Users are more experienced and willing to pay a higher price for apps if they feel it is worth it
Mobile app downloads are now so commonplace that app developers and providers could take prices higher, according to a new study.
App providers should take a serious look at user familiarity with apps and the fact that people are willing to pay for good quality apps, and structure their prices and offers accordingly, said a study by global strategy consultancy, Simon-Kucher & Partners.
In the study, in which over 1,000 UK smartphone and tablet PC users were questioned, 80% of respondents download apps frequently and about half have already paid for an app. News apps are used more often than games apps (91% and 45% respectively), although games apps are downloaded more often than news apps (respondents own on average eight games and two news apps); around 40% of respondents indicate willingness to pay over £5 for an app.
Study author, Annette Ehrhardt, senior director at Simon-Kucher, said this is a positive sign that the app market is not spiralling toward an 'everything for free' culture. 'App users are generally very knowledgeable and willing to pay for good apps. The app range is however large, which is why there is no one 'optimal' price for apps,' Ehrhardt explained. 'But the experimental phase is over, for users as well as for providers.'
The majority of respondents download apps once or twice a month. Downloading behaviour has stabilised in the last year and users do not foresee any major changes over the next twelve months.
App selection, according to the study, is influenced mostly by top listings ranking and the app price, in addition to recommendations from family and friends. For many providers this means a balancing act between volume and revenue; to stand out amidst the multitude of apps and attract users, app listings and price are critical. Both support lower prices, and free apps which tend to top download lists. 'But providers can't make much money from them,' commented Ehrhardt.
Almost all study respondents (90%) own apps in the surveyed categories of games, productivity (functional every day helpers), news and social networks; on average, respondents own approximately eight apps from the games category, and around two each from productivity, news and social networks. Two apps from productivity, news and social networks are used regularly, but only around three for games. In other words, games apps are downloaded spontaneously (e.g. to try out a new game), but then used less frequently.
Only 20% of respondents would not pay for an app, whilst over 40% believe the price-performance ratio for apps is cheap. For their most expensive app, the study respondents spend on average £2 depending on the category (games, news, and productivity). In exceptional cases, up to £70 is spent on an app, but on average apps are £1 to £2. This is higher than the seemingly typical low prices of £0.65 or £1.59, certainly a good sign for providers, said Ehrhardt.
Ehrhardt has some key advice for app providers based on the study results. First, providers should take a two step approach: a 'freemium' model with a free basic version, and then a premium version with paid content. 'This way the app can top the download listings more easily, and then the provider can make money with it later,' said Ehrhardt.
Next, as upselling gains importance, this makes it easier for users to switch to premium versions. Mark Billige, managing partner and head of the UK media division, warned about setting prices too low: 'Depending on how much value the app offers and the app category, providers may be overlooking their chance to earn more. Even if the basic version is free, the paid content version can be higher priced, thereby significantly increasing revenue.'
Ultimately, providers shouldn't wait for the one optimum price; it doesn't exist, said Ehrhardt. What works for one app (category) may not work for another. Instead of looking to the others for direction, providers should pull out their calculators and start doing their own maths.