killer features, you need to give them the one that really sets the hook and use the other three as a promise to reel them in.”

Although it varies from product to product, the overall conversion rate for apps is between 2-10%. The rate shows there are many who try but don’t buy apps – and also reflects the vast choice consumers have. The App Store has over 75,000 apps and the Android Market has over 20,000. “At end of day, consumers only have so much capacity or interest to use a certain number of applications,” said Farago.[…]





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