Publication: The Impact of Price Changes

We’re please to share our first monthly publication of 2013. This month’s publication focuses on the effect of price changes on download volumes and revenue in the Apple App Store for iPhone and iPad. Many developers discount their apps from time to time, with some of them being very successful. We take a look at our data to learn from their strategies. Does it really pay off to discount your app, and to what extent if so?

Sizes of Price Events

The majority of price changes are within a $1.00 to $3.00 range. The largest price changes are in the Apple App Store for iPad, twenty percent of all price events involved a change larger than $4.00 in this store.

The Effect on Downloads

The effect of a price drop is more intensive in the Apple App Store for iPhone than it is in the Apple App Store for iPad. On average, cumulative downloads grow by 1665% five days after the price drop in the Apple App Store for iPhone, while the growth is 871% on the iPad. However, the effect on downloads of a lower price ends, when the price increases again. Download volumes in the Apple App Store for iPhone drop by -46%, aggregated over five days after a price raise. In the Apple App Store of iPad, the drop in downloads is somewhat higher, -57%.

 

The Effect on Revenue

The effect of a price drop on revenue is significant and is already visible within three days after a price drop. This effect is more intense for application on the iPhone than it is for iPad applications. Moreover, the effect on revenue becomes larger in the long run in both the Apple App Store for iPhone and iPad. Revenue from one-off fees and in-app purchases are both contributors to this increase in revenue in the long run.

 

Price Changes most effective on the iPhone

The price elasticity on revenue in Apple App Store for iPhone is the lowest, which means that revenue reacts most heavily on any price change in this store. Here, a 1% price drop leads to a 1.2% revenue increase within five days. The price elasticity in the Apple App Store for iPad is -0.7, which indicates that a 1% price drop causes a 0.7% increase in revenue.

 

Download the Full Report

The full report includes a more detailed analysis about the impact of price events. Please download the full report here.

The press kit including all image files is also available.

Tiuri van Agten