I haven’t always used these particular apps to solve these problems, but it takes a lot to change my mind on one. If you make another RSS reader or Twitter client, there are certainly a lot of people who could use it, but you’ll need to compete with very mature, established apps. Competing in these categories isn’t about price: it’s about relevance and attention. If you can’t find enough customers here, it’s probably not because you’re charging $2.99 instead of $1.99 or $0 — it’s because your app isn’t convincing enough people that it’s worth using over the alternatives.
This is also the same problem I run into every time I’m sent new apps to review: is this going to be better than Tweetbot, Fantastical, or Drafts for my workflow? Should my readers know about this app even if I won’t use it every day? How do I balance the expectations of my readers, who want to know about new apps, with my personal opinions and workflow preferences?
App store economics are largely just general business economics. If I am going to start a pest control company, I've got 3 options:
1. Offer the same product and lower the price below competitors
2. Offer the same product at the same price as competitors
3. Offer a revolutionary new way of doing whatever apps in that genre do
Based on those options, a lot of developers just simply choose option 1.
Let's look at Panic's Status Board. They are charging a premium and it seems to be selling well (based on the press around it). It's not $.99, though. Why can they charge a premium price? They went with option 3. If I am wanting to launch a new service based company, I have to try to either create a market for myself or compete with the incumbent players. My favorite Wi-Fi vendor (Aerohive) also went with option 3 when they launched controller-less enterprise WI-Fi. They offered a product with similar goals as Aruba and Ruckus, but with a revolutionary way of doing it. There is already a business term for this effect. It's called Blue Ocean Strategy. A blue ocean market is where you've changed the game and your competitors aren't relevant in the discussion. The incumbent competitors are competing in a red ocean (for your scraps).
My advice to app developers? Look for blue oceans and you can charge a premium.