On Tuesday, Apple announced that they were updating the prices of apps and in-app purchases on the App Store. If developers choose to take no action, the content and subscriptions they sell in-app will automatically increase or decrease in price. And that may have a material impact on users’ purchasing behavior, for better or for worse.
Take, for example, the changes to in-app purchases priced in pounds. Since Brexit, the pound has depreciated considerably against the dollar. Apple’s price changes see an in-app purchase that currently costs £14.99 increase in price to £19.99, which is a 33% increase for a British user.
You can argue that this price change is simply a reflection of exchange rate movements. But, apart from the Toblerone fiasco and a very small uptick in inflation, Brexit has not yet had much impact on the average consumer. So a price increase based purely on exchange rates, without any behavioral consideration, is a potentially dangerous move.
When a mobile app sells an in-app product, such as in-game currency, it uses Apple’s price tiers to do so. Apple provides 88 price tiers, with 7 alternate tiers, that group prices together across currencies. That means, for example, that to sell something for $9.99, the app instructs Apple to use ‘Tier 10’. Apple will then convert $9.99 into each user’s local currency using a relatively static reference table.
Google, on the other hand, allows app developers to specify prices in every country they distribute in. And, although developers often set local prices using exchange rates, they at least have control over their local pricing.
App Store Price Increase Does Not Mean More Revenue
So app developers that rely on the App Store’s price tiers now face a problem. If they blindly accept Apple’s increase for British users, they may sell fewer units of their in-app purchases. If that drop in purchases falls too much, they will actually be generating less revenue than before the price changes.
The key consideration, then, is not how far the pound has fallen against the dollar. But how British users will respond to an increase in price. In some cases, a price increase is good for business. In other cases, it is bad for business.
For app developers that have price tiers (or, more specifically, product IDs) hard-coded into their mobile apps, they have no choice but to accept the App Store’s price change. If the price change is detrimental to their revenue, the only way they can reverse the price change is by publishing a new version on the App Store.
But, even then, Apple still constrains developers to the price tiers. If a developer wants to reduce prices in dollars, they also have to reduce prices in pounds and every other local currency. The alternate price tiers give some control over prices in developing countries, but it is still impossible to lower a local price for a specific product ID.
Dynamic Pricing Is the Solution
The only solution is for app developers to take back control. Rather than hard-coding product IDs and relying on Apple’s price tier system, they need to have full control over their pricing. That means control over which users see which prices and when prices should increase or decrease.
Segmented pricing and dynamic pricing are two tools that help app developers generate revenue from in-app purchases. As monetization is an increasingly important concern for app developers, tools like these are extremely valuable for controlling and optimizing prices.
In the case of segmented pricing, app developers have an easy way to change prices for specific groups of users. It is possible to segment out British users to ensure that a mobile app does not pass on a price increase, for example.
Dynamic pricing takes this a step further. It uses machine learning algorithms to automatically adjust prices for users. App developers can use dynamic pricing to adjust prices between countries to ensure the best outcome. It uses data about purchases to drive price changes, rather than relying on exchange rates.
Sweet Pricing provides these tools to mobile app developers. It takes less than one developer day to implement Sweet Pricing, using a simple SDK that works with existing Android and iOS mobile apps. With Sweet Pricing’s suite of pricing tools, it is easy to control pricing and boost revenue from a freemium mobile app.