After Realmac Software had released Clear for iOS 7 as a new paid app, the outcry from existing users quickly made them change their mind about the pricing model. Now they are offering the iOS 7 upgrade for free to existing Clear users on the iPhone, while only charging for the new universal app. This in turn caused other developers to complain about Realmac Software for giving in and participating in the downward price spiral.
David Smith weighed in with an interesting perspective by interviewing his wife on this issue. The bottom line is – as Marco Arment confirms – that most users will look for a free alternative when presented with a paid upgrade.
Of course this phenomenon is not specific to upgrades, but also affects first time purchases. If there is a good enough free alternative, most users will stick with it.
One thing we can do with all this is to complain. Complain about the App Store, complain about the customers using the App Store, complain about Apple not providing upgrade pricing or free trials, complain about fellow developers pushing prices down.
Another approach – and I would argue a more insightful one – is to learn about the nature of the market we're working in. And not only about the market as an abstract whole, but about the value of our products specifically. The economic reality is that most apps offer next to no value to people. They might say otherwise when asked about, but their actions speak pretty clearly: A cup of coffee is worth more than almost every app on the store.
That's a hard pill to swallow, but we should let it sink in. We pour all our creativity, time, and passion into creating basically worthless products.
We can try to find niches or adopt new pricing models that give our products at least the value of a cup of coffee, or even a sandwich if we're lucky. Enough to sustain our business for the time being.
But we should be aware of the fact that we're in the business of creating products which offer very little value to people. It's our choice if that's what we want to pursue.