App store analytics company, Distimo, released a new publication today discussing the effects that app price changes have on iOS download volumes and revenue. The study, which focused specifically on app price drops, found that the effect of an app price drop is more intensive in the iPhone App Store than it is in the iPad App Store, though both stores benefit in number of downloads and short and long-term revenue growth with price drops.

The study shows that, on average, cumulative downloads grow by 1665% five days after the price drop in the iPhone App Store, while the growth is 871% in the iPad App Store. Price drops also positively affect revenue in both stores, with revenue in the iPhone App Store increasing by 95% three days after a price drop and revenue in the iPad App Store growing by 51% as a result of a price drop.

The majority of app price changes are typically within a $1.00 to $3.00 range, though the iPad App Store generates the largest price drops, with twenty percent of all its price events involving a change larger than $4.00.

Distimo reports that lower app price specials generate lower price elasticity on revenue in the iPhone App Store but still positively affect revenue in the iPad App Store. A 1% drop in the iPhone App Store leads to a 12% revenue increase within five days while a 1% price drop causes a 0.7% increase in revenue in the iPad App Store.

The study theorizes that price drops positively effect revenue in the long run for both Apple App Stores for multiple reasons.

On one hand, developers put their apps on sale to achieve higher rank, attracting more attention and generating more revenue over time because of this attention. And, the surge in downloads makes up for the loss in app price.

In another theory, consumers would be eager to pay higher prices for popular applications, which would provide developers with an incentive to raise prices as their applications gain attention and become more popular.

According to Distimo’s report, the top 10 applications that benefit from price drops were mostly in the games category in the iPhone App Store, while the iPad App Store showed more variety, with some of the top apps benefiting from price drops including educational apps for kids, for example.

The following screen shots come from the Distimo study and display the specifics on the Top 1o apps benefiting the most from price drops in the iPhone and iPad Apple App Stores.

iPhone:

iPad:

This study focused mostly on the iOS App Store, as Distimo views it as more powerful than Google Play.

Distimo notes that all data included in its publication covers the Apple App Stores for iPhone and  iPad during December 2012 in the 10 largest countries: Australia, Canada, France, Germany, Italy, Japan, Korea, Russia, United Kingdom and United States.  The company’s analysis is only based on applications that have reached the top 400 Overall and had at least one price change in December. Because these Top applications have reached some degree of popularity, this analysis could have a bias towards higher growth figures.

 

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