When does it make sense to release a sequel app versus a new app?

I, as an indie dev, own a set of Face Switch entertainment apps (free, paid and iPad) on the app store and one free Face Switch app on Google Play.

I'm about to relese a new app on the app store that has the same core functionality but with many upgrades like new GUI, Facebook, history etc.

I have noticed that many publishers release similar apps not as upgrades but as new apps that are sequels (e.g. Halftone and Halftone 2) or under different app names (e.g. Face Swap! and Face Bomb!)

I wonder, however, if I should release my new app as 'Face Switch 2' or as another app say 'Face Mix'?

What are the pros and cons with releasing a sequel app? What should I pay attention to?

I agree with Matthew Brown's excellent answer.
We have had similar doubts when pushing updates to our apps as well and the rule of thumb that we follow is:

If the new app looks and feels substantially different from the old one AND it has many new features, we will generally publish an AppName 2

• You can get your existing users to download the new version and if you have a big enough user base that you can activate, it will push the new app to the top of many charts.
• People searching for your app name will probably download the 2 version - so it makes sense to call the new app - AppName 2 (instead of a totally different name)
• If you have spent a lot of time developing new features, this is a better avenue to get paid for the update. Doing IAP updates can get slightly messy at times.

The only risk to this approach is:

• If you have built new IAP based monetization features and the new app does not pick up, you'd probably have been better off updating the existing one with more users.

Your main consideration here is audience perception and branding penetration. By releasing a sequel you are leveraging existing brand recognition whereas by rebranding a very similar product you are competing with your past self for possibly the same clients. This is why Microsoft release still call their OS Windows all these years later.

A good reason to rebrand on the release would be to attempt to re-market to a different market segment that might respond better to a different name. This would also be good if the feature set is substantially different from the existing app as users will expect a similar feature set if you simple released version 2.0.

A good reason to stay with the existing brand and release a 2.0 version would be to let existing users of the 1.0 edition know that a newer more feature rich version is out and to encourage them to buy the new version as well or in replacement for the older version.

So the answer to your question is that it entirely depends on how different the end product feels to an end user.