I quit my job. I have enough saved to last me 1 year. I have 365 days to find out how to earn a living. This is Day 41.
On Day 25, I finally found success with my app Iron HUD by giving it away for free and charging for In App Purchases. Now that it's starting to make me money, it's time to see if we can squeeze more profits from this "cash cow".
By the way, if you are short on time, or like to watch instead of read, check out the video below.
Day 41 Video
After a few days of the app being updated, reviews on the App Store started to pour in. Most of them were good stuff, a few bad apples here and there, but the gems were the few people who were loving it, but wishing it had some other features.
These are gold! Because I already know that there is at least one customer who would happily pay for this feature if I do happen to build it.
So that's what I did. I added two new In App Purchases which brings the total to four for Iron HUD. And people loved it! I got a huge spike in sales for the first few days, but then it started tapering back down. And then a few days after that something unexpected happened...
I was starting to get even lower sales than I had when I just had two IAP. What the hell?! So I dug into my analytics and discovered what was going on. The huge spike in the beginning mostly came from past users who already purchased the first two IAP. When the two new IAP's came out, they gladly spent 2 extra bucks to complete their set.
But most of the new users downloading the app, used the free features, browsed the four IAP, and never bought a single one. The problem was the Paradox of Choice. When I had only two options for upgrades, the choice was a lot simpler. Now that there are four, it made things a lot more difficult. "Which one should I choose?", "What if I don't pick the right one?" They debated with themselves and ended up not getting anything instead of just selecting an easy option.
So what can I do about this? Well... I could make the two new features free and go back to only having two options, at least my sales would go back up to normal. But I think there is a better way.
I've been doing some research about this and came across two interesting topics. One was this idea of Price Bundling. Price Bundling is a way of packaging two or more of your products or services into a single package with a single price, usually at a cheaper price.
The second topic was about Price Anchoring. Price Anchoring is a way to create a higher perceived value of something based on the price of something else. So for example when you go to the movie theater and see 3 different sizes of popcorn, small, medium, and large, with a price of $6.00, $6.25, and $6.75 respectively. The small popcorn valued at $6.00 is the price anchor because it raises the perceived value of the other two.
"I can just pay an extra 75 cents to get the largest bag of popcorn", is something you might think instead of thinking "Should I pay $6.75 for a large bag of popcorn?"
Armed with these two ideas, I think if I bundle up all four IAPs and offer that as a separate IAP at a lower cost, I can achieve both Price Bundling and Price Anchoring at the same time.
So for example, offering all three IAP features as a separate IAP for only $3. ( Savings of $1 to the user ). Not only does it make it easier to make a single choice/decision for the user, but each separate IAP acts as a Price Anchor for the bundle.
This is what I have coming out soon, and I'll be running this experiment to see how it combats with the Paradox of Choice.
I'll let you guys know!