Pricing Mini Case: Mobile App Pricing Strategy Imagine you are the CMO (Chief Marketing Officer) for Poochie Pal Selfies, a mobile app for Android phones. Poochie Pal Selfies is a little like Instagram, but it is designed solely for the use of sharing adorable photos of pets (dogs, cats, boa constrictors, etc.). You have not yet decided how to price this mobile app, but you did hire a marketing research company to evaluate four different pricing strategies and have them present to you a conservative, most likely, and optimistic forecast for each of the pricing strategies. The marketing research company based its reported numbers based on forecasts for the first year of Poochie Pal Selfies.

Summary of pricing strategies:

1. The first strategy is to strictly give away the app for free. Money will be made by serving mobile ads to users.

2. The second strategy is to use a "freemium" model. The app will be given away for free (without ads), but useability will be somewhat restricted in the free version. Users are allowed to unlock various features by paying money.

3. The third strategy is to simply charge $0.99 for a completely unlocked ad-free version of the app.

4. The fourth strategy is to charge $3.99 for the unlocked, ad-free app. While the fourth strategy would make more revenue per person, fewer people would be willing to pay $3.99. Although many other pricing strategies could be considered, the CEO has already decided that only these four strategies will be considered.

The spreadsheet included has the information the marketing research company provided you for each of the four pricing strategies. For the first strategy, the estimated number of users, the number of ads you will be able to serve to each user, and the likely price per thousand mobile banner ad impressions is given for a conservative, most likely, and optimistic scenario. The second strategy includes both the total number of users as well as the number of user who will by upgraded features. Strategies three and four estimate the total number of app purchasers.

_____

If you knew the CEO is extremely conservative, what would be your recommendation?

_____ with the maximum total revenue of $___. (Round to the nearest dollar.)

Most Likely Optimistic Strategy 1: FREE (mobile ads served) Conservative Mobile Ad Estimated RPM (revenue per thousand ads $0.36 shown) Mobile Ads served per user per year Number of users 4,000 $0.90 $1.62 50 100 20,000 160 88,346 Strategy 2: FREEMIUM Conservative 6,000 Most Likely 20,000 Optimistic 65,638 3,938 120 800 Total number of users Number of users who upgrade Avg. Revenue per upgrading user $0.35 $1.00 $4.00 Strategy 3: PAID ($0.99 pricing) Conservative Total number of users 750 Price $0.99 Most Likely 5,000 $0.99 Optimistic 29,906 $0.99 Strategy 4: PAID ($3.99 pricing) Conservative Total number of users 100 Price $3.99 Most Likely 1,000 $3.99 Optimistic 11,220 $3.99