In-app purchases (IAPs) are one of the most effective ways to monetize your app and generate revenue from your users. However, setting the right prices for your IAPs is not a trivial task. You need to consider various factors, such as user behavior, psychological price barriers, market trends, and competition. In this blog post, we will share some tips and best practices on how to optimize your in-app purchase pricing strategy to maximize your app user lifetime value (LTV).
What is App User Lifetime Value and Why is it Important?
App user lifetime value (LTV) is the total amount of revenue that a user generates for your app over their entire lifetime. It is a key metric that reflects the long-term value and profitability of your app. By increasing your app user LTV, you can:
spend your marketing and user acquisition budget more efficiently and effectively
estimate how much each user is worth to your app and optimize your pricing accordingly
segment your users based on their spending behavior and retention patterns
improve your app retention and engagement rates by offering personalized and relevant IAPs
measure the return on investment (ROI) of your app and your monetization strategy
How to Increase Your App User LTV with IAPs
IAPs are a high-cost, high-return monetization option that can drive significant revenue from your app users. However, not all users are willing to pay for IAPs, and not all IAPs are equally appealing to your users. Therefore, you need to design and implement a smart in-app purchase pricing strategy that can:
attract and convert more users to paying customers
increase the average revenue per paying user (ARPPU)
encourage repeat purchases and loyalty from your existing customers
Here are some tips on how to achieve these goals with your IAPs:
Set the Right Prices
One of the most important factors that influence your app user LTV is the price of your IAPs. You need to find the optimal price point that can balance the trade-off between the number of users who buy your IAPs and the amount of revenue that you generate from each purchase. To do this, you need to:
Conduct market research and competitive analysis to understand the demand and supply of your IAPs, as well as the price range and elasticity of your target market.
Test different price points and measure their impact on your app user LTV, conversion rate, ARPPU, and retention rate. You can use tools like wappier to automate and optimize your IAP pricing strategy using artificial intelligence and machine learning.
Adjust your prices based on the feedback and data that you collect from your users and the market. You can also use dynamic pricing techniques to offer personalized and contextual prices to different segments of your users based on their location, device, behavior, preferences, etc.
Respect Psychological Price Barriers
Another factor that affects your app user LTV is the psychological perception of your IAP prices. Users tend to have certain price thresholds or barriers that influence their purchase decisions. For example, users may be more likely to buy an IAP that costs $0.99 than one that costs $1.00, even though the difference is only one cent. To leverage these psychological price barriers, you need to:
Use charm pricing, which is the practice of ending your prices with 9 or 99, such as $0.99, $1.99, $9.99, etc. This can create the illusion of a lower price and increase the perceived value of your IAPs.
Use tiered pricing, which is the practice of offering different levels or packages of your IAPs, such as bronze, silver, gold, etc. This can create a sense of comparison and choice for your users and encourage them to buy the higher-value options.
Use anchor pricing, which is the practice of showing a higher price before showing a lower price, such as a discounted price, a limited-time offer, a bundle deal, etc. This can create a contrast effect and make your users feel that they are getting a bargain or a better deal.
Create IAPs for all Price Segments
Another factor that influences your app user LTV is the diversity and variety of your IAPs. Users have different preferences, needs, and budgets when it comes to buying IAPs. Therefore, you need to offer a range of IAPs that can cater to different segments of your users and increase your overall revenue potential. To do this, you need to:
Analyze your user data and behavior to identify and segment your users based on their spending patterns, such as whales, dolphins, minnows, etc. You can use tools like adjoe to calculate and boost your app user LTV using predictive analytics and user segmentation.
Create and customize your IAPs for each segment of your users, such as cosmetic items, gameplay bonuses, premium features, etc. You can also use tools like Branch to deep link your users to specific in-app content and offers based on their preferences and behavior.
Experiment and optimize your IAPs for each segment of your users, such as the frequency, timing, placement, design, etc. You can also use tools like Mobile Marketing Masterclass to learn and apply best practices and strategies on how to increase your in-app purchases and boost your app revenues.
Conclusion
In-app purchases are a powerful way to monetize your app and increase your app user lifetime value. However, you need to optimize your in-app purchase pricing strategy to maximize your revenue and profitability. By following the tips and best practices that we shared in this blog post, you can:
Set the right prices for your IAPs based on market research, testing, and feedback
Respect the psychological price barriers of your users and use charm, tiered, and anchor pricing techniques
Create IAPs for all price segments of your users and customize them based on user data and behavior
We hope that this blog post was helpful and informative for you. If you have any questions or comments, please feel free to share them with us. Thank you for reading and happy app monetizing!
Comments