The biggest problem faced by Instapaper, which is an iPhone app that enables readers to download articles, publications, or other written material available on the internet and read then later is that even after reducing the price needed to upgrade to a premium app version, the number of subscribers did not increase. On the other hand, only the number of version subscribers increased. This posed a challenge to the developers of the app. Freemium is the pricing strategy that was adopted by Instapaper application. Users were allowed to use the application for free but with limited features and were required to upgrade to a premium version of the same at a fee to enjoy additional features. The pricing strategy used for the app was aimed at maximizing profits, enabling the founder of the app to reach his market share and revenue objective, and match the price that users will pay for the premium version of the app. After the introduction of the product in iPhone app store in 2008, a user was supposed to pay $9.99 to upgrade to a premium version. The company decided to lower down the charges to $ 4.99 for an upgrade. However, this step did not increase the number of users who upgraded to a premium version as it did to the number of free app users. The number of free users tripled the number of those using premium versions. Recently, the Instapaper free was removed from the App Store due to higher opportunity costs as many users settled for free app versions, increased support costs, as well as a poorer image of the app as a result of the free version (Lazaro, 2011). These were the price transparency effects.
There is a difference when it comes to fixed pricing and dynamic pricing. The difference can be evidenced from the definition of the two pricing concepts as well as their advantages and disadvantages. A fixed pricing strategy can be defined as a price point which is established by a firm for its product or a service for an extended time. On the other hand, dynamic pricing means that the price of a charged by a company for its product or service changes over time (Kokemuller, 2016). Fixed pricing is used by companies to attract more buyers as it offers them assurance. Clients have a guarantee that the cost paid for a product or service offered will remain the same for a long time (Kokemuller, 2016). The pricing strategy is also consistent. Therefore, clients are used to the level of pricing employed by the company, and there are fewer chances that they will be offended by the often change of prices. Fixed pricing strategy eases the process of undertaking future predictions and making profit estimates. Consumers of the company products have to pay the established price regardless of the shifts experienced in costs and time. Lastly, a fixed pricing strategy does not permit adjustments over a short period to sell off additional inventories. On the contrary, dynamic pricing is price discriminatory because it allows maximization of profits with every clientele that purchases a product or pays for a service. The strategy is mostly used during event promotions. That is if the initial demand of the product is very low, managers will work towards selling off the products to generate whatever amount of revenue is possible. Dynamic pricing offers firms on the opportunity of adjusting prices for goods and service projects by cost and time involved or shifting demand. Lastly, dynamic pricing can lead to alienation of customers (Kokemuller, 2016). In case clients realize that they paid a higher price than others had paid for the same product, they demand a refund or even spread negative messages of the same in the market.
Both Instapaper and Angry Birds are apps that can be downloaded from the app store. The two apps use freemium as a pricing strategy. Users are allowed to enjoy the apps for free. However, these free versions have limited features requires the user to upgrade to lite or full versions to enjoy more features of the product. Every upgraded for any of the two apps is done at a free. Angry Birds Lite is the demo version of the application. It has only twelve levels of poached eggs. The demo version was taken off the app store and replaced with Angry Birds’ free app. Instapaper free app features included third-party API integration, access to support, save content from various apps like Digg, Facebook, and Twitter. Users were able to create folders that enabled them to organize their articles for easy viewing. Lastly, users were able to save as many videos, articles, as well as other pages. The full versions also known as the premium versions come with more features compared to the lite or free versions. For instance, in Angry Birds’ application, the birds come with unique powers that a player can use to destroy the defenses of greedy pigs. Also, Instapaper full version comes with additional features (Tennikoff, 2011). The user can make extensive notes and ad-free Instapaper website among other features. Full versions are better than free versions, and when a price for upgrading is reduced, it is expected that more users will turn to using full versions compared to those using the free version.
References
Kokemuller, N. (2016). The Advantages and Disadvantages of Fixed Pricing and Dynamic Pricing. Yourbusiness.azcentral.com. Retrieved 2 May 2016, from http://yourbusiness.azcentral.com/advantages-disadvantages-fixed-pricing-dynamic-pricing-13188.html
Lazaro, A. (2011). Instapaper Case Study: The Costs of Freemium Pricing. The Pricing Journal. Retrieved 2 May 2016, from https://thepricingjournal.wordpress.com/2011/05/04/instapaper-case-study-the-costs-of-freemium-pricing/
Tennikoff, A. (2011). Where is the lite version of Instapaper in the iTunes store now? Has it been pulled out? If yes, why? Retrieved 2 May 2016, from https://www.quora.com/Where-is-the-lite-version-of-Instapaper-in-the-iTunes-store-now-Has-it-been-pulled-out-If-yes-why
