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Sorry, just think about it, that's a terrible solution.

First, remember that the Apple App Store doesn't give you any way to directly notify existing customers. See my other post, it's a great deal of work to induce customers to give you email addresses/etc.

But lets say you have emails for most of your users, or that you autoupdate your app to notify them that the new version is out and for a limited time available for a cheap price. Most of your users are going to miss this email, or forget about the discount, or not use the app during the discount period and never see the notice.

Those who miss the discount window are going to be pissed. That's going to be a lot of 1 star reviews. Some are going to be pissed they, as long standing users, didn't get a "real discount" since you gave it to anyone who bought it at the same time. That's more 1 star reviews.

But the worst problem is you are discounting the value of your product to new users. Your retail price should be set where it maximizes long term revenues (if you thought you would make more money by discounting you'd already be doing that).

For existing users who have already paid you for much of the value, you want to set your upgrade price at a reasonable value for the additional features of the new version. That price normally should be lots lower than retail, essentially 20-30% in any mature product.

By giving the new users a price that is the 20-30% of what they would normally pay, you are leaving a ton of money on the table. Worse, you are front-loading sales. Anyone who planned to pay full retail in the future will rush to take advantage of the discount. How do you think sales for the rest of the year will look?

Imagine you expected to sell 36,000 copies to new users this year at $10 each, or a net of $252,000 this year after Apple's 30% fee.

You announce the new version is only $3 on the store for a month, but only tell the 50,000 existing users that you have email addresses for. You get a great response from them, and sell 20,000 units to existing customers the first month, netting $40k.

But instead of selling your typical 3,000 units to new users the month, you instead sell 12,000 units to new users. What happened? Well, anyone who was likely to purchase this year and found out about the huge temporary discount, bought now. And lots found out, either by checking the store, or hearing from existing users (50k people have lots of friends), or from bloggers, or one of the hundreds of discount alert services, etc, etc.

And by front loading their purchases, your sales will be lower over the remainder of the year, by the 9,000 extra new users who took advantage of the discount. So instead of netting $292k this year, you are going to net less. How much less? Your 36k in new users now net you only $168k, for a total of $208k, costing you $84k or 25% of revenues.

The problem with discounting for everyone is that the shorter the discount period, the angrier your existing users will be. And the longer the discount period the more money it will cost you. It's a no win approach. You absolutely need a way to qualify existing users to provide the upgrade price, or it can't work. You'd be better off never discounting and forcing existing users to pay full price to re-buy a slightly better version of the app they already own.