New topic: Apple MAS, Reseller Channels, and Margins
<http://forums.realsoftware.com/viewtopic.php?t=40183> Page 1 of 1 [ 4 posts ] Previous topic | Next topic Author Message brumeister Post subject: Apple MAS, Reseller Channels, and MarginsPosted: Sun Aug 07, 2011 2:00 pm Joined: Thu Jan 04, 2007 1:00 pm Posts: 104 Location: Lego® Deathstar, Orbiting Above Scottsdale, AZ, USA Hi Folks, We see this come up multiple times when the discussion involves the Apple MAS - the concern that Apple takes 30% of your application's selling price as their margin. A long sales and marketing diatribe follows. Ignore if you're either already selling through disti channels and know the ropes or aren't interested in how the real world works ... ----------------------------- There are 4 basic types of app delivery models (sure there are sub-genres, but for now we'll focus on these 4): 1 - Free - You give it away and don't expect any compensation for your work (aside from a thank you or three). You post it on your website, and on various download sites. If users find it, they use it. There's really no "accounting" involved aside from the cost of your download site. This class of app can also be delivered through the MAS so long as it adheres to the MAS rules of engagement. 2 - Shareware/Begware - you put a price on your app, provide it for download on your site and other sites and hope that people like it enough to pay you for it. This is a difficult model to provide any direct accounting for since there is no direct correlation between the number of users and your revenues. Most people with history in this model accept a 40% payment to downloads as a very good result. More usual returns are closer to [edit] 0.5% according to the Independent Software Vendors organization. 3 - Commercial w/Direct Sales - you sell your app directly to your users through your own web presence download. This is the easiest one to provide accounting against. You sell a copy, you get paid. The only exception is any fee that you are charged by PayPal, eSellerate, your credit card processor or bank, and the cost of your web hosting. This group is where I believe the majority of the complaints about the MAS 30% fee comes from. Your delivery model does not involve a third (or fourth) party for delivery. You get to keep most of your revenue. 4 - Commercial w/Channel Sales - you sell your app through a reseller and / or distribution channel. This is where the MAS 30% becomes a very good thing. For those of us who sell through distribution and retail sales, a margin of 30% is a no-brainer. I'll describe the 4th model processes further: Simply put, in the 4th model you must pay your distributor partner (if you go that route) and reseller out of the revenue generated by your app. Therefore, a portion of the selling price of your application gets consumed from what you are paid. In the bigger world, these numbers can range around 52% if you go through distribution or 40% if you sell directly to your resellers. Your list price: $99 Distributor pays: $47 Reseller pays: $59 Customer pays: between $59 and $99 depending on the reseller's profit requirement and any "sale" event. The variations on the reseller's profit requirements can also affect the perceived value of your product. If you have set a selling price of $99 (your value for the app), but the reseller passes it through to the end user at $2 over their cost, the user perceives your product as worth $61, not $99. You can try and prevent this with a minimal allowable price (MAP) agreement with your resellers, but not all resellers will agree to this on a low dollar item. This is how Apple prevents their resellers from deeply discounting the various products and undercutting one another. Additionally, you must consider marketing and sales development funds that you pay as incentives to the resellers to actually sell your app (and there are myriad variations on these). These numbers are above and beyond the percentages that you give up to the disti and reseller as part of your normal sales operations. With numbers like that, you may wonder why anyone would utilize a distribution model. If your app is a product that sells in the 100's of copies, you wouldn't. However, if you sell a product that is sold in retail stores around the nation (or world if you;re lucky), imagine if you have to deal with communicating with potentially 1,000's of resellers. Your cost of business just went up because of the staff required to manage that many relationships. However, by selling to 2 or 3 high profile distributors, their staff handles the the reseller relationships and order fulfillment and you only need one or two people to handle the relationship with your distributors. In the MAS model, the structure is much simpler: Your list price: $99 Apple pays you: $69 Customer pays: $99 As you can see, the MAS 30% model actually translates to $24 or more in your pocket since there's only one fee involved and you don't need to play the "incentives" game. If your app sells itself, this is a great way to provide it to a huge customer base. Additionally, your value perception is maintained since you set the price that your app sells for, not the reseller. This means that you fully control your app's perceived value. It also means that a one person operation can manage the entire process. On the other hand, by not allowing the use of incentives as in the disti / reseller world the MAS can be limiting in that you will only gain special positioning in the App Store if someone on the MAS review team actually "likes" your app. There's no way to "buy" a front page slot for your app on the MAS page like you can in paying Best Buy to feature you in their email and print ads (yep, the big boys pay extra for that spot). This means that you must undertake the marketing yourself to get the word out about your app. Fortunately, a few "enterprising" folks have started providing marketing assistance designed to get the word bout your MAS app out to a broader public. In summary - before you automatically poo-poo the MAS 30% sales fee, compare that to what it would cost you to reach the potential presented by the MAS channel over the older methods. If you've got a product with a potential for multi-million unit sales (Mass Effect 3), the costs of this 4th model are just a business expense (and, you'll probably include the MAS as part of the mix). However, if you have something that sells 100's of copies and you don't have a marketing and sales team in place to promote it to higher volumes, the MAS is a very easy way to distribute your app with very low overhead ($99 ADC membership and your time). Last edited by brumeister on Sun Aug 07, 2011 2:38 pm, edited 1 time in total. Top Markus Winter Post subject: Re: Apple MAS, Reseller Channels, and MarginsPosted: Sun Aug 07, 2011 2:31 pm Joined: Sun Feb 19, 2006 4:00 pm Posts: 889 Location: Heidelberg, Germany 25% for shareware/donationware? Dream on. In my experience (and I had two VERY successful utility apps where proceeds were donated to a good cause) donationware has about a 1% paying customer rate - and less if you don't give the money to a good cause. _________________ Best Regards Markus "If 'GOD' is Truth then why does religion deny scientific and historical truths?" 17in MBP C2D 2,5 GHz 4 GB RAM 500 GB HD MacOS X 10.6.7 REAL Studio 2011 R2 Enterprise supported relief project http://www.veronikawinter.de/Indien home page http://www.ahatfullofsky.comuv.com/English/REALbasic/REALbasic.html Top brumeister Post subject: Re: Apple MAS, Reseller Channels, and MarginsPosted: Sun Aug 07, 2011 2:33 pm Joined: Thu Jan 04, 2007 1:00 pm Posts: 104 Location: Lego® Deathstar, Orbiting Above Scottsdale, AZ, USA I'm just going by the shareware industry's claims. My previous shareware apps for the Amiga and C=64 platforms ranged closer to the 60% range, so my personal experience was a bit off the curve. [EDIT] another source I just read quoted 0.5% as a more modern estimate for paid conversions of shareware / begware app sales. Tim Top Markus Winter Post subject: Re: Apple MAS, Reseller Channels, and MarginsPosted: Sun Aug 07, 2011 5:27 pm Joined: Sun Feb 19, 2006 4:00 pm Posts: 889 Location: Heidelberg, Germany A few hard numbers: I made a website for one of the utility apps (Startup Mode Selector), and all donations go to charity. On start-up I strongly advice the user to read the information on the website, and there is a link to the website in the app. So far 488,390 people visited the english language website, and 37,506 the german language website (I just checked the stats). Still every day about 50 people visit the site. I would presume that most of them downloaded the app. I still get support requests every week - annoyingly most of which are answered on the website. So far 558 people have donated (most $1, though I should point out that two donated $500 each, one donated $250, several donated $50, $25, $20, $10, $5 etc) - that's 1 in 942. And that is distinctly more than before I decided to give everything to charity - after deciding to give everything to charity I got nearly three times as many donations. Add to that a little info I found which tallies with my experience: Quote:I actually thought that if I made the template cheap enough, users would actually pay for some of the labor that went into it. If everyone could write Filemaker script with loops to extract information, they would not need this database template. Well, my experience is that users DO NOT pay unless you give them considerable incentive. You must "cripple" the program or "lock" it up so it is only really usable if they pay the SHAREWARE FEE. Over 1,400 people downloaded this database template (if you count versions 3.3 and 3.4) and you count Macintosh plus PC downloaders. Guess how many actually paid any shareware fee? The answer is only five so far. I guess that makes me extremely naive but actual experience is a reality based teacher. _________________ Best Regards Markus "If 'GOD' is Truth then why does religion deny scientific and historical truths?" 17in MBP C2D 2,5 GHz 4 GB RAM 500 GB HD MacOS X 10.6.7 REAL Studio 2011 R2 Enterprise supported relief project http://www.veronikawinter.de/Indien home page http://www.ahatfullofsky.comuv.com/English/REALbasic/REALbasic.html Top Display posts from previous: All posts1 day7 days2 weeks1 month3 months6 months1 year Sort by AuthorPost timeSubject AscendingDescending Page 1 of 1 [ 4 posts ]
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