Telling me that Starbucks is a Trustable Experience is a Lousy Way to Convince me of Something

Josh Lehman: ‘Stop Using the Cup of Coffee vs. $0.99 App Analogy’:

If Starbucks gave out free coffee every day there would be mile-long lines at the drive thru. If the free coffee was anywhere close to as good as their paid stuff people would abandon the paid en masse. Some would pay maybe because they felt bad, as a freeloader. Others would pay because they preferred the options available to them in the paid column vs. the free. Now imagine the free selection at starbucks was nearly as large, or larger, than the paid selection: Welcome to the App Store.

(Via Daring Fireball)

Yes. And that’s why Starbucks doesn’t give away free coffee. Because they have business sense, unlike most small indie developers who think they can jump into the free market and survive.

Some places do give away free coffee, by the way. But people keep going to Starbucks, anyway. 

I’d like to know how many “free” apps this guy has fed his family on over the past five years. 

Fact: just because some companies with a lot of funding give away free apps, that doesn’t mean that all iOS users don’t want to pay for anything. And it certainly doesn’t mean that you as a small developer should feel it necessary to underbid your competition with your app. 

There are more free alternatives than not in the App Store because of bad business sense. Not because free apps have some inherent value, or because those free apps make selling an app for a price an impossibility. A few apps do a fine business with the free model. Most don’t. 

650,000 apps on the App Store. And we keep making our pricing decisions based on 25-100 of them.

Fact: there are a lot more free and 99¢ apps on the App Store making no money than ones that are making good money. By a couple of orders of magnitude. 

When competitors have unsustainable business models, you’re better off sticking to your guns and waiting for them to die. Raise your price and appeal to a more discerning type of consumer. Or drop out altogether and find another market. But lowering your price to their level is only going to bankrupt you. 

I guarantee that if Starbucks did give away free coffee, they would have those long lines like Josh describes here, but the small artisan coffee shops would keep on churning out their modest profits without missing a beat. Because here’s the kicker: people who like good coffee would rather pay more for good coffee than be caught dead in Starbucks at any price, free included. There are customers for every product who actually want the high-priced stuff, even when it comes to software. We sell our apps to them daily. The trick is to find them and then show them why your app is worth more. 

Fact: not all apps should be the same price. Fart apps and other stuff you tinker with for five minutes then erase, sure. Those are throwaways and should be priced accordingly. But apps like Omnifocus, iDraw, AmpKit—these are in a completely different class. And users need to be educated on the fact that those types of apps cost more to develop and maintain.

The problem isn’t that there are free apps and 99¢ apps and $15 apps. It’s that customers are being conditioned to treat them all the same. That’s a problem of sales and marketing, not price.

No one in his right mind wouldn’t understand that there’s a difference in the cost of making a paper plate vs. a ceramic dinner set for four. Yet many users don’t know how much longer a full-featured vector drawing program takes to create than a fart app. That’s our fault. But giving away the drawing program for free isn’t going to help. It’s going to further reinforce that ignorance. 

All too often the solution I hear is to drop the price, rather than dig in and make the sale. And when developers realize they can’t develop meaningful experiences at that lower price, they build something oversimplified. And so we get an App Store that is overburdened with throwaway items, instead of overflowing with awesomeness. 

So yeah. In that regard, I agree. Don’t complain that your customers waste money on crap coffee but won’t pay for your app. At the same time, don’t go and make an incredible app and then undervalue it just because most apps are undervalued. At that point you’re only contributing to the problem.

Instead, show customers how crappy their coffee is and how much better an investment your app would be. You have a web site. You have a blog. You have Twitter and Facebook. Go out there and sell. 

But don’t tell me I need to learn to “understand how to make money on ‘free’.” I most certainly don’t. 

Update: For the record, Josh Lehman contacted me via Twitter and informed me that he has in fact fed his family on the proceeds from at least one of his free apps. Good for him, and shame on me for being a little too snarky with him. I stand behind my position, but he’s a stand up guy, and I don’t completely disagree with his article. It’s great that more of us are talking about this subject and arguing about it.