Freemium is new trend for smartphone apps
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Freemium is new trend for smartphone apps

Nothing is impossible when it comes to setting app prices. Freemium models are on the rise in the US, UK and Germany. Staggered prices combined with cleverly communicated value boost customer loyalty.

The international App Store Study 2012 conducted by the global strategy and marketing consultancy Simon-Kucher & Partners in the US, UK and Germany analyzed the prices of 2,400 apps by price and category. Looking at the top 100 downloads and top 100 purchases in the Apple AppStore, the study shows consensus concerning price models and ranges across the countries.

Although upfront payment is the most common price model for apps (40%), freemium models are on the rise. Almost one-third of all apps use a freemium model already: a new trend in the industry. Looking at the price levels and the differences between upfront and in-app prices, prices strongly vary.

App developers have created two different freemium price models. They offer apps for an upfront payment and then offer in-app purchases ("freemium I"), or they offer free-to-download apps with the option of in-app purchases later on ("freemium II"). The freemium approach is becoming an increasingly popular monetization strategy for app providers. What's more, there are almost twice as many apps without upfront payment than apps with upfront payment in the whole freemium market.

"'Download first, pay later’ is the name of the game here," says Annette Ehrhardt, senior director at Simon-Kucher.

The majority of app prices for upfront and in-app offers range from US$1 to $5. Yet app prices vary strongly.

"Uniform pricing for products of varying value is never the best approach," says Ehrhardt. "The cost for an in-app purchase can be up to ten times higher than for an upfront app."

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