How to use pricing research to price your app effectively

Let’s talk about pricing and spoiler alert: you’ll probably not want to hear this. But I promise, you need to hear it. Too often, prices are set for subscription apps based on what the founder feels they should charge, or worse, what competitors charge – and usually, it’s based on the most expensive competitor. 

Here’s the thing: those competitors have no idea what to charge either. They probably looked at other competitors to get their pricing, making it a case of the blind leading the blind. Not only that, but no app is identical, so their pricing shouldn’t be either.

A more structured but still flawed approach involves examining costs, both fixed and variable, to determine what price point would allow you to become profitable for a certain number of customers.

It’s data-driven, which is a plus, but the issue is that it focuses on the wrong thing: what you think and need rather than what your customers are willing to pay, which is the value they perceive you to bring. The truth is your customers don’t care if your app is expensive to build and manage, if it’s not delivering value they don’t want to pay for it.

Now, in an ideal situation, you’d go full data-driven and just run pricing experiments until you find the perfect sweet spot that balances conversion rate, retention, and profitability, but unfortunately, that’s just not realistic. 

I’m not saying that you shouldn’t run pricing experiments; instead, you need to be very conscious of each experiment you run. Too often, testing too much around pricing can lead to negative feedback and inconsistencies for your customers making it hard to rely on tests alone to find your sweet spot in terms of price.

Given my love for customer research, from user interviews to surveys, you won’t be surprised to hear my proposed solution: do pricing research. While not 100% reliable, it’ll get you closer to understanding your customer’s perception than just setting and forgetting when it comes to prices. From there you can then A/B test the change to understand the impact on growth further.

One of the most popular pricing research tools is the Van Westendorp Pricing Model, which is the one we will focus on the most. But I’m not biased; I know it’s not suitable for all cases. So, I’ll cover two other great pricing research techniques I’ve used before: Conjoint Analysis and the Gabor-Granger Pricing Method. 

All three methods try to manage the potential challenge of pricing research, namely that people find it hard to say what they would pay and often indicate a higher amount than the reality. They do this by ensuring there are multiple questions or working with options rather than the straight-to-the-point question, “How much would you pay for this?”. Before we dive into the research techniques, let’s first do some general preparation: 1. Knowing if pricing research would be valuable for you and 2. Thinking about who and what to ask with the pricing research.

Which subscription apps can use pricing research?

The majority of subscription apps, existing and new, can benefit from this type of research. The exception is apps that rely heavily on branding to drive value. 

High-end apps take time and exposure to communicate their value. For example, the value of Masterclass, online classes, takes time to come across as they have a wide range of experts onboard, and their unique courses add value. But imagine trying to capture all of that in just a few sentences. 

You’ll also notice this hurdle with their ads, as some of their Meta ads are well above the usual 20-30 seconds and reach up to 90 seconds instead. They are proof that sometimes you need to break the rules.

Even if you don’t have a high-end app, it can feel a bit scary, especially for stakeholders, to conduct this type of research because what happens if the resulting price is lower than you hoped? What if you discover a price that isn’t a price point at which you can be profitable?

These are possibilities, I won’t deny it. All you can do is ensure that you have a plan for after the research is conducted. You need to ensure it is clear internally that a lower price doesn’t mean you’d change too much. It may simply mean that the perceived value is lower, or there is a certain gap in perception that branding needs to deliver. You’d first work on increasing the perceived value of your brand before you consider dropping your price, so don’t stress just yet.

Who and what do you ask with pricing research?

All three techniques are surveys and start with finding a relevant pool of people to ask. It could be potential customers or strangers to your brand, the choice is yours, just ensure they’re your target demographic. 

I tend to prefer non-customers with an app as they won’t know your app and or be biased by what you charge now. If you are working on a new additional app or a different subscription type, then you could definitely ask your existing customers.

I’d recommend getting at least 100 responses if you’re looking for directional guidance, but ideally, 300+ when making a major pricing decision. 

You also should add a few extra questions to your survey to gauge more context. Maybe a bit of an obvious one, but grouping together iOS and Android is going to give you useless insights. Your conclusion will likely be that you’re too expensive for Android and too cheap for iOS, meaning you are missing out on revenue in both cases. 

So definitely ensure you ask what operating system they use and any other useful context that might impact their spending. A great question is after you’ve presented it is what they would use the app for—through the lens of Jobs To Be Done (JTBD). This may also help to guide you in terms of which JTBD are more willing to spend. 

If you are speaking to non-customers, you may want a JTBD question upfront to filter down respondents on relevancy. How you phrase this will depend on the JTBD your app focuses on. For example, a financial planning app might ask the following to understand who would meet their audience best:

Which of the following best describes how you currently manage your personal finances?

1. I actively budget and track my expenses using an app or spreadsheet
2. I try to budget but find it difficult to stick with a system
3. I keep an eye on my income and spending but don’t follow a set budget
4. I don’t currently manage my finances in a structured way

Those that respond with the first answer and potentially the second are the ones they’d want to conduct the pricing research with as those are the ones most likely to see value in a financial planning app.

Here are some more questions I like to throw into the mix that are helpful in understanding the users context and segmenting the audience further:

• Have you paid for a similar app before? This helps you to gauge their pricing expectations and how realistic they might be. It also shows whether they’d put their money where their mouth is
• Which of these apps have you used and paid for before? This can be helpful to see what is influencing their perspective and how much they’ve spent in the past on competitors.
• What solution(s) are you currently using to solve this problem? This not only hones in on their JTBD, but shows your real competition, and it’s usually not what you expect it to be so can be a great alternative question to the above.
• Where are you based? You’d be shocked at how much pricing expectations differ per country, or even region. You can’t dictate your price per geographical location, but you can take this into consideration. But use a dropdown option for this to avoid a mess of answers.

With all techniques, if you can get a big enough sample size, then understanding the different preferences for different prices is invaluable. Now, let’s move on to my favourite pricing research technique.

The Van Westendorp Pricing Model

With the Van Westendorp Pricing Model, you ask four different questions to find a range of prices based on what people are willing to pay. 

The benefit is that it provokes people to think a bit more about their answers. It’s not a case of just handing over a single figure but a range of acceptable price points to get you started. Done right, this method produces a clear pricing graph:

How the Van Westendorp Pricing Model works

You explain your app briefly; this is really your 30-second elevator pitch. It should contain what your app helps your customers do and also the clear benefits of using it. Including a visual of your app can provide more context and help branding weigh in on price.

You then ask the following questions:

• Too Cheap: At what price would it be so low that you start to question this product’s quality?
• Not a Bargain: At what price would you think this product is starting to be a bargain?
• Not Expensive: At what price would this product begin to seem expensive?
• Too expensive: At what price would this product be too expensive?

This gives you a table of results:

	Participant	Operating System	Relevant Context	Too Cheap	Not a Bargain	Not Expensive	Too Expensive
1	John Doe	iOS	Use case 1	$40	$60	$100	$120
2	Jane Doe	Android	Use case 2	$20	$35	$45	$55
3

This is translated into a graph by plotting the cumulative percentage of respondents that answered each price point. For example, the lowest price is 100% for the too cheap curve because all would pay that. This results in four curves:

• Too Cheap Curve: Percentage of people who think the price is too cheap or lower
• Not a Bargain Curve: Percentage of people who think the price is a bargain or lower
• Not Expensive Curve: Percentage of people who think the price is expensive or higher
• Too Expensive Curve: Percentage of people who think the price is too expensive or higher

You should end up with four places where the graph intersects, which allows you to identify the following:

• Optimal Price Point (OPP): This is where the “Too Expensive” and “Too Cheap” curves intersect. This is the price where you maximize the appeal of your app without hurting the perceived value
• Indifference Price Point (IPP): Where the “Not Expensive” and “Not a Bargain” lines cross. This is where roughly equal numbers of people see your pricing as fair vs. too high
• Point of Marginal Cheapness (PMC): Where “Too Cheap” and “Not a Bargain” intersect, this is the lowest price you can charge where people will still perceive value 
• Range of Acceptable: The range between “Too Cheap” and “Too Expensive.” If your price is between here, your customers likely won’t be put off by it

While the OPP gives you a recommended price, you can actually use the full diamond to balance profitability and demand. You can also use this range as a starting point for a technique we will cover later, the Gabor-Granger pricing method.

If you are disappointed in your OPP (like if it’s lower than where it needs to be), consider what we discussed previously. It may reflect that you need to get better at communicating value, or part of that value needs to be made up in terms of brand.

Tips for using the Van Westendorp Pricing Model

I’ve used the Van Westendorp Pricing Model a lot, and here are a few lessons I’ve picked up along the way:

1. Incorrect answers will mess up the diagram

Firstly, that beautiful diamond formed by the four price points won’t work unless you restrict what people can fill in. If they can fill in a lower price for too expensive vs too cheap, it will mess up the diamond. The first way to solve this is to set certain conditions in your survey tool that prevent this. The second option is to filter out these responses retrospectively with the assumption that they weren’t really paying attention to what they were answering, making the responses less valid.

2. Be conscious of anchoring people with a slider

Often, the survey is given with a scale like the following:

Doing this does make it easier for people to respond, but it can cause an anchoring effect in terms of price, depending on the range you use. So be very conscious of what you use, e.g. not going too low or high with the range. If you are worried about this, I recommend opting for an open text box instead. 

Pros and cons of the Van Westendorp Pricing Model

The model is great in that it’s very simple to implement and captures a range of prices rather than a singular one. In my opinion, this makes it more accurate. It’s a great way to understand the perception of price.

However, there are a few downsides to it that you should keep in mind. First, it offers limited context, which is a challenge for all models. Secondly, it is highly subjective and based on individual perceptions rather than actual purchasing behavior. People don’t act rationally, and what they say they would pay versus what they actually will pay may vary. 

Finally, it only asks about one option, e.g., an annual or monthly subscription, making it very long when asking about multiple pricing packaging. For this, an alternative model might be better suited.

Conjoint Analysis

Let’s put the Van Westendorp Pricing Model to the side for a moment and consider another option. Conjoint Analysis breaks down a product or service into smaller attributes (e.g., features, price, billing frequency) to understand how consumers prioritize different product attributes when making buying decisions. It can also help identify the attractiveness of certain packages and who would select each one. 

For example, Mimo, a coding school app, could use it to get feedback on their pricing structure: 

This is great for apps with tiers rather than fixed monthly or annual prices. It manages to mimic purchase decisions better. It also helps businesses prioritize features, optimize pricing, and tailor marketing to consumer preferences. 

To give you a better idea of how to set it up if you don’t have a pricing block, you could present it like this:

You work out 3-4 packages to present with their price and the key features they include.

Pros and cons of Conjoint Analysis

I find the Conjoint Analysis to be a bit more of a realistic simulation than the Van Westendorp method. It adds the value of understanding the relative importance of different product attributes and how consumers may trade-off between them. It also allows you to segment your market based on preferences, allowing for targeted offers.

However, it is a bit more complex to create and run than the Van Westendorp method, as you need to be very intentional about the packages you present. Too many packages or options can lead to suboptimal selection. I recommend no more than four. 

It also assumes you know approximately the right price, so it isn’t great for initial pricing research. Just like the Van Westendorp, it may not capture other factors influencing purchase decisions, such as brand perception, external influences, or situational factors.

The Gabor-Granger Pricing Method

I wanted to share one alternative method that focuses more on the price elasticity of demand. Price elasticity is a measure of the change in demand for a product in relation to the change in its price.

High price elasticity means running discounts and offers will be more effective but makes increasing prices more challenging, while low elasticity allows for the opposite.

This is great for gauging how price-sensitive your audience is in general, helping you understand whether or not running discounts or offers will be impactful and whether increasing prices will impact demand. 

Here’s how the Gabor-Granger pricing technique works:

1. Select a range of price points to test
2. Present the product in a survey
3. Ask respondents if they would purchase the product at each price point
4. Analyze the data to determine the price point at which the highest percentage of respondents would purchase the product 
5. The price point with the highest percentage of respondents willing to purchase represents the optimal price or the price with the highest demand elasticity

The end graph will look something like the following, with apps with high elasticity having a higher drop-off:

There is also a variation of this called Price Laddering. This can be a great follow-up to the Van Westendorp model. You take that optimal price point and ask if they will pay that. If they say no, you present a lower price and repeat the question. If they say yes, you present a higher price point. You continue until you hit the highest price (on either end) they are willing to pay.

Pros and cons of the Gabor-Granger Pricing Method

The Gabor-Granger Pricing Method is very simple and offers quick results. It requires a minimal resource and time investment. It’s particularly useful for new apps where historical sales data is unavailable, or you struggle to find similar competitors to get an indication of what people are willing to pay.

However, as with all techniques, it relies on respondents’ stated intentions rather than actual purchasing behavior. It’s also arguably too simple. While an economics professor would be proud of us for looking at price elasticity, the reality is that it assumes a linear relationship between price and demand. Again, it may not capture the full complexity of the market, ignoring competitive pricing strategies, consumer preferences, or changes in market conditions.

Using pricing research 

We can’t endlessly test around prices, and when setting up new prices, whether for a new app or a new package, it’s valuable to have a stronger starting point than just a review of competitors and basing it on costs. Pricing research will help you learn what drives value, how to communicate that value, and understand the price associated with that value. I still always recommend experimenting afterward. Your initial price is not the finish line by any means.

We’ve focused mainly on the Van Westendorp Pricing Model, but the other two are valuable techniques worth considering as well. Here’s a guide on when to best use which one:

Pricing Method	How It Works	Best Use Case
Van Westendorp Pricing Model	Asks four key questions to determine a price range based on perceived value: too cheap, bargain, expensive, and too expensive. Creates a price range based on customer perception.	Best for understanding price perception and acceptable price ranges for an app. Ideal for early-stage pricing or repositioning an existing app.
Conjoint Analysis	Breaks down a product into attributes (e.g., price, features, billing frequency) and asks respondents to choose between different packages to understand how they prioritize attributes.	Best for apps with multiple pricing tiers or feature-based plans. It helps determine which combinations of features and pricing maximize appeal.
Gabor-Granger Pricing Method	Tests a range of price points by asking users if they would purchase at each level to determine demand elasticity and optimal price.	Best for understanding price sensitivity and price elasticity. Useful for gauging the impact of price increases or discounts.

Finding the right price for your subscription app isn’t just about covering costs – it’s about understanding what users are willing to pay. The Van Westendorp Pricing Model is a powerful tool for gauging customer perceptions of value and optimizing pricing strategy. But it’s not the only option out there, as conjoint analysis or the Gabor-Granger Pricing Method can also offer insights into your pricing model. Sometimes, the best option is a combination of two methods. Find the right fit for your brand, and please, don’t just whip a price out of thin air.