When are apps worth paying for?

The market for apps appears to be like 21^st century’ s wild west – where phenomenal growth rates have fuelled a massive rush of participants, but the laws of participation are still little understood.

In just over a decade, the app market has grown from almost nothing to be worth more than $2 billion a year, involving developers and consumers in every country of the world, but little research has been conducted into the factors that govern successful app marketing – until now.

With so many apps to choose from, Dr Lara Stocchi, Lecturer in Marketing at Flinders University, has led a project examining the factors that make one succeed over another. The research has found that consumers tend to place a higher value on independently-produced apps if they have to pay for them.

“If an app is not linked to a major brand and offers something unique – for example a new game, or additional functionality for your phone – then consumers tend to value it more,” Dr Stocchi said.

“If matched with some clever advertising that presents the app as ‘cool’ and distinctive, charging a small price an independently-developed app could help drive its’ success,” Dr Stocchi said.

After interviewing consumers who had used apps and studying their behaviour, Dr Stocchi and her colleagues also found that if the organisation providing the app had an established brand and was using the app to open up an additional channel of communication with customers, it would be most successful if it was provided without charge. For example, if a supermarket chain or cinema established an app to sell their goods and services, consumers would be more likely to download and use the app if it was provided free of charge.

The paper, ‘When are apps worth paying for? An analysis of the market performance of mobile apps’, was written with colleagues from Loughborough University in the UK and has been published in the Journal of Advertising Research.

“Apps represent a $2 billion market worldwide, but the research around marketing apps has been quite limited to date. A lot of the research around apps focuses on the technical side and also on what makes people select an app for download,” Dr Stocchi said.

“Ever since apps came out in 2000 there has been a widespread belief that apps marketing is different but it turns out the basic underlying mechanisms of marketing are the same – it’s just that they haven’t been researched before.

“If an app provides value on its own through unique features that have value to consumers that they cannot get for free, then developers will generally be most successful in driving consumer interest and usage when they charge for the app.

“We hope this information will be useful to developers and provide a strategic framework for app pricing in future.”