You are currently viewing IAP Pricing Is Not a ‘Once and Done’ Proposition

IAP Pricing Is Not a ‘Once and Done’ Proposition

In 2020, revenue from the App Store and Google Play reached $111 billion. While most mobile game studios have a solid understanding that free-to-play can drive major revenue through in-app purchases, in-app pricing isn’t something you can set and forget. In order to see consistent, sustainable results, IAP pricing requires a more active approach.

In this article, we’ll look at some of the key factors that necessitate an active approach and dive into how wappier incorporates these into our global pricing solution.

Players come and go, seasons change, economies fluctuate

Establishing an effective app monetization strategy requires time and effort. Developers have to weigh the pros and cons of paid app downloads, in-app advertising, and in-app purchases, and then settle on a detailed strategy for each option they choose to include. In-app purchases are the most costly of the three options, but they also present the greatest revenue opportunity.

Considering the high implementation cost of IAP monetization strategies, it’s critical for developers to maximize results from the investment. Setting an accurate pricing structure is the key to that ROI equation, but accuracy in IAP pricing is not static. As long as currency markets are in perpetual flux, consumers are evolving and changing their behaviors, and tech innovations are proceeding at a rapid-fire pace, IAP pricing will need to adjust along with them.

There’s no such thing as a one-size-fits-all IAP pricing solution. However, localizing pricing needs to consider the following:

  1. Setting prices by currency rate conversion alone in the App Store and Google Play is insufficient.
  2. Adapting pricing to the demand curve requires a deep understanding of local markets.
  3. Managing prices for multiple products is operational challenge.

wappier takes IAP pricing from one and done to fully managed

The wappier Intelligent Revenue Management Platform addresses those challenges and more by driving incremental IAP revenue through fast and easy country-specific pricing powered by machine learning and proprietary formal models. The platform automatically updates all IAP pricing to find the optimal price point for the individual game or app on a per country basis. We begin by collecting data in a number of critical categories:

  • Macroeconomics: International macroeconomic trends like fluctuations in currency values and exchange rates and growing or shrinking national, state, or city GDP.
  • Microeconomics: Forces related to individual decision-making and household spending power, like mobile device prices, housing rates, and rent costs, etc.
  • Game market statistics: The status and health of the overall gaming market, including trends related to revenue and growth at the country level.
  • Device context: Overall device factors like smartphone penetration, adoption rates, Android vs. iOS device usage, etc.
  • Game context: Game details including genre, app store rating, and daily and monthly average user rates (DAU and MAU).
  • User characteristics: User-level details including ZIP Code, device operating system, brand, and model, etc.
  • User behavior: User interaction details, including DAU and MAU rates, average revenue per user and per paying user, and number of transactions, payers, and whales.
  • Temporal elements: Time-related shifts ranging from seasonality to upcoming trends and events.

wappier aggregates and weights those variables to reflect the real-time game population as much as possible, rather than relying on the general population of the target country. This forms the basis of our proprietary wappier Index, which is used to derive the optimal initial discount for that country. The result is a price adjustment that remains geographically specific and is applied horizontally to all live SKUs in order to respect the economy of the game.

Machine learning comes into play in the next stage, where we fine-tune the initial model. wappier experiments with various discounts and relative prices until we have generated enough price change iterations to revert to formal modeling. Sometimes we even raise prices. Finally, we estimate demand for individual SKUs and determine the expected revenue to optimize IAP pricing.

Some developers think that after setting initial prices, their pricing exercise is complete and all is well. But that’s simply not the case; at wappier, determining optimal prices on a per country level is just the first step in managing pricing.

The world is dynamic, so your pricing needs to adjust along with those global macro changes, from shifts in the app ecosystem like new feature releases and user composition changes to more global forces like currency rate changes and exogenous events like the impact of Covid-19 on consumer behavior. That’s why the wappier platform provides optimized IAP pricing that is designed for today and tomorrow, no matter how global markets fluctuate. Whether your goal is to maximize revenue or maximize payers, the final stage of our methodology is recurring so that demand estimation and pricing optimization are ongoing.

Put simply, the wappier Intelligent Revenue Management Platform uses inputs like the wappier Index and game data to produce optimal pricing according to price elasticities per country. The platform applies price changes directly to the App Store and Google Play, thus eliminating the need to manually update individual SKUs, which is important when you are managing hundreds or even thousands of price SKUs.

With wappier, you get the benefits of dedicated data science and data engineering teams with a deep understanding of local data and market trends and half a decade of experience working with a broad range  of mobile games. In addition to automating price changes, the cloud-based platform provides your team with deep insights into player behavior so you can better understand what works and what doesn’t about your monetization strategy. And with no SDK integration requirements, the solution can be deployed in under a week, so you can see results in less than a month.

In-app purchases are a more rewarding monetization strategy than ever before, and their popularity shows no sign of slowing. wappier’s AI-powered pricing optimization platform helps mobile game developers maximize their revenue outside of core game play. Contact us today to find out how wappier can introduce global pricing and drive revenue for your apps.