It’s widely assumed that lowering price can increase sales. In theory the lower the price, the larger the increase in sales. This can indeed offset the difference in price and possibly even increase bottom-line revenue. What happens when you raise the price instead?

In the case of reMovem, not much. This app has never been featured but maintains a top-100 ranking in the Puzzle and Strategy categories for much of the last two years. There’s a significant upsell through the immensely popular free version, and any app that can snag a spot in the top 100 of any chart will attract a certain amount of traction. Reason? There are four “pages” of 25 apps that a user can see when perusing the App Store on an iPhone. This is the poor man’s feature, but it comes at a cost.

If your app is not one of the perennial favorites or currently featured somewhere by Apple you will need a low price just to crack a top 100 ranking. At $0.99 reMovem was very consistently in the 25-40 range for both Puzzle and Strategy (figure 1).

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reMovem seemed stuck at around #25, and there was no more leeway with the price, other than going free. We tried http://freeappaday.com/ in May and don’t want to do that again. Besides, with the regular free version, and a free Halloween version (and an upcoming free Christmas version), it seemed like a good time to differentiate more on price. It’s likely the price will go back down during the holiday feeding frenzy, but for now we hiked the price to $2.99. So, at 3 times the previous price, do sales fall to 1/3? Not quite (figure 2).

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Here’s where things get interesting. Though sales seem to plummet, they bounce back a bit. Although it’s too soon to say, there’s hope that the daily download will stabilize at a number above 1/3 the old number of downloads. This is great for the bottom line (revenue) which appears to be holding up nicely (figure 3).

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So in the short term, raising the price appears to boost the bottom line, at least in this instance. I think the new price is important, too. In the past we’ve juggled with a price between $0.99 and $3.99, all with different results. If you double the price you’ll see a similar drop-off to what we have illustrated here, but perhaps not much of a change in revenue. Perhaps a follow-up post will chronicle how this change pans out over the next few weeks.

Far more interesting is the effect of ranking. As you can see (figure 4) the rankings have taken a beating, but they’re still somewhere in the top 100. After falling to around 80 and stabilizing things seem to be in good shape. My fear was it would drop like a rock right off the charts. Usually we control the price to keep the app in the top 100, but it’s not entirely predictable. Also, not shown, the top grossing ranks have edged up slightly to near 50. These metrics may take more time to adjust, as they consider more than raw sales x price calculations.

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I had been fearing a spate of negative reviews over the price change, but so far only 4 and 5 star ratings continue. I heard somewhere that if nobody complains about the price you aren’t charging enough. Users that pay more for a product are more attached to that product and more likely to give it a good rating to justify their expense. A cheaper product lowers the barrier to complaints. Plus, we’ve been heavily promoting the prior “special” low price, so there are no excuses for those that waited, only regrets.

What we learned from this exercise is that:

  • raising the price can hurt sales (but not kill them)
  • raising the price enough can overcome lost sales in revenue
  • raising the price can seriously hurt rankings (but not kill them)

It’s way to early too draw serious conclusions from this experience, but we now have the wiggle room to lower the price again at a convenient time. This could be to coincide with an update, or to counteract any massive price drops elsewhere. We’ll see. It’s nice to have options.

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This post is part of iDevBlogADay, a group of indie iOS development blogs featuring two posts per day. You can keep up with iDevBlogADay through the web siteRSS feed, or Twitter.