The iPhone grew 88% year over year compared to Q4 2011, selling 35.1 million units in the quarter worldwide. The iPad in particular grew year over year compared to last year’s quarter by 151%. In fact, the iPad has now officially overtaken the iPod line as Apple’s second-biggest product. The initial sales of the third-generation iPad helped these numbers, and the price drop on the iPad 2 may have helped as well. Revenue from the iPad (and accessories) grew 132%.

iTunes as a whole, including the App Store, grew 35% from Q1 2011 to $1.9 billion. While the ratio of revenue from apps compared to other media types is unknown, there is evidence that the store is still growing, and that either more people are spending money, and/or that users are spending more money. Either is a good proposition for iOS developers.

While investors may be skeptical about the future of AAPL, what developers need to know is that people are still buying iPads and iPhones. They’re buying them more than they did a year ago. The market is still growing. As well, Apple CFO Peter Oppenheimer claims that Apple is selling iPads as fast as they can make them, so skepticism about the stock may be misplaced. Evidence is also out there that these iPad buyers aren’t just repeat buyers upgrading their old hardware – 25% of iPad buyers are actually buying their very first Apple device!

The iPod line, which includes iPod touches, was down 15% year-over-year. This decline could reverse next year if Apple winds up introducing a fifth-generation iPod touch, as they did not release a new model last year as they did with the iPhone. Or perhaps with the availability of cheaper iPhone 3GS and iPhone 4 models, along with low-cost Android phones, the iPod touch is becoming a less desirable product. Of course, without knowing specific iPod touch numbers compared to the entire iPod sales numbers, the possibility also exists that the decline has been spurred on by the iPod nano and iPod Classic models.

Even as the iPad and tablets continue to change the computing world, Macs aren’t going away, as Mac sales were up 7% compared to last quarter. While this means that the Mac App Store is not likely going to be the kind of potential revenue generator that the iOS App Stores are, there are still people buying Macs.

All in all, Apple results paint a rosy picture for the company and for those who are trying to sell to new Apple users, as that population continues to increase.

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According to Transparency there were 67 million tablets sold in 2011 and that the market is expected to grow by 38 percent annually. Crunching some numbers that leads to anticipated sales of 248.6 million to be sold by the end of 2015. Meanwhile, smartphones are expected to expand from 282 million to 1.05 billion over the same time period. Asia is proving to be the fastest-growing market, and will make up an estimated 40 percent of the entire smartphone market by 2015.

So what does this news mean to developers? First off, the bubble is far from bursting, with several markets snapping up phones and tablets at a breakneck pace which should continue for the foreseeable future. Also, many studios may want to turn at least part of their attention to the Asian market, since that slice of the population is nowhere near as saturated as the US and even Europe. While everyone dreams of creating a game or app with worldwide appeal it makes a lot of sense to start focusing on apps which serve specific markets in regions such as China, Japan and India. It will be interesting to see what studios manage to find great success creating apps that don’t even launch in the West.

The other issue we may want to consider is that the estimates put forth by Transparency may be too conservative, and the market could explode even faster than they anticipate. For instance, the report uses the incredibly strong sales of the iPhone 4S as the basis for its smartphone projections, and that particular model isn’t even Apple’s most anticipated product. A fair number of smartphone owners chose not to upgrade to the 4S, instead opting to wait for a true redesign, which is expected to touch off a tidal wave of sales once announced. Add in an anticipated iPad refresh and the looming spectre of a true Apple television and the projections of this report may prove to be downright timid.

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As far as rank increases go, 87% of apps increased in rank while in their sale period, with 35% increasing over 25 rank positions, and 17% gaining over 50 rank positions. Obviously, pure rank increases don’t actually say much – increasing 25 rank rank positions from 100 to 75 would be different than jumping from 30 to 1. Relative rank increases were on average 137% on the iPhone App Store, and 252% on the iPad App Store.

However, the tradeoff with that rank increase is obviously lower revenue per sale at the hope of increased total sales. Not many applications actually undergo a massive revenue boost: only 18% of apps that go on sale in the iPhone App Store (17% in the iPad App Store) experience at least a 50% increase in revenue; in fact, 44% actually lose some revenue by going on sale, with 49% on the iPad. However, the average app’s revenue increased by 22% on the iPhone, and 19% on the iPad during the total length of the sale.

Shorter sale periods with higher price cuts may be the way to maximize the odds of revenue increases. Evidence shows that apps gained more money and higher ranking positions on the first day of their sale, and steeper discounts decrease the risk of losing money, and increase the possibility of revenue increases. In particular, discounting at least 50%, or down to $0.99 or $1.99 provided optimal revenue increases, according to Distimo. Their report is free to read and available here.

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Munster reports that the typical user will download 83 apps this year compared to 51 in 2010. That’s a whopping 61 percent increase in one year. “Smartphone users are showing an increasing appetite to use apps to add features to their phones and iOS has the leading app ecosystem.” Actually, it looks like a voracious appetite. Granted, the price per app is not that high. Munster reports that 82 percent of App Store business is from free apps, while the 18 percent of downloads that are paid apps average $1.44. This price went up recently, Munster says most likely because the iPad apps are higher than the iPhone an iPod touch.

In fact, Apple says that 15 billion apps have been downloaded from their store over the past three years. Munster adds that this trend demonstrates “the increasing importance of an app store with a broad selection of tested apps,” that are driving Apple device sales. “Smartphone users are showing an increasing appetite to use apps to add features to their phones, and iOS has the leading app ecosystem.”

All this bodes well for app creators and developers. It shows there is a market for their wares. However, it also shows that the competition is going to become even keener, and that it will be continually more difficult to stand out amidst all the contenders.

[Source: CNN Money]

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Backflip makes its money from a combination of in-game advertising and upselling players to paid versions of the games.

In May, AdMob’s Russell Buckley confirmed that Backflip was making $100,000 a month from using AdMob’s ad units in its games – which he said was half the developer’s monthly revenues.

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Read Chapter 1 of my new book “iPhone and iPad Apps Marketing: Secrets to Selling Your iPhone and iPad Apps” below to get you started down the path to better marketing.

You can purchase my book from Amazon and directly from the publisher Que.

Your iPhone and iPad App Marketing Strategy: Grand Slam or Base Hits?

As an iPhone or iPad app developer you want to strike it rich selling your app to millions of customers, or at least tens of thousands of customers, to make your hard work pay off. Other equally ambitious developers hope to achieve a steady income and perhaps write apps full time and leave their other full-time jobs behind. While these goals are possible, it has become much more difficult over the past year to achieve such success.

There are several reasons. First, the sheer number of apps for sale on the App Store has made it much more difficult to stand out from the crowd. Instead of just a few similar apps in your category, there are likely hundreds, even thousands, vying for the buyer’s attention.

You are competing against free and paid apps, some brilliantly written and some not even worth giving away.

Secondly, the intense pricing pressure causes many developers to start off at a low price or quickly drop their price to $0.99, a figure that makes it extremely difficult to break even much less make any profit. According to the website 148apps.biz, almost 42% of all apps (games included) are priced at $0.99. Figure 1.1 shows a range of apps, from free to $9.99, and their percentage totals on the App Store. You’ll notice that 77% of all apps sold are at $1.99 or lower.

Figure 1.1 iPhone app prices tend to be bunched down at the $1.99 level and lower.

The sheer number of competing apps may seem daunting; however, these statistics are not presented to be discouraging. Rather, this chapter is designed to point out that the App Store has matured very quickly, and you have to develop a solid marketing strategy to realize success. The App Store is not running on Internet time, it’s on mobile time! Your marketing strategy also has to be tuned to work with your buyer.

We’ve Seen This Movie Before

The App Store is much like your local supermarket. In the 1980s, the average supermarket carried about 7,500 items. Today, that same supermarket carries upward of 50,000 items! Every vendor is fighting for shelf space so more people will buy their products. Manufacturers want their products positioned at eye level or placed on their own display at the end of an aisle. They are willing to pay extra for this privilege. The supermarket makes its money through high volume turnover of its products. Those items that don’t sell well are pushed to the bottom of the shelves or moved to another part of the store.

Amazon.com is no different; vendors are trying to stand out in a very crowded market. Not counting other items, its bookstore alone boasts well over 250,000 titles. Many authors hope to achieve fame and fortune by landing on the top 100 list on Amazon’s book home page. Other authors hope to get their big break by being mentioned on Oprah.

The App Store has exploded from its introduction of fewer than 1,000 apps to well over 185,000 apps at the time of this writing. Just like the supermarket vendors, every app developer is vying for that eye-level virtual shelf space, hoping to get top billing so buyers will take a look. They are either hoping to make it into the top 100 sales for their category or get a mention in the “Staff Favorites,” “New and Noteworthy,” or “What’s Hot” sections of the App Store. Table 1.1 shows the breakout of the different categories of apps available on the App Store. Approximately 450–600 apps are posted to the store each day! According to Apple, almost 10,000 apps per week are submitted for the approval process. At this pace we could easily see well over 225,000 posted to the App Store by the end of 2010.

Table 1.1 App Store Percentages for the Most Popular Categories on the App Store

Source: www.148apps.biz

As the App Store has grown, it has necessitated reconfiguration numerous times to further segment the apps into logical groups where buyers can more easily connect with sellers. Apple has improved the search capabilities of the store, added sub categories and added Top Paid Apps and Top Free Apps columns to each of the individual categories. As shown in Figure 1.2, the top paid, free, and grossing apps are displayed on the home page of the App Store.

Figure 1.2 Top Paid Apps, Top Free Apps, and Top Grossing Apps are shown to the right of the App Store’s home page.

If you drill down into a category such as Lifestyles, you see that there is also a breakout of the top 20 paid apps and the top 20 free apps. An example of this breakout is shown in Figure 1.3. Notice that this particular category has 275 pages of free and paid apps at 20 apps per page! I’ll do the math. That’s 5,500 apps in the Lifestyle category (at the time of this writing). If your app manages to sell enough copies to make it into the top 20, you will see your sales climb dramatically (as long as you stay on this list.)

Figure 1.3 Each category on the App Store has columns for paid and free apps.

You can also sort the apps within each category by Name (A–Z breakouts), by Release Date, and by Most Popular as shown in Figure 1.4. Searching by Name is helpful if you’re searching on a particular name of an app or your best guess as to its name. Release date is the default. Searching on Most Popular almost always brings up a huge list of free apps. No surprise there.

Figure 1.4 The App Store allows you to search by Name, Release Date, and Most Popular within each category.

The App Store will continue to make improvements to help strengthen and refine the search process and showcase apps in the best way possible. After all, Apple has a vested interest in your success. The more apps you sell, the more they make. Perhaps more importantly, the more apps that are sold, the stronger the iPhone brand. Apple doesn’t publish App Store sales in its earnings results, but it has commented on earnings calls that it is slightly above breakeven on the App Store. However, no matter what it does to improve the store, the challenge will always be the same for you: how to get your app noticed.

Note: Someone once said (possibly Rudi Giuliani) that hope is not a strategy. Hope is also not a marketing strategy! Posting your app on the App Store and hoping for the best is not a plan and will more than likely result in mediocre sales from the very start.

In order to create a winning sales and marketing strategy for your app, it’s important to understand the dynamics of the App Store and understand that there are several strategies that you can employ. Most developers are trying to knock their app out of the park. They want the grand slam and think anything less is failure. A number of developers give up, thinking there’s only two possible outcomes: the big win or no win. But, there are actually three possible outcomes: the Big Win App, the Steady Win App, and the No Win App. All apps fall into one of these three categories. Over time, and without marketing or product updates, all apps will eventually slide from one category to the next one below.

The Big Win—Grand Slam

The Big Win apps or Grand Slams are generally characterized by explosive sales from their launch. Games, by far, make up the majority of the Big Win apps. Why? Because games take advantage of the impulse buy which occurs directly from an iPhone. Games are the most likely app to be bought on impulse. The impulse buyer doesn’t care about reviews. Sometimes, a community of people is familiar with a particular development company and is hungry to purchase its new app. Some companies have made their app successful by porting an already successful PC or Mac game over to the iPhone platform.

Big Win apps have been positioned by large development companies with huge followings. Their aim is to achieve quick sales on apps that are priced in the games sweet spot from $0.99 to $1.99. At this price point, the impulse buyer is looking for something to occupy his time. The longevity of this type of app may be short, lasting only months. Then the same company releases another app and focuses its attention on that. Some winning apps are designed in such a way to bring the customer back over and over again with paid add-ons or frequent updates. One of the most popular game apps to provide frequent releases is Pocket God shown in Figure 1.5. Pocket God refers to its updates as “Episodes” and has built a very strong community of users that keep the game in the spotlight. User suggestions for new features keep the game fresh and exciting.

Figure 1.5 Pocket God has done a very good job keeping customers engaged with its frequent new “Episodes,” or product updates.

Another common element for Big Win games is that they are usually simplistic in their premise. The masses of iPhone users purchase games that are easy to learn. Low on learning, high on enjoyment is the rule of thumb for the quick win Big Win games. The typical game buyer doesn’t want to learn tons of rules to a new game. They want to understand the point of the app immediately.

The Big Win apps can also come from independent developers (Ethan Nicholas of iShoot Fame) whose military tank battle game is a classic example of independent developer success. However, the big wins for independent developers are happening less and less due to the number of games on the App Store and because game quality is going up while the time to market is going down. Larger companies have the development staff that can bring apps to market more quickly without sacrificing quality. It simply takes an independent developer longer to create a high powered, high quality game app. iShoot continues to do well, although its sales are not as strong as they used to be. However, once a following is created and the app is updated frequently, you will continue to attract customers and positive reviews as shown in Figure 1.6.

Figure 1.6 Positive reviews continue to roll in for the infamous iShoot App.

The last characteristic of these apps is that they often get a big break from the press as being an app to look at. Tom Clancy achieved remarkable success with his book Hunt for Red October when Ronald Reagan praised the book after he read it while on vacation. After Reagan’s comments, sales of that book skyrocketed. If an iPhone/iPad app gets a lucky break from a major news agency, it can serve as the catalyst to get sales moving in a big way. Word of mouth takes it from there.

Some other apps that fall into this category are shown in Figures 1.7 and 1.8. These apps have achieved phenomenal success. Flick Fishing continues to stay on the best seller list due to its amazing graphics, simple play premise, and huge following. Koi Pond also hit the mark with its relaxing and amazing graphics, and, according to its developers, being in the right place at the right time when the App Store was launched. And who can forget Bejeweled and Bejeweled 2 shown in Figure 1.9.

Figure 1.7 Flick Fishing has achieved Big Win success with well over 1.3 million downloads. They also offer an add-on pack for additional play, adding to their revenues.

Figure 1.8 Koi Pond achieved early success with its incredible use of graphics and simple premise of design.

Figure 1.9 Bejeweled is the runaway best selling game from PopCap Games, Inc. It is on Apple’s Highest Grossing App list.

The Steady Win—Base Hits

The next category of iPhone/iPad apps is the Steady Win, also known as base hit apps. This category may be overlooked by some app developers who focus solely on the Big Win. The majority of new iPhone/iPad apps land in this category even if the developer has intentions of his app making it into the Big Win group. These apps rely on app reviews, positive blog posts, and making it onto the App Store’s “wall of fame” where the app is placed in the “New and Noteworthy” of “Staff Picks” sections for a time. These placements are definitely helpful and will boost sales noticeably while you remain on that list.

These apps also rely on good, old-fashioned, consistent marketing. The revenue with this type of app can be more predictable when the seller understands what marketing activities work for him. With a good app, the right marketing mix, and product updates, your app can achieve success on the App Store. It may not be multimillion dollar success, but it can be decent. It may be enough to compel you to write multiple apps, build a brand, and truly make a business out of your efforts.

Some apps that have achieved solid success that are not necessarily iPhone games are shown in Figure 1.10 and Figure 1.11. These apps have been achieving a steady revenue stream for their developers albeit not millionaire levels. They have strong value propositions and their products resonate with their intended audience. These apps are focused on saving money and getting healthy, topics that interest almost everyone.

Figure 1.10 Save Benjis is an app that allows you to do price comparisons. They also offer an up-sell to their product, a newer app with the popular bar-code scanner feature.

Figure 1.11 iFitness is a long time selling app that helps you track and learn how to do more than 200 exercises.

Since most apps fall into the category of Steady Win, the bulk of this book is focused on helping you achieve ongoing success through a complete marketing approach. These apps generally command a higher selling price and can have more predictable revenue streams. Independent developers will most likely be playing in this category whether they realize it or not.

The No Win—Strikeout

Sadly, a large number of apps on the App Store are DOA. After working months and months or paying someone else to write your app, you post the app to the App Store and anxiously await its review and approval. After a few weeks you get the word back that your app has been approved. The app is posted within a few days of approval and your expectations soar! You can see the checks rolling in from Apple. You’ve already bought the swimming pool (remember Christmas Vacation). Then, you wait. You check your sales stats. A few sales here, a few sales there…. What has happened? Where are all my buyers? What happened to the 10,000 downloads overnight? You thought people would be breaking down the doors to get at this new app. You are discouraged and think you’ve wasted your time. You’ve probably thought about dropping your price. Surely there must be something wrong with the App Store to cause this.

Sometimes, even very well written apps end up unnoticed and ignored. An app that sees 0 or 1–2 sales a day is not going to cut it to reach your break even. At the time of this writing, there are almost 12,000 apps that are inactive and no longer for sale on the app store. So, what does a person do who finds himself in this predicament where his app is not doing well? It’s time for a total app makeover. Ask yourself the following questions, and be brutally honest:

1. Is there really a market for my app? Did you come up with your app idea while sitting around with a bunch of friends and thought you had stumbled onto something that was incredible? Or did you do some solid competitive research to see if there were similar apps already posted, especially in the Free category? Nothing wrong with creating a competing app if you can make it better, but it’s got to be better! Often, whenever we think we have a great idea we need to really analyze whether it’s viable or not. Ask some family, friends, or coworkers if they would be willing to pay for such an app. Find out if you have a market (and its potential size) for your app before you start coding or launch into an expensive project with a developer.
2. Is your app extremely well written? A number of apps on the App Store are poorly written. They have bugs or some of the features don’t work. This is a surefire way to get a one-star rating on the App Store by a disgruntled buyer. Even at $0.99 people will take the time to point out that your app is crap and not worth the money on the customer reviews. One of the outcomes of competition is that prices fall and quality goes up. Customers expect an app to work just as well at $0.99 as they do at $29.99.
3. Have you done any marketing? As we will mention time and time again in this book, marketing is not posting your app to the App Store. You’ve had your app approved by Apple, and that’s a great accomplishment. Now the second half of your work starts. Selling iPhone/iPad apps is not a passive activity if you intend to make money at it. A few other questions to consider: Does your app’s icon convey what the app does? Icons that don’t convey what the apps does or at least what category the app is in are missing a marketing opportunity. Does the name of your app communicate the value of your app or help tell the story of what it does? Does your web copy match your product website in terms of crisp well-written content? All of these things combined help you to tell the story of your app and communicate its value. Figure 1.12 shows some sample icons that do a good job of communicating their value.

Figure 1.12 These icons communicate very nicely what the apps do. This is an important part of your overall marketing.

Taken together, these three components are the pillars of your app’s success as shown in Figure 1.13. Failure to address all three of these areas well means the likelihood of your app succeeding in the market is slim. I know there are stories of some apps seemingly not addressing these areas and yet achieving wild success. There are always examples of people achieving success in books or movies that, for some odd reason, defy all understanding.

Figure 1.13 Three pillars of iPhone/iPad app success: a market, well-written app, and deliberate marketing.

The same goes for iPhone/iPad apps. But, even the successful apps that achieve (perhaps) undeserving success have done at least two of these three things right. They definitely have a market for their app, regardless of how stupid or pointless their app may be. They may claim to have done no marketing, but word of mouth (a form of marketing) has propelled them to success. There is never an explanation why an app is not successful. The answer is always there with a little digging.

If you should decide that your old app should rest in peace, at least you have a better understanding of what you can do the next time around to help you achieve success. Don’t kid yourself when you answer any of these questions. If you truly believe you have a great idea for an app and you’ve done your homework, then go for it. If you have written a great app and know it without a doubt, then apply some marketing and get those sales moving.

Benefits/Drawbacks of the Big Win and Steady Win Strategies

The App Store is not a perfect democratic society and never will be. No matter how many changes Apple makes to the App Store, there will always be unhappy participants. So, you can whine about what’s wrong or you can figure out how to work the system to your best advantage. Table 1.2 illustrates the advantages and disadvantages of the Big Win strategy. The App Store is not for the faint of heart. Table 1.3 shows the advantages and disadvantages of the Steady Win strategy. Again, it’s more likely you’ll end up in this category than the Big Win.

Table 1.2 Big Win Advantages/Disadvantages

Table 1.3 Steady Win Advantages/Disadvantages

If you haven’t started developing your iPhone/iPad app, you are at an important decision-making point. Making a strategy decision now will help you make important marketing decisions as you get closer to launch. Having clear (and realistic) expectations of where your app will be positioned on the App Store gives your app purpose and will help your avoid the No Win bucket.

Summary

iPhone and iPad apps fall into one of three categories: Big Wins, Steady Wins, and No Wins. The Big Win is what every independent developer tends to go after. However, they would be wise to look closely at the Steady Wins category of selling as this affords the best opportunity for most developers. Good marketing can make the difference between no revenue (No Win) and steady revenue (Steady Win).

Decide now what your iPhone selling strategy is going to be and you’ll have an easier time defining a marketing plan and sticking with it. It will save you a lot of heartburn too if you look realistically at your app and its market and set realistic expectations on your success. Don’t get me wrong, I want you to be wildly successful in selling your app. I hope you hit a grand slam into the parking lot, but I also want you to realize that it’s hard work to get there. Even getting base hits is hard work but more likely, especially when you apply some marketing to it.

For those of you who think you’ve got an app lost in the No Win bin, it’s never too late! You can resurrect your app from the No Win status to the Steady Wins status as long as your app is well written, has a strong premise, and gets some marketing. Are you prepared to rewrite a poorly written app? Does your app really have sales appeal? If so, then roll up your sleeves, put your marketing hat on, and keep reading.

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iPhone app developers would do well to carefully examine all aspects of pricing as it pertains to their product, make careful pricing decisions, monitor and measure sales results, and make adjustments as needed to maximize their revenue. You can maximize sales results for your app through better marketing and marketing includes spending some time on the challenging area of pricing.

You should consider a number of factors when pricing your iPhone app. 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 do you define your app and market? If you are selling a tool for sales reps only, have you attempted to define approximately how many sales reps are in your country or market? Of your target market how many of them might own iPhones?
• 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 is a high hurdle that can be mitigated with better marketing.
• How much would the app cost to develop by another company? Larger development firms 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).
• What were the actual development costs or time involved? Knowing your development costs is also very important in helping you determine the price of your app.

Setting Your App’s Price

After you’ve considered these issues, the big question remains, “How do I price my app?” You’ve come this far to develop a great app so don’t pass up this crucial step in making your app as successful as possible. Now, everyone defines success in their own way. Perhaps you want to generate $20,000 a year in additional income from an app that cost you $5000 to create.

Perhaps you have grander 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!

In both examples I didn’t mention the breakeven which should also be factored in. I’m assuming you want to make some money selling your iPhone app. But, for the record you would need 7,215 downloads at the $.99 selling price to break even on the first example at a development cost of $5000. The second app would require you to have 28,860 in downloads just to break even on expenses of $20,000!

I also realize that you may have spent less developing your app and so your break even may be lower. 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.

Let’s assume you have spent $5000 to develop your business application. You believe you can sell 100 apps per day. Your sales numbers based on different price points are shown below. As you can see by looking at the table, pricing your app at $.99 will take you over two months (70 days) to break even assuming you spent $5000 to develop your app.

Based on the chart above I am of the opinion that it’s better to price your app a little higher at first and carefully monitor the results. By this I mean at least $1.99 so that you’ve got room to adjust your pricing downward if needed. The issue with any pricing assumption is trying to figure out how elastic the pricing model is for iPhone apps. Some app developers have said that lowering their price has had some effect on sales but only for a limited time. Others have said that lowering the price has had no effect on their sales. Who do you believe? Well, they are both right. It depends on the type of app being sold. So, the best approach is to experiment at a price point that makes sense for your app based on your competitive research, breakeven analysis and type of application. A truly unique app can command a higher price. Some utility apps are selling for much higher than $.99. Yes, even some games are selling for more than $.99!

Some app sellers have also found some success in offering some limited time offers where they drop the price for a few days to spur sales. If you have a certain promotion you want to do around an event you can often spur sales by offering a temporary price cut. Let’s say you offer a financial calculator that includes special tax features. You may want to reduce your price for a few days around tax time to spur sales to have your app take advantage of this particular time of year.

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. If over a few weeks your sales start to drop off you can carefully reduce the price for a time and measure the results. If you are spending some time on marketing and building a following for your brand you should see steady sales. Remember, in this economy people are willing to pay for quality at a reasonable price. They are not willing to pay for poorly designed apps at any price.

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If you have aspirations to make more than a little spending money from your iPhone app then you must develop a marketing plan and apply tried-and-true marketing principles to your sales strategy. For example, as you wrote your iPhone app did you take some thought to determine who your target market is and how you will message to them in a way that they immediately understand the value of your app? Do you understand how to price your app for maximum success? Have you spent some time to formulate a marketing plan that will create a strong following of satisfied customers?

Marketing for iPhone apps is similar to marketing other online software products, although the marketing tools available have expanded in recent years especially in the area of social media. The steps are still the same: develop a product that your customers need (iPhone app), create and deliver a strong marketing message to attract a following, and continue to develop new products and upgrades to retain existing customers.

When you understand that marketing is a process that incorporates these fundamental steps you will be able to perform them to increase sales success for your iPhone app. For many iPhone app developers an understanding of the necessary marketing steps to increase exposure for iPhone app(s) is something new to them. Whether you are just starting out as a first time developer or have created and posted a number of apps for sale, you’ll want to take a closer look at marketing if you desire to move beyond being a casual developer and seller of iPhone apps to a successful marketer of your own best-selling brand.

Step 1: Understand Your App’s Unique Value and Message It

What sets your iPhone app apart from all your competitors? Let’s face it. There are lots of competitors with similar apps. You have to come up with ways to be unique. There are three key questions that you should attempt to answer as you define your iPhone app’s unique value. The answers to these questions become the pillars of your marketing process and should be incorporated in your marketing plan to the best of your ability:

1. What’s unique about your iPhone app? List all the features, graphics, sounds, functions that are unique to your app. This list will help you develop a marketing message for your app and keep you focused during app development.
2. Who is your target audience? Who will buy your app and who do you really want to sell to? Are you focused on the teenage market? Do you have a business app geared to a specific type of profession? Understanding your audience will help you develop a targeted marketing plan.
3. Who are your competitors? Are you going up against a large game developer or a business program? Knowing your competitors will help you define strategies to compete against the big boys.

The answer to these questions forms the basis of your marketing message.

Step 2: Deliver Your Message to your Targeted Audience

Demand for your app is created when you help a prospective customer see that you have a solution to their problem or you pique their curiosity. The demand for most products is already there; it’s just a matter of you creating a message that resonates with that audience and gets them to notice you.

Delivering your message happens when you create powerful descriptions and visuals for your app on the AppStore and on your app’s own web site. You must think in terms of showcasing your app on the AppStore and on a corresponding web site. The web site can be used to show videos of your app, provide additional screen shots and other content. Always display a “buy now” button prominently on your own site that directs the buyer to your app on the AppStore.

Social media marketing (SMM) can help you generate buzz for your app. Long before you launch the sale of your app you can be visiting and blogging to audiences that share an interest in your type of app. This interest can be converted to buyers once your app is launched. Take a look at using Facebook, MySpace, Twitter and other social media tools to help get the word out about your app.

Step 3: Price Your iPhone App Effectively for Maximum Success

Much has been said about pricing your iPhone app. The strategy of pricing your app at $.99 to gain entry into the Top 100 category is becoming more difficult because of all the apps already posted to the App Store.

A better approach is to review the competition to get a feel for the price ranges for similar apps. If your app has strong features (go back to your list of unique features from step 1) then don’t be afraid to price the app at a higher price than $.99. Achieving break-even at $.99 is a lot harder than you may think unless you are one of the lucky few who hit a grand slam first at bat.
Starting at a little higher price gives you some room to discount and try some promotions to test out where your app will sell well. People will pay for quality and as more business-related apps become available their prices will reflect their value.

Step 4: Implement a Brief Marketing Plan for Your App

With the right message and the right audience combined with the right marketing tools and methods, you can create marketing campaigns that will be extremely effective in reaching your ideal audience. Your marketing plan does not to be lengthy but it needs to define what steps you will use to reach your defined audience. In short, your plan should include a clearly defined marketing message, a description of your ideal target audience, campaigns definitions (product reviews, press release and promotions) so that you have a roadmap of what you want to happen before your app hits the App Store.

Regardless of where you are at in the development process of your app you need to spend some time looking at how you want to market your iPhone app. The days of “hoping for the best” when selling your iPhone app are gone. Your marketing efforts should work in lockstep with your development efforts. Your sales results will improve through marketing and you just might come back to write another app, perhaps a best-selling blockbuster app!

Author: Jeff Hughes
Creator and Instructor of “Intro to Marketing iPhone Apps” available at http://www.xcelme.com

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MajicRank is an application that lets users check the position of one or multiple apps in the top 100 lists in all regional app stores. You can specify both the Top 100 overall and up to three categories for the app to check. MajicRank can be set to either the check just the big 8 countries or all available app store countries. You can modify this in the application preferences.

Even though most people will use this app to just track their applications, it makes a great tool to keep track of competing applications as well. You can put in as many application IDs as you wish, use this to track both your applications and applications you want to keep an eye on.

This update adds a new major feature that will be very useful over time. The ability to track the history of the apps specified over time. Once you have a few days available, you can switch the app display to graph from table to see the history graph (example above). There are a couple caveats to this history graph feature though. For the history graph to be complete you must run this application at least once per day to allow it to grab the needed data. Also, when you first launch and configure the app there will be no historical data available for the applications you specify. This will only come with multiple days of running MajicRank.

Here’s a list of the features that this version, 1.3 adds:

• Adds historical graphs
• Stores all archives by AppID
• Reduces file size of stored archives
• Allows entering AppID with search preference over name
• Auto detects and fills in app ID when app name is entered
• Allows re-ordering of apps list
• Fixed a bug where deleting an app while editing it’s title caused a hang
• About box allows resizing, should now be viewable on low-res displays
• Adds latest date run to status text when update is complete

The application, which is available for download here (Mac OS X only) has already proven to be very useful to developers. This version makes it even more so. More details on the app are available on the MajicRank page.

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It’s an interesting move. Chopper has been around for a while, it was first released in late August, 2008. Chopper has also spent quite a bit of time in the top 100 lists. It peaked at number 2 in all paid apps in the US, and spent 9 days as the number 2 paid game during the Christmas/New Year time frame. A great time to be on the top lists with all of the new devices and people with gift cards to spend.

But, that was months ago. Sales, while never disappearing, had started to fall from their peak. So David decided to release a free demo version, Chopper Lite. A smart move if the example of some other games are any example. iShoot rode to number one on the games and all paid apps lists in the US, many believe, due to it’s demo version. Similarly, Fast Lane Racing also saw a boost in sales once they released a free version of their app.

So, with that, releasing a demo version seems to make sense. It requires a minimal investment. You do risk the chance of diluting the sales of your app. But if a demo version of the app is done properly, it’s a kind of taste for the app and just increases the interest of the customer for the paid version. Deciding how much to put in your demo version is a tough topic, and one we’ll have to discuss at another time.

The graph below shows a month of sales for both versions of Chopper starting out on the date the free version, Chopper Lite (yellow line) was released. At the time of release, you can see that the paid version of Chopper (blue line) was selling around 300 copies / day and increased to a peak of just over 800/day during this month. The scale on the left is the download count of the free version.

The graph shows that the release of the demo version had an immediate impact on the paid version, easily doubling sales in less than a week. The interesting thing is the direct correlation of the free version downloads to the paid version download. When one does better, so does the other. The spikes, mainly come on weekends.

Also notice how the paid version sales slowly come down after a peak in the free version downloads. “Whenever I download a lite version it usually takes weeks before I then buy the full version. I’d say that is exactly what is going on here, the lite version is having a more long term effect, despite having peaked in downloads some time ago.”, theorized David on this trend. A theory that seems sound. It could also have to do with how long it takes a user to complete everything they have available to them in the demo version. Once they are done with the demo they will decide if they want to just replay the demo, delete it, or hopefully, purchase the full version.

David also notes that Chopper and Chopper Lite have been far more popular in Germany than any other country. Some days sales of Chopper in Germany have outnumbered the sales in the US.

This, of course, is just an example. Releasing a demo version will not work for everyone but shows that having a demo version can be beneficial. In this specific case, David released a demo version at just the right time. Both for the sales level of his game, and for the market at the time. Thanks, David, for sharing this info.

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