You have come up with the next great iPhone app. You’ve come this far and iPhone app development is almost complete, the next crucial step in mobile application marketing is pricing. But how do you decide what you charge for your iPhone app? If you charge too little, you lose valuable revenue. If you charge too much, you might never gain the necessary momentum to move up the ranks in the app store. Price is hugely influential in whether a customer buys an app or not, and is one of the most powerful tools that developers have to position their apps and drive sales. It is incredibly important to get right, but also quite difficult. You should consider several factors when pricing your iPhone app, so here are some things you may want to consider:

• Competitive Advantage

• Breakeven Analysis

Competitive Advantage

For starters, look at competing apps in your category and then ask yourself the following questions:

• How much do competitors charge for a similar app? Take a look at the AppStore and review how many apps are similar to yours. Have you produced another Battleship game that is similar to other apps or is it far better? Be honest!

• What are the differences between my app and someone else’s? Do you have more features? If it is a new financial calculator, does it offer something more than the other competing apps on the store?

• How does your app rate against the competition? Do you feel that your app has better graphics? Better sound? More exciting action? Have you confirmed this with your reviewers, friends, followers, and customers?

• How does your app compare to free apps? If there are many competing free iPhone apps you will need to strongly communicate the value of your app. Overcoming objections to free apps is a high hurdle that can be mitigated with better iPhone app marketing.

If you are confident that your app is unique and has qualities and features that no similar app provides, I say price it higher and measure the results. People are willing to pay for quality at a reasonable price. They are not willing to pay for poorly designed apps at any price. Bearing all of this in mind, the next step is to evaluate your breakeven volume.

Breakeven Analysis

The first thing a developer should do when pricing an app is to decide on what their goal for success is. Now, everyone defines success in their own way. Whether they want to make the most money, or grow the largest customer base, or probably somewhere in-between. The ideal price point for any app is going to be somewhere between the ‘most money’ price and the ‘most customers’ price, dependent on how important a large customer base is. This price is something of a bell curve, it is unique to every app, and varies continuously. For any given app, the ‘most money’ price requires experimentation, and research into the potential customer base and competition. It is also heavily influenced by the app type, any current marketing pushes, and other external forces.

There are several things to consider in breakeven analysis. First, what are your revenue goals and what are your costs associated with development of the app? As an illustration, here is an example:

Perhaps you have grand ambitions and want to generate $100,000 in app sales for a product that cost you $20,000 to create. If you start at a $.99 selling price (less Apple’s 30% take) you would have to generate 28,860 downloads to clear $20,000 or 144,300 downloads to achieve $100,000 in sales! These are huge numbers of downloads any way you slice it and that’s after you pay for your development costs. Starting at a $.99 sales price is going to take some time to breakeven unless you have a "grand slam, out-of-the-park, into-the-parking lot" kind of app!

It’s worth noting that spending less developing your app is a possibility, and so your break-even may be lower. Larger mobile app development companies can create an app less expensively than a small developers because they already have developers and graphic designers on staff and can quickly redirect their efforts to that iPhone app. Independent developers may have to outsource some of the skill set of development (especially if it’s a game). But, regardless you need to calculate your break-even so you at least have an idea of what it’s going to take to cover your development costs. If you haven’t spent real dollars in development you most certainly have burned long nights writing code! So, you should calculate your hours spent in development and estimate some sort of development cost based on your typical hourly rate.

Given this breakeven value, assess the feasibility of attaining that figure- how many apps can you realistically sell per day? Making an estimate as to that, you can calculate the horizon (time period) to achieve breakeven and profit.

Let’s assume you have spent $5000 to develop your business application. If you believe you can sell 100 apps per day, pricing your app at $.99 will take you over two months (70 days) to break even.

Pricing is a very important question for every developer. It heavily affects your revenue, but also affects your sales amount. It’s always difficult to pick up correct price for you app. You worked days and nights creating and polishing your app and then you face this question – "How much should your iPhone app cost?" But considering your goals, competitors, as well as the breakeven analysis, you’ll have a better idea of the price you should charge.