I consider myself incredibly fortunate to have a great network of infinitely smarter friends. One of those, Deb Hall, founder of Toronto-based web2mobile, an all-round mobile maestro and whip-smart marketer.
We recently got talking about mobile apps. The post below is directly influenced by her insight.
It seems like each week I see another article on the rags-2-riches story of Rovio, the Angry Birds developers. In equal doses, I read alarming figures about the rise of the “download and delete” generation of mobile and tablet apps.
Most brand marketers start this process by musing two questions.
“What’s the optimal way I can distribute this?”
“What can I charge for this application?”
The former question is relatively simple because the channels of distribution aren’t infinite.
The latter question is definitely more knotty. Here’s why. It’s not just a case of what you’re going to charge – more important to ask IMHO “why the heck am I building an app in the 1st place?”
Let’s establish some context, shall we?
Application sticker shock
I think there remains an ignorance in many companies have about what it actually costs to build, and sustain, an app. Applications are still a relatively new phenomenon and there remains a palpable sense of “sticker shock” when you present that first estimate for an app. In fairness most brand marketers have a mental yardstick when you tell them a TV commercial will cost $2,000,000 – that means a great spot but no Ridley Scott, Jessica Alba or James Cameron “Avatar” stuff. A $2,000,000 website has a similar level of general understanding – limited ecommerce, pretty decent CMS, no deep KM or CRM integration and so on.
In App-land if you present a $2,000,000 application development cost the first reaction is typically “WTF, I only wanted an App”
However when you consider expectations for what the app is intended to achieve, $2,000,000 can often be a bargain.
Is your application intended to support a tactical short-term marketing initiative or do you anticipate it will be live – and relevant – for longer? Do you know?
The former has a narrower production expectation, lower requirements for a roadmap of new releases and features, lower requirements for content refreshes. Lower overall budget perhaps. But you are going to have to consider a migration plan for all those customers who have downloaded the app. If you’ve got loyal fans, what’s your plan to manage their expectations? When do you retire the app and stop supporting it? Even the simplest app deployment warrants these questions.
The latter is a significantly larger undertaking. Keeping an application relevant (ie being used) over the long haul requires detailed planning and an expectation of investment to support it. Questions like “What’s the content roadmap?”, “What level of maintenance should I devote to this?”, “What’s my plan for loyalists and leveraging their love for this product?”, “Will I need to continue advertising this app or will it reach a momentum of its own?” Thanks to my daughters, I currently have four different versions of Angry Birds on my phone. Do you have a similar roadmap thought through?
Again, without understanding how long you actually want the application to remain live for, there is no way you can begin to benchmark your total investment. In my experience you’d be surprised how many companies launch applications with a “let’s just see how it goes first” mentality. That is a huge mistake.
Cost-neutral or Revenue-positive?
After the sticker shock has worn off, the real question becomes do you want this application to be cost-neutral or revenue-positive. In the former, you’re merely trying to minimize or totally off-set your CAPEX and OPEX for the application. The latter is about making a buck or two. For certain categories, like Games and Media, applications are a crucial revenue stream so finding out the appropriate price point for an app is critical.
Ultimately revenue-positive or cost-neutral is only about trying to ascertain how many application downloads you need to hit to break-even. Again, have you worked out which one of these camps is your app going to fit in? Is that perspective shared by your boss?
Now, who are you going to charge for this little app! That’s where it gets really interesting folks.
In part 2 I’ll be discussing fun topics like value exchange and revenue models. Do come back for that.