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App Developers Should Charge More If They Want People To Buy Subscriptions, Suggests Report (theverge.com)

Posted by BeauHD on from the sunk-cost-fallacy dept.

A new report from Liftoff, a Silicon Valley-based mobile app marketing and retargeting firm, says that subscription-based apps may do better if developers charge a higher price for services, rather than setting prices too low to lure users in initially. The Verge reports: The Liftoff report, which analyzed data gathered between June 2016 and June 2017, categorized app subscriptions into low-cost monthly subs ($0.99 to $7), medium ($7 to $20), and high-cost subs ($20 to $50), while also factoring the cost of acquisition per customer. The company found that apps in the medium price range had the highest conversion rate -- 7.16 percent -- and the lowest cost to acquire a subscriber, at just over $106 dollars. This was five times higher than the rate of people who subscribed to apps when the apps were in the low-cost category. This may partly be because streaming media apps, like Netflix and Spotify, have already conditioned people to pay around $10 a month for services. But it also might be attributable to the sunk cost fallacy, Liftoff says: the "cognitive bias people have that makes them stay the course because they have already spent time or resources on it." The report also examines apps that fulfill "need states," like dating apps or cloud services. These have the potential to offer services that customers are willing to pay for, again and again. But, according to Liftoff, utility apps have a much higher install-to-subscriber rate compared to dating apps. Blame those who eventually find love?

5 of 50 comments (clear)

  1. Cost is not priority by amiga3D · · Score: 4, Interesting

    I want an app that does what I want without trying to take over my damn phone. I don't mind paying a reasonable price for that. I pay for FBreader app on Android because I've used it for many years on Linux and love it so when I found it on Android I gladly payed for premium version even though I really didn't need the premium, I just wanted to support the developer because it works without taking over my phone. I don't like apps that want access to things on my phone they don't really need and I get rid of them, free or not.

    1. Re:Cost is not priority by beelsebob · · Score: 5, Interesting

      Yeh, there's MASSIVE selection bias in the study.

      The reason that apps that charged $10 for subscriptions were successful was not because that's the price sweet spot. Instead, it was because the samples in that category are dominated by a bunch of really useful applications.

      There are tons of apps charging $0.99 for subscriptions to things that are fucking useless, so again, selection bias in that bracket.

  2. Not just for apps by El+Cubano · · Score: 3, Interesting

    This phenomenon is true for lots of things.

    I read an interesting analysis about automobile purchasing behavior. The main point of it was that most people want to get a good enough deal to be able to brag about doing well on the purchase ("check me out, I am a skilled negotiator") but not so low that they appear to be cheap. I have to admit I don't fully understand why that is, as I always seek the absolute lowest price I can find, but hey some college professors studied it, so I guess it is accurate.

    Of course, there is also the same sort of thing for "lifestyle" and luxury brands. Would a Rolex that cost $100 have the same value as one that cost $10,000? In some ways yes, but not in the ways which make a Rolex a Rolex.

    On the flip side I remember having interesting "discussions" with people regarding the various merits of Linux and Windows. This was probably 10-15 years ago. A surprising number (at least surprising to me) were of the mindset that since Linux was basically given away for free that it must not be very good. Of course, that has somewhat changed over the years, but you still come across people like that.

    It probably boils down to the fact that people, especially in consumerist societies, tend to equate price with value.

  3. Never ending revenue by markdavis · · Score: 3, Interesting

    >"App Developers Should Charge More If They Want People To Buy Subscriptions, Suggests Report"

    Or give up on subscription. There is no app I would ever get sucked into "renting", ever. But I will pay a few dollars for a useful app. Maybe even more for a fantastic one (of which I have only done once).

  4. Perception of Value by seoras · · Score: 3, Interesting

    I've been doing Website's and Apps for a decade now and a hard lesson I learned early on was that people don't value what they get for free or cheaply.
    As soon as you put a decent price tag on it their perception of it's value changes.
    You get less complaints and support problems too.
    Give stuff away for free and you are just asking to serve your heart up on a plate to vultures.
    I even have to kick myself sometimes when I find myself griping over a $1.99 app that it isn't free. It's small change. Beggars and buskers stuff.
    The whole sub $10 market is just toxic.