In Part 1 of this series, we began to explore the difficult question of whether developers should charge for the mobile apps they create, or make them free to download and monetize them in some other fashion.  This week we’re going to take a closer look at paid apps and consider when that pricing model might be preferable to the free app model.

When pricing a paid mobile app, you need to bear in mind that you’re competing against other apps, not other kinds of products.   That is, the mobile app market constitutes a unique ecosystem, and it would be very unwise to calculate your price point based solely on the amount of capital invested in research, development, and marketing.  Doing so would likely lead to overestimation of the app’s actual value that could kill its chances for success as soon as it hits the store.  Most apps are free, even some very useful, very sophisticated ones.  Most paid apps cost 99 cents.  Only 6% of the apps available cost more than $5.

So how much to ask?  Seth Porges at Mashable believes that setting the price at $1.99 is the best way to go.  This is considered a “premium” price in the mobile app landscape, and Porges arrives at that number for two reasons:  one, the per-download profit is considerable, and two, setting the price at $1.99 allows you lower it in the future should you choose to do so.  Additionally, this gives the developer two tiers at which they can give their product more exposure:  when an app goes from $1.99 to $.99, it will appear on an “on sale this week” list, and when it goes from $1.99 to free, on a “free this week” list.  Both of these promotional lists will increase exposure and profitability.

Of course, other experts will tell you in no uncertain terms that “charging upfront for an app is clearly not the only way to generate revenue.” Next week we’ll take a look at your monetization options if you choose the free-to-download pricing model.

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Mark M. Stetler is CEO of AppMuse and its related businesses: iPhoneAppQuotes.com, iPadApplicationQuotes.com, AndroidAppDevelopmentQuotes.com, and BlackberryAppDevelopmentQuotes.com. AppMuse is the Internet's leading provider of free app development quotes from experienced, pre-screened app developers for iPhone, iPad, Android, and Blackberry smart phones.

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