Before Christmas, we asked you what you would charge for iA Presenter and you said: “Much more than you think!” Unfortunately, we forgot to ask you where you are from, which, when it comes to pricing, matters. So, we’d like to ask you one more time: How much would you charge for iA Presenter in your country?
Building iA Presenter, methodically, we did everything we wanted to do with iA Writer but didn’t dare to. You used the app and helped us fine-tune the design for three years. And instead of telling you what it costs, you told us what you would charge for it. All of that was not done willy-nilly. We had premises:
- We knew that we wanted to offer both ownership and subscriptions. Our experiments on Android proved that this is the best model for both you and us.
- Logically, ownership had to be higher than an annual subscription. Again, from our experiments on Android we knew that, arithmetically, the ownership should be between two and three times the annual price. It depends on the price point though. Paradoxically, the logic goes “the higher the subscription price the lower the ownership price.”1
- Ownership would only be available for single licenses. You won’t be a student forever. Businesses, at least of a certain size, don’t care about owning software.
We offered a form that required you to fill out monthly and yearly subscriptions plus ownership. Some of you hate subscriptions so much, that you refused to fill out the form as long as it required putting in numbers for subscriptions. We offered a second version that didn’t require you to fill out all fields. What happened there raised brows. The price suggestions changed. They got lower. We continued changing the form and, every time, the result changed. We’ll write a detailed report on the design of every form and how exactly it influenced the data later this month. Here’s the result.
Different entry forms, different prices
Forcing people to reflect on the logic between subscription and ownership changes the price tag as much as involving or excluding different audiences, like students and businesses. In retrospect, it’s obvious why.
- Setting an ownership price in relation to a subscription price makes you understand that ownership should reach a value higher than a one-year subscription.
- Just letting you pick a one-time price leads to a simple thought: “How much do I feel like paying?” What you feel like paying is usually lower than what you pay if you have to. I never feel like paying as much for my iPhone as I end up paying. Having subscriptions as an option forces you to follow some of the market logic.
- With the industry benchmark of +-5.- per month no matter what the app does, ownership quickly gets into a rather expensive region.
What else did we learn? The main lesson was that you’d pay much more than we expected.
All data combined, you decided that iA Presenter should charge the industry standard of 5.- for a single license. Multiplying 5.- times twelve for a year and times three to make it worthwhile, would make iA Presenter make a 150.- app. We did not expect that at all. Your suggestions for business subscriptions varied between 10.- and 20.-/month per license. Wow!
The iA Team discussed the process and the result intensively in our yearly camp last week and came to the following hypothesis:
Students want to be free
Students want and should get both iA Presenter and iA Writer for free. Students are low on budget, but they are, by definition, open to learning new things. Students are our future clients. We would have loved to use Writer and Presenter as students ourselves. Likely we would have preferred to spend money on fun stuff and then tried to pirate it. Pirating sucks for everyone. So be it.
We will soon have our own sales platform. So we can offer our apps for free outside the App Store. Likely, you’ll need a school address and you’ll be fine. If your school is not listed, we’ll ask you to tell your administrator to get in touch. We’ll count the school licenses for each school and then contact the school if it grows out of proportion.
As we mentioned in the previous article, offering software for free is too expensive if you’re not Google or Facebook. So, depending on the school, we’ll try to convince the admin to get a school license. The price of a school license depends on the school’s size and budget. Yale will pay more than the University of Burundi. We’re not quite ready yet with that, but soon.
Companies will pay more
We need to stay flexible with charging companies as well. A bootstrapped startup with five people has nothing in common with General Motors which may want a general license for 10,000 employees.
If a bigger organization is interested in using our apps we’ll offer special services, too. We’ll offer special support and we’ll design the template for you, so you don’t have to learn CSS. Companies and organizations will have to contact us.
From the data we got from you, charging $5.-/month for single licenses was one of the very few constants. Typically, $5.- per month translates to $50.- per year. At that price point, we’re fine with two years of return, so that puts the app at $99.- for those who want to own it. Most of you told us, you’d pay $100.- Ha! That’s double the price of iA Writer! Back to the drawing board?
In spite of the much higher prices that other apps charge via subscriptions, some already think that the $50.- we charge for iA Writer is high. There’s a caveat though: $100.- is not that much in Switzerland but in some countries $100.- can be a big chunk of a monthly salary. Some could argue that if you can afford a new Mac (iAP doesn’t run on old Macs) you can afford $100.- Unfortunately, it’s not that simple. Instead of thinking about the global price of a Mac, we should think about the local prices of Big Macs.
Notably, most people that currently are vocally unhappy about our prices don’t live in countries with low average salaries.2 We clearly see how different buying power affects sales in different markets. If we could we would offer local pricing in the App Store. But Apple doesn’t like paid apps enough to offer that option. (App Store doesn’t offer local prices for paid apps).
Soon, we will be able to sell the app directly through our site. So we can finally take local pricing into account. Rather than making our apps less expensive via our Website, we’ll adapt the pricing to different markets. Based on what? To keep things simple, we’ll use the Big Mac Index. So, how much is it going to cost? Well, what if iA Presenter cost exactly as much as a Big Mac? One Big Mac per month, that is. It’s not logical.3 But it’s still simple.
Some of the most expensive Big Macs (in USD)4:
|Country||Big Mac||Yearly (×10)||Ownership (×20)|
Some of the least expensive Big Macs:
|Country||Big Mac||Yearly (×10)||Ownership (×20)|
iA Presenter is one Big Mac per month, just a bit healthier. We want to run a final round to take the different markets into consideration.
Please tell us where you come from and what you would charge for a single license, via subscription, or as a one-time payment. We added the price of a Big Mac in your country for comparison.
Select your country, fill out the form, and click “Send”. If you have more thoughts, please let us know at email@example.com.
Selling an app via subscription doesn’t mean that people will pay you forever and that selling subscriptions always works better than offering ownership. It is a huge and common logical fallacy that subscription proponents make that subscriptions always make more money. The probability of losing your customers with one and the same app increases with the subscription price. ↩
This was quite a head-scratcher for us. Why do customers from high-wage countries complain more often about high software prices than customers from low-wage countries? It seems like customers that use expensive products in low-salary countries are not as price sensitive as customers in high-salary countries. Is it, maybe, because, on average, a Mac user in Zhongshan has fewer financial worries than a Mac user in Boston? ↩
You’ve heard others saying “Buy us a cup of coffee!” instead of “Pay for our product.” The comparison is supposed to communicate that software is not that expensive, because you spend more for coffee every day or something like that. That’s not our intention here. It’s none of our business how much you spend on beverages or food or socks. The comparison with Big Macs allows us to communicate the difficult aspect of buying power in different markets. And since in the US, it’s close to the standard $5.- subscription point, it keeps things simple. ↩