Price To Sell

I want to try a little experiment with you all. If you own a smartphone (and you should), pick it up, and go to your phone’s application store (Blackberry App World, Google Play, Apple’s App Store, etc). Now take a look at the most downloaded apps. More specifically, take a look at the prices. Notice anything?

Apps generally fall into three categories. Free, which is, well, pretty obvious. Premium, which can cost anywhere from a few dollars to, well, a lot more than a few dollars. And finally, the extremely cheap. We’re talking 99 cents to two dollars here. If you look at the most downloaded apps on your marketplace of choice, you’ll notice that two of those categories appear in the most downloaded list most often. Free, and really cheap.

In both cases, these apps are so successful for really one reason, and it has little to do with quality (although many of them are in fact quality bits of software). They are successful because they hit the pricing sweet spot, at which point people will, after taking a look to see what the app is all about, shrug and say, “Well, what do I have to lose?” and download it.

Now for the purposes of this article, forget the free apps. Monetizing a free application is a whole different article.

Now those paid apps, the really cheap ones. The ones that are only a dollar or two. They appear on paper to be interesting bits of software. They’re priced cheaply. People buy them on impulse. They can make millions of dollars. Somewhere in that application list, did “Angry Birds” come up? Don’t answer that, of course it did. That little geometry puzzle game has made over five hundred times the cost of creating it. It’s well into the nine figure range. It costs a couple of dollars. Why is it so successful? One, because it’s fun. Two, because it’s priced to sell. Rovio could easily have charged more money for the game, and have in fact attempted to (versions for home consoles retail at $20-$30), but they didn’t. They kept the cost low, and sold enough money to build themselves a Scrooge McDuck-esque swimming pool full of money. Not a bad business plan, is it? So here’s how you make it work for you.

With any product or service that you put together on your way to Personal Independent Earnings, you’re going to have to set a price. The school of thought here is that if you price in the impulse range, people will go for your product on a whim, en masse. You need more sales to break even, but with a lower pricing structure, you stand a better chance of getting them. You even make what you have on offer seem more enticing in the process. It sounds kind of odd, but it’s hard to argue with the results. Making back over five hundred times your manufacturing and development costs is nothing to sneeze it. That’s actually really, really successful, by anybody’s standards. And it in all likelihood never would have worked out that way, had Rovio not decided to price their product to sell.

This may not work for all businesses, but it’s definitely a tactic worth considering if it can apply to you. After all, if a small piece of software about throwing birds at pigs with a slingshot can pull in nine figures, imagine what your ideas can make!