Upfront payment the most common price model for App Store apps | Mobile Apps | Mobile Entertainment

Upfront payment the most common price model for App Store apps

Upfront payment the most common price model for App Store apps
Daniel Gumble


Apps / Apple App Store / December 3rd 2012 at 2:28PM

New study also looks at the rise of freemium models.

The international App Store Study 2012 has shown that 40 per cent of App Store apps employ an upfront payment model, making it the most common payment model in the store.

Conducted by the global strategy and marketing consultancy Simon-Kucher & Partners in the US, UK and Germany, the App Store Study examined the prices of 2,400 apps by price and category. By looking at the top 100 downloads and top 100 purchases in the Apple AppStore, the study showed that upfront payment is the most common price model for apps, while freemium models are on the increase with almost one-third of all apps utilising a freemium model. ??

However, when looking at the four analysed app categories - games, news, productivity (‘functional daily helpers’) and social network apps - some clear differences begin to emerge. The games category has proved top be particularly successful at using the freemium model to transform customers into payers.

When looking at the price levels and the differences between upfront and in-app prices, costs vary significantly. Maximum in-app prices can be more than ten times higher than maximum upfront prices.

Annette Ehrhardt, Senior Director at Simon-Kucher, said: "Nothing is impossible. Correctly communicated, there is a market for any price. It’s no wonder, considering the vast variety of products you can now find as apps."

In a bid to attract and keep paying customers, app developers have created two different freemium price models on top of the traditional free and paid apps. While some are offering apps for an upfront payment and then offer in-app purchases (‘freemium I’), others are offering free-to-download apps with the option of in-app purchases later on (‘freemium II’).

Meanwhile, there are almost twice as many apps without upfront payment than apps with upfront payment in the entire freemium marke, going some way to emphasise the fact that there are other opportunities to monetise apps than the classic paywall. "'Download first, pay later’ is the name of the game here. If app providers want to enter the ranks of top downloads, this is the key. Monetisation would then follow," commented Ehrhardt.

Across the countries included in the study, the majority of app prices for upfront and in-app offers range from one to five USD, GBP or EUR. Yet app prices vary strongly, with the study indicating that providers should refrain from focussing too much on assumed price limits and very low price thresholds. Higher priced apps are also well represented in the analysed top 100 listings. "If we consider how different the value is that each and every app delivers, the vast price variation we observe is good news," added Ehrhardt. "Uniform pricing for products of varying value is never the best approach.

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