Starting a successful app business on Shopify requires a well-thought-out strategy for pricing and billing. This blog will guide you through the strategic steps to create effective pricing plans for growth and show how Shopify's managed pricing can help simplify the process.
How pricing impacts app growth
Setting the right price for your app is crucial for driving growth, not just covering costs. Apps are a significant part of a merchant's expenses. On average, Shopify merchants need 6 public apps to be successful, with Plus merchants needing 12. Merchants are also willing to pay more for apps in categories that are vital for their business growth and efficiency, such as finance and marketing
App pricing isn't one-size-fits-all. It's influenced by supply and demand, and understanding your target market is key. Consider these questions:
- How big is the problem your app solves for merchants?
- What is the level of competition in your market?
Keep in mind that both app features and pricing influence merchants' purchasing decisions. In some instances, new developers with few reviews, low installation numbers, or still-developing features might consider pricing their apps lower to quickly attract customers and gain market traction.
Moreover, converting and retaining paid subscribers is challenging. At the start of the install funnel, about 14% of app installs are uninstalled within 24 hours. Throughout the journey, only 13% of installs eventually convert to paid customers. However, those who convert typically stay, with an average lifetime value of $300. A strong pricing strategy is key to turning more users into long-term subscribers.
What we learned from high-performing apps
Insight #1: Simple and scalable plans
High-performing apps often offer plans that scale with merchant growth. These apps start with a basic plan priced lower than the category average, making it affordable for new and smaller shops. As merchants grow, they can upgrade to more advanced plans with additional features.
Additionally, simple pricing plans tend to have higher conversion rates. About 75% of high-performing apps use only subscription-based recurring charges. Simplicity enhances user comprehension and encourages purchasing decisions.
Insight #2: Free trials
High-performing apps often offer free trials, with the average trial period being 14 days. Adjusting trial lengths based on user engagement can maximize your offer’s effectiveness.
Insight #3: Predictable pricing
Apps with mixed pricing models, such as a combination of usage-based fees, add-on charges, and one-off top-ups, often receive more pricing complaints due to their complexity. Clear, upfront pricing helps maintain a positive user experience and trust.
So to rehash, a great app pricing model simplifies pricing plans and payment process, provides a consistent and enjoyable merchant experience, and supports backend logistics such as chargeback, trials, and proration. You can now set it up easily with managed app pricing.
What makes managed pricing the best option
Setting up pricing manually can be complex and time consuming. You need to configure the Billing API, create a third-party hosted pick-a-plan UI, and fill out the app listing form in the Shopify Partners dashboard. Managed pricing simplifies all of this.
With managed pricing, the app listing page becomes a no-code single source of truth. The pick-a-plan functionality works seamlessly out of the box via a Shopify-hosted URL that you can easily embed in your app.
Managed pricing provides essential business logic right out of the box, including:
- Trial days proration: Prevents infinite trial gaming.
- Upgrade/downgrade logic: Handles plan changes smoothly.
- Dev store charges: Automatically treated as test charges.
- Translated pages: Shopify-hosted pick-a-plan page is auto-translated into 8 languages (DA, DE, ES, FR, NL, PT-BR, SV, ZH-CN)
No-code discounts and trial prorations
Discounts and trial prorations are now available via the Shopify Partners dashboard. Shopify sends an email to the merchant to confirm these changes, which are applied automatically starting from the next billing cycle.
Automated test charges
With managed pricing, when a development store subscribes to a plan, Shopify creates a test subscription automatically so that your account isn't charged.
Seamless integration and compliance
The Shopify-hosted pick-a-plan page is built using Polaris and Built-fo-Shopify-approved components, increasing the likelihood of smooth app review approvals.
How to set up app pricing with managed app pricing
Managed app pricing is the default option when you start a new app. If you have an existing app, you can easily opt into managed pricing from the app listing.
For more details on how to set up managed pricing, refer to our dev documentations.
What’s next for app pricing at Shopify
Managed pricing is now the default way to set up pricing and billing for your app so we encourage you to try it out today. Apps built with managed pricing also help ensure a smoother process for app review and for Built for Shopify review.
Here’s a sneak peek at some exciting new features and improvements coming to app pricing.
- Pricing models: Introduction of usage-based plans and multi-subscription plans (recurring + usage).
- Conditional plans: Options for Plus-merchants-only plans and custom plans.
- Plan selection page improvements: Enhanced plan comparison grid and improved app cards.
To summarize, setting up the right price and billing strategy for your Shopify app is crucial for growth. By understanding market demands, offering scalable plans, and leveraging Shopify's managed pricing, you can create a seamless and effective pricing strategy.
