Feature Article

December 03, 2012

Freemium App Pricing Takes on New Importance in Simon-Kucher Study

Eventually we will reach a point in terms of smartphone app saturation where the Apple tagline, "there's an app for that", becomes reality to such a degree that it will be appropriately used for just about everything. Chances are, based on the results of a recent study staged by Simon-Kucher & Partners, those apps will be available, at least somewhat, for free.

The Simon-Kucher study illustrated the benefits, and the overall use, of what's known as a "freemium" pricing structure when it comes to apps, a model that gives away at least part of the app. There are essentially two substrata of freemium, with one version requiring a small upfront payment with add-ons to purchase, and the other giving away the base model with the option to add on more later.

Image via Shutterstock

Simon-Kucher then analyzed the prices of fully 2,400 different apps, looking in terms of both price and category, ultimately comparing this analysis against the top 100 listings in both downloads and purchases. This led to the finding of an unexpected consensus: upfront payment may be the most popular sort of payment method for apps, with 40 percent of the total going that route; freemium pricing was steadily on the rise. Fully one third of all apps are using a freemium model, with that model split into the two subclasses above, and the "free base model" version of freemium outweighs the "small upfront payment" model of freemium nearly two to one.

Perhaps most unusual in the study was the sheer range of pricing available in terms of apps. While most app prices tend to stick around the one-to-five range--whether denominated in U.S. dollars, British pounds sterling or Euros--a freemium app has a much broader potential price range. Some freemium apps, reportedly, can reach up to $448 U.S. in price.

The freemium pricing model, especially the "free base model" subclass, has a lot of potential value as a marketing tool. Not only does it provide an inducement to get the app itself--"free stuff" has a lot of impact on the consumer psyche, which in turn looks for value in its purchases, especially in slow economic times--it also shows off just what the app could do if the customer were willing to extend a little extra cash the programmers' way. It provides not only the best marketing there is--direct personal experience--but it does so in a fashion that not only is low-risk for the consumer, but is also low-risk for the developer.

While the freemium market may not be the answer for every app maker, those who can use a freemium model will likely find it very valuable. It gives users the opportunity to see the app's value clearly while at the same time allowing the developer to make money, and this in turn means a lot more apps will likely be freemium-priced in the future.

Edited by Brooke Neuman

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