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App Development
8 minutes read

How is App Pricing Determined?

by Robert Kazmi
App Development
8 minutes read

Determining the price to develop an app is a very rigorous and scientific endeavor. Some important elements used to perform calculations are highly standardized. Nevertheless, it is not an exact science. The risk of using false premises or calculating specific elements erroneously is real. This is because pricing an app is as much a science as it is an art. Many subjective factors also come into play. Experience plays a major role. Luckily, it can be conceptualized into a series of steps. 

Since many entrepreneurs and enterprises want to know how to calculate the price of an app, we are sharing with you some key pointers on the subject. We hope this information can help you get an idea of how the app pricing process works. In general, the three steps involved when setting up the pricing of an app are:

  1. Scoping
  2. Risk Analysis
  3. Effort Estimation

I also recommend you check out our articles on what does it cost to develop an app and how to raise funds for your app

App Pricing General Overview

You should always keep in mind that there isn’t a magic formula to determine how much an app will cost. Hopefully one day we will be able to do this easily through the use of AI or similar technologies. However, as of today, this process requires a great deal of human interaction. As a matter of fact, I personally cannot conceive of this process, even in the future, without humans being involved.

The reason why this is so fundamental is that well-done app pricing requires multiple creative iterations, something computers are not yet experts in. Potential clients and app development companies need to discuss the scope of what the app will do. It is also important to set clear goals. Aspects like functionalities, design, and customer journey become extremely relevant. 

Design thinking is a key component of how this is done because it allows app developers to refine estimations on the go. It is important for app development companies and clients to work hand in hand to determine critical success factors. This is done through workshops, like the ones we do at Koombea. Ideation workshops allow the parties to get a better idea of the app and consequently develop a Minimum Viable Product (MVP). After all, if it were easy to develop an app completely from scratch, everyone would do it. The reality is that apps need to scale, and this needs to be taken into account at the moment of defining its development process and its price. 

Once an MVP is defined, app developers and business analysts can set clear estimations on the resources needed and subsequently define specific goals. This involves calculating the necessary man-hours. Because these are estimations, unexpected events can derail the process, usually delaying the end date and increasing costs. These risks need to be considered. A responsible app development partner, like Koombea, should let you know these risks and consider them at the moment of setting a price.

With this said, we can now move on to explore in detail the three steps to set the pricing of an app.

App Pricing Process

The app pricing process is not a straight path that app development companies follow. There is usually some rework to be done throughout the different steps. Here is our approximation to how it works:

App pricing process

1) Scoping

Scoping is all about understanding what the app will do and how it will look like. This is where the fundamentals of the app are established. Whatever is defined here will be used to calculate any further estimation. Getting it right is key to a successful app pricing process.

Ideation workshops are performed at this stage. Questions like the what, who, why, where, when and how are answered, usually through qualitative research or the team’s expertise. The most important outputs are wireframes, user stories, and epics

Wireframes are the most basic sketches of how the design of your app will look; they will eventually be updated, but as a starting point a wireframe fits the purpose. User stories and epics relate to the features that will be considered for your app while considering the user journey. These elements will help determine the app’s overall functionalities, the MVP, and how the development phase should evolve. Being strategic in this phase is all about choices and how you prioritize them. 

It is important to note that an ideation workshop is not mandatory to establish the scope, but it will help both the app development team and you to determine the steps to follow. The clearer the information you have, the better estimations you will get. In other words, if you want to have an accurate estimation, ideation is a must.

2) Risk Analysis

In this second step, the idea is to identify potential risks throughout the following phases. Errors in setting up the development of an app can result in high costs and delays. If not done properly, the risk assessment can lead to a false conclusion that everything has been considered. This is a big threat to your project. 

Make sure that you understand the importance of this stage and what it means to your app. At the end of the day, you are responsible for the vision of your product. A good development partner can always guide you, but can’t make key decisions on your behalf. Choosing the right one is crucial for your success.

When it comes to choosing the right development partner there are two common mistakes you should avoid at all costs. The first one is choosing a complacent development partner. Beware of companies who will say yes to everything you ask for. Realism is better than ‘yes-ism’. The second mistake is avoiding important discussions just to save time. Some development companies can dismiss key aspects of your app as unimportant. Things like design (UX/UI), technical configurations, or even business-related aspects like in-app purchases should not be taken lightly. A development partner has the responsibility of qualifying your project’s risks and subsequently letting you know if something is unrealistic or too risky.

Assuming risks is not necessarily a bad thing. Just consider that not all risks are the same, and some can deliver great payoffs if the right preventive actions are considered. Make sure that aspects like potential price variability, assumptions, dependencies, integrations, and the technical team involved are properly aligned to meet your needs, and most importantly, to reality. Avoid vanity metrics at all costs. 

3) Effort Estimation

This is where everything comes together. Based on the choices you’ve made, now the necessary development resources can be calculated. The most important thing to consider in this step is to establish realistic expectations on resources, particularly costs and time. To do so, it is important to consider the required developer/designer-hours. 

Other important elements should also be taken into account. Things like travel expenses or communication tools are key to the success of your app’s development, so don’t save on them. Many app development companies like Koombea are ready to work remotely. This experience is invaluable, otherwise, you run the risk of having to improvise and you surely don’t want that for your project. 

Making sure a rigorous billing process is in place will save you a lot of headaches. At Koombea we have a dedicated team of experts that calculate realistic estimations of billable hours so that chargebacks are reduced, saving you lots of time on unnecessary discussions. This increases the accuracy of budgets while guaranteeing your project a successful financial execution. 

Final Thoughts

Determining the price of your app can be quite a ride, but don’t let that discourage you. It involves hard work and a great deal of dedication, but the results speak for themselves. One of the best things you can do to make sure everything runs smoothly is to hire the right development partner. 

At Koombea we have more than 12 years of experience developing world-class apps. Our team of expert designers and developers is ready to develop that great app of yours. Through our own ideation process, we make sure that pricing estimations will be pretty accurate. That way you don’t have to worry about any unexpected costs. Contact us and book a free consultation with one of our experts. We’d be more than glad to help your project come to life.