Pricing changes can have a significant positive impact on app download volumes, leading to a corresponding increase in revenue, according to the latest study from Distimo.

Reducing costs can have several benefits for developers, it was noted. Increased download volumes can improve chart rankings and therefore increase visibility, while also making up for the loss of revenue from the initial cut.

It was also mooted that customers may be prepared to pay a higher price for popular applications, which would be an incentive to raise the price of the most popular titles.

Download and revenue growth
Apparently, after a price cut on the App Store for iPhone, cumulative growth in downloads was 1,665 percent after five days, with the figure for the iPad being 871 percent.

This led to a growth in revenue of 95 percent three days after the drop for the iPhone, and 51 percent for iPad titles.

The company noted that the sales gain increases in the long run, both from one-off purchase fees and in-app purchases over the lifetime of the app.

And a price reversal has a clear, negative impact. For the iPhone, download volumes decreased by 46 percent aggregated over the five days, while for the iPad, the drop was 57 percent.

This means that “applications do not maintain the download level that is reached by a price drop once the price increased again”.

Price Drops Positively Affect Revenue

Pricing performance
Distimo said that the majority of price changes are within $3.00. Some 42 percent of price changes for the iPhone were in the $1.00 to $2.00 range, with one-third for the iPad.

Prices for the iPad had the largest fluctuation, based on the tiers which indicate the largest price changes. While 20 percent of all price events involved a change greater than $4.00 for the iPad, this was 15 percent for the iPhone.

The largest single change was a $200 change for Add2Cart Amana by Data Driven Decisions for the iPad.

In contrast, 9 percent of iPhone and 8 percent of iPad changes were less than $1.00.

The Majority of Price Changes is Less Than $3.00

Google Play comparison
Distimo said that the effect of price changes is also evident in Google Play.

While a lower price “stimulates download volumes and revenue positively”, the impact was less powerful than Apple’s App Store.

This was attributed to the fact that it is harder to reach the top charts in Google Play, reducing the “ranking effect” where better performing apps have more visibility than lower-ranked titles.

It was noted that “higher ranked applications are downloaded and generate more revenue than lower ranked applications, disproportionately”.

Methodology
Distimo based its assessment on apps in the App Store for iPhone and iPad across the ten largest markets.

It is also based on applications that have reached the top 400 rankings and which had at least one price change in December 2012.

The report included a caveat: download volumes and revenue in general increased by 25 percent to 40 percent during the month, when compared to November 2012.

This seasonal impact “could explain the extreme growth rate as a result of a price drop compared to the less extreme drops for price increases”.