This Is How I Feel About Buying Apps
I came across a funny cartoon the other day that captures an interesting aspect of our purchasing behavior. We are perfectly willing to spend $4 on coffee (for some of us this is a daily purchase), or $500 on devices that you can argue we don’t really need. However, when it comes to buying digital items, such as apps, most of which are priced at $1, we suddenly get really cheap. Why?
http://theoatmeal.com/blog/apps
Here are some reasons. The first is that we are anchored by the price of categories, so when we think about lattes, we compare only across beverages. When we think about apps, we only compare across digital downloads. Thus, when we think about buying a $1 app, it doesn’t occur to us to ask ourselves what the pleasure that we are likely to get from this $1 app — or even what is the relative pleasure that we are likely to get from this app compared with a $4 latte. In our minds, those two decisions are separate.
So now the question becomes, why is the price anchor for apps so low? I think the answer to this is that we have been trained with the expectation that apps should be free. Having lots of free apps on the App Store is clearly advantageous for Apple, because it makes their devices more attractive. However, because FREE! is such a special, exciting price level, it makes the thought of paying even $1 for an app into an agonizing decision.
I think this could have been avoided. Imagine if instead of offering free apps on day one, Apple instead created a really low minimum price–say $0.15. Lots of people would still go for Apps at this price, but instead of being anchored to the idea that apps should be free, we would be anchored to the idea that apps should cost something. Then paying more (maybe even $2) for an app would be a simpler step, maybe one that we could take as easily as paying $4 for a latte.
The Honest Truth About Dishonesty: How We Lie to Everyone - Especially Ourselves
Not sure Apple should charge a minimum price for apps. First because apps are only a mean for selling more iPhones and iPad (exactly like iTunes Store was only a way to sell more iPod) and if you fix a minimum price you’ll loose the benefits of this strategy; second, in average Apple users have a larger willingness to pay for apps, making possible to attract developers on the App Store (I think it’s a kind of two sided market). For instance the share of the App Store in revenues is quite larger than the Apple share on smartphones.
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(=^.^=)
You already wrote lots about “free”…
really beautiful
Photos not seen
Indeed 99c is the magic number for Mac App Store apps (probably for iOS App Store as well). Apple promotes your app in the first few weeks. So if you are a small developer it is smarter if you start with free or with a very low price to gain momentum in sales. Then depending your overall performance you may go down or up in the first page of relevant category or search page. If your sales is phenomenally great you should increase your price but of course you would be risking new sales (assuming you are not a well known developer). It is incredibly competitive with apps nearing to 700,000 (I may be wrong but something like that).
Well in my particular case, it is a previous filter system. I do’t trust the paying method on such cheap things….. I do trust paying in Amazon.com for example, but when it comes to pay 99 cents, it is not about the 99 cents, it is about the possibility of a scam or a faulty transaction. Why? I download many apps from the Android market for example, and many of them are real crap. So, I feel a bit ….. no willing to trust other transactions on the same league.
Dan, I think the problem started with the way operating systems for computers and electronic devices are sold. This software feels like “free” because you pay 1 price and get 1 physical hardware and 1 intangible software.
Then there is the alternative to paying which is copying it at zero cost which is “free” until getting caught and going to jail.
You already wrote lots about “free”…
If it’s an app I want I don’t hesitate. Free, .99 cents, $4.95…the thing that drives me is “Do I want or need it and will I use it?” It’s more about what my budget for apps, music, software and “entertainment” is rather than what a specific app costs. A simple Google search will tell me if the App lives up to its hype, and at .99 cents it’s no more risky than the lottery tickets I buy from time to time.
Very interesting.
There’s one more interesting thing about mobile apps. I heard in a marketing lecture that the proportion of users that pay for apps is significantly smaller in Android than iOS, and for those who are paying, it takes substantially longer time to “convert” a user into a paying user on Android.
My theory is this stems from the fact that when you set up your iphone for the first time, you have to create an account and give your credit card info, whereas this is not the case in Android. So, when a person shows intent to purchase his very first android app, he confronts the barrier of setting up a billing account. This is a burden, it gives the user more time to consider if he really needs the app, and it also substantially increases the price of that specific app he intended to purchase (by factoring in energy, the need to handle more account credentials, etc.) so he might decide against it in a simple cost benefit analysis. This analysis reappears the next time he considers buying an app.
Furthermore, of course, some people just don’t want to set up a billing account on their phone, and unlike in the iPhone case – they have a choice.
Merry Christmas and APPy Hanukkah
Good comment, I fully agree. Furthermore, I think that is not only a question of price but also for quality. A lot of apps are not so interesting, so, thiniking about buying them is not so interesting
Happy Christmas!
Alon,
Some comments…
* You can open an iTunes account without a credit card. the way to do it is to open itunes, make sure you’re not logged into another account, click on downloading a free item, choose your store, continue with the registration and then choose none in the payment options.
* Android apps are more difficult to sell since the android market is far more pirated. the current numbers are 1:70. 70 illegal users for any legal one. in IOS the numbers are 1:3
Where did you get those stats for legal use? How do you possibly know these things? Good science needs to cite these claims. Nobody seems interested in responding to my comment that the whole phenomena here hasn’t been shown to be real…
Thanks for your comments.
Re. the app store, I think I was forced into a $10 software upgrade weeks after I got my iTouch, so there was no way around it.
I’m now an Android user and while I don’t know where did you get the numbers you cite from, as someone who recently got into app development I can believe that pirating apps is much more prevalent over on Android. However, I do not know how much it matters. The average user doesn’t know what an .apk is, how to enable those files, and is afraid to enable his device and get apps from questionable sources [and no, I don't have data to back up this claim, Aaron. A small sample between a few dozen friends gave my a sense that's the case]
Interestingly, I had exactly the same issue you describe on my iPhone, not android: When I first connected the iPhone, I was asked to give a credit card. I didn’t understand why, so after a few clicks here and there I somehow managed to get it working *without* entering a credit card. From there on, I can’t buy any app – The first time I will want to buy one, I’ll need to enter my credit card, but I’m not even sure how and this complexity prevents me from making my first purchase.
Hi Dan et al,
I think Dan’s right about the creation of a ‘norm’ for getting things for free. Does this not have something also to do with how we value intellectual property rights? If we buy an iphone we can hold it, and lock it away to protect it as well as show it off. With software (and music and films) it is not something we can do that with in the same way, and surely that’s why people are much more willing to commit software piracy than to steal an Iphone from the Apple Store!
I think I’ve read something Dan has written on this somewhere…
Anyway, season’s greetings to everyone!
Paul
Excelent review, have that problem all the time i thought about it one day and realize man it’s 1 dollar! Wtf is wrong with u! Buy it!!! I always thought that maybe I’m a cheap btard but thanks to u I know I’m not haha greetings from Mexico!
Dan, your observations are possibly an example of your a priori presumption of correctness of your theory of anchorage as given in Predictably Irrational (wonderful and interesting read!) As well as your subconscious disinclination to venture out of your own zone of comfort. Tell me why doesn’t some marketing guy give a or create another anchorage like Starbucks or create another class itself by having additional Apps @0.51?
Isn’t it possible?
I think this has more to do with physical goods vs. digital. The perceived value for something that you can touch and feel is higher at least for this generation.
Yes, that’s what I was going to say. The exception given was movie tickets, but there are a few differences with that example. 1) I’m not convinced that people really are OK with spending money on movies. The rise of dvd’s, blockbuster, netflix, hulu, youtube, etc., speaks to people sick of the movie experience. 2) when you go to a movie there is a social pressure because you’re doing it with others, so on a date or with friends you don’t want to appear cheap, but in the “privacy” of another purchasing decision, you don’t have that social pressure. 3) new movies have a scarcity factor. they’ll only be around for a few weeks before you have to wait a year to see them again.
The real question is: is this true??
Before seeing this, I would have guessed that people who are impulsive and don’t hesitant to buy expensive drinks are also impulsive and buy lots of 99¢ apps.
I am a frugal/stingy person and I am very reluctant to buy drinks or movie tickets or apps.
Is there any objective evidence that people are actually more hesitant about apps than about other purchases??
Great article Dan!
I share the hesitance of many other consumers to buy apps for even $1, and I absolutely agree that my anchor price point for apps is FREE!
I don’t think eliminating the free app altogether would be the right solution. For some app vendors, their goal is to acquire as many mobile users as possible, because they have other ways of monetizing them – Advertising, services, etc.
Personally, I am hesitant to try paid applications because there is no trial period, and no refunds. As soon as I install it, I own the license to the app in perpetuity, and I cannot even transfer it to someone else.
As a matter of principle, I dislike paying for things that I don’t use or don’t like, even if they cost me 99 cents.
If Apple were to enable their developers to offer free 30-day (or any length of time) trials, I think it would eliminate hesitance to try out non-free apps, and also increase the price someone were willing to pay for it.
For instance, I think I paid $1.99 for Angry Birds several years ago, trying it out because several co-workers were obsessed. If I had been able to play Angry Birds free for 30 days before having to decide to pay for it, I probably would have been willing to pay much more (say $8.99).
Adding trials complicates the revenue generation process for paid app vendors, because they must now think about conversion rates, but it also could help them generate more revenue per customer and make for happier consumers.
Even though I like the intelectual exercise, I should note that ideas on how to make apple products more expensive may not be the best thing to do near Christmas… Love your work!
I think people are unwilling to pay for apps because they don’t get anything physical. When you buy a book, you’re not paying to get the paper and other materials, but when you know they have no overhead per unit you’re not willing to pay so much (ie an ebook)
Another thing is that a book you would keep for a long time, and its bein is justification for the price even when you’re not using it – it is added to the stuff you have in your house. But with an app you don’t have any of that, and you also dont have the assurance that an app wouldn’t be deleted by accident or become unusable some day.
Right, and also a physical book is a physical commodity that can be shared or sold. I often buy physical books to evaluate knowing that I’ll have the option of passing them on to my students. I can’t do that with apps.
But the movie ticket analogy is more similar to the apps. If it were true that the same people who readily buy movie tickets are stingy about apps, that would be an intriguing thing to study. However, I doubt that premise is even true.
The suggestion could make sense if Apple was a monopolist but it is not. Apple can’t change the Free app anchor if android and windows don’t change it. Without free apps few people would buy iPhones.
This post exemplifies one of the main problems of using psychological research to understand markets: taking competition into account.
Potential alternative explanation: Is it that the marginal cost of digital goods is so apparently near zero that it seems unfair to pay more?
Copying a song and putting it on a usb to give to your friend just seems so effortless.
Don’t forget the Shareware Age, when all apps (they were called sg else I don’t remember, maybe: programs) were $15-$25. For example, when iPhone came out, Bejeweled was $24 for Palm (PalmOS, not webOS), $25 for WinMo (6.x), $24 for BlackBerry… and $2 for iPhone. So, the situation is better than it was before the rise of iPhone. We’d be happy.
One reason I don’t like buying apps or buying too much from the iTunes store is that the price makes it so easy to spend money. I fear that I will be addicted to spending 99 cents on a song I like and that this will add up quickly without me knowing it. So the separation from hard currency is at work and so is the convenience and the price. A lot of things add up in favour of indulgent spending.
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I read somewhere that app stores are an example of a perfectly competitive market. This is where all information on competitors price and quaility are fully available to consumers. That means the lowest possible prices.
Another interesting thing that in a perfect market long term profits approach 0. I understand very few app makers are making money.
Losers. I used to drink instant, but when I got addicted to cappuccino, I bought a refurbished Cuisinart for $100. When I still did go to to movies I brought my own snacks, but I’ve stopped going, because tickets are too expensive, and stopped watching them on DVD because they’re just not very good. I resisted getting a cell phone until recently when I got one for $10 and buy prepaid cards. I got my last laptop on sale for $500. No Ipad and no friggin’ apps.
Oh, when I finally read “Predictably Irrational”, it was a public library copy.
I don’t think it is a bad thing, from a consumer’s perspective, to give consumers a bias towards free software.
I spend $20-$30 a month on apps typically. I’ll buy anything for a dollar.
I would like to add one, maybe a niche, idea.
For me, although i buy some 1$ (sometimes 10$ apps), it’s the “sucker” concept that makes me hesitate.
The “sucker” concept relates to the fact that app prices vary. an app bought today for 4.99 can be 0.99 or even free tomorrow.
So… i check appshopper or appzap every day for deals and watch the price of items i think i might want.
On another note.
As a developer, i can share, that giving an app for free, even for 24hrs is a risky, many times devastating move.
The reason being that users, in many cases, will download an app they know nothing about just because it’s free.
They won’t understand it’s use or purpose and will give you bad ratings.
Sometimes even bad comments.
This can easily cost you a full 1 point rating from which you will never recover.
I agree about the anchoring effect, but I think the app situation is also a manifestation of the overall e-content issue. When people perceive there is zero cost to distribute, they rebel against paying too much. The WSJ just ran a story about consumer “sticker shock” for Kindle & Nook titles, which in some cases cost as much as or even more than discounted paper versions.
If I buy a paper book at Barnes & Noble, I know there is cost all through the distribution process – the paper, the ink, the transportation, the cost of store operation, etc. I don’t know what those costs are, but $15 for a hardcover book doesn’t seem exorbitant. To pay the same for a one-click, friction-free download seems unfair and sets off a “pain of paying” reaction in my brain. (Arguably, the value of an ebook is as high as a paper copy – the cost disparity is the problem.)
I must also point that Apple has strict quality guidelines before your app is accepted on the App Store. Apps are tested against crashes, memory leaks and other acceptance criteria. As a developer you need to agree on a pretty thick license agreement between you and Apple. You may also be required to agree on government regulations that would extend your legal responsibilities (if for instance your software uses encryption). Each developer has a ‘legal entity’ role that they need to fulfil and each product has to have a support web site. There is also a watchdog to ensure credibility of ‘star’ system. These rules, regulations and agreements are there to maximise product quality and customer satisfaction.
As a buyer you need to do your homework too. Check out developer’s website. Search the Internet about the developer, their LinkedIn profile or their company. Check out their support and FAQ pages if any. See if they provide enough information to answer your questions, if not don’t hesitate to contact them.
I think there is something deeper than anchoring with digital goods. I think consumers see that the cost of producing and delivering an additional copy of digital goods is basically zero and therefore are unwilling to pay the premium.
Of course, the first copy of a digital good may take much time, effort, and money to produce, and therefore it seems rational to demand a premium for copies, but consumers are not rational.
That was a very interesting article, and made me thinking.
But, in “practice” (Apple Store) i think every app should be free, and not because im some kind of torrent freak or an activist…
Imagine that you have an “idea”, or something that is in a non-materialistic form (you are a teacher, u have “knowledge” or on the internet, there are “softwares” etc)… Would you charge a price for something that you can copy free, and can made people happy, or help them?
I think not, or at least not in every situation… Of course i understand that there is a market, and there are some costs… But think about “built in marketing”, there are many investors who want their logo, or their stuff in app, so charge them, not the public. (they already hide many things in movies, apps etc. Why charge an extra?)
Your thinking on this is interesting. App developers should not charge for their work, because it is in a non-materialistic form? Now my work, which is not app development, does not produce physical objects. I do however, require some tangible stuff. Food, certainly, and, for comfort and social reasons, clothing. I enjoy helping people and occasionally making them happy. The reason I receive money for this is so that I can continue to do that and also be fed, clothed, and housed. Money is the medium of exchange.
Some of us would prefer to not have the distraction of ubiquitous advertising.
Why buy something when it would take away the fun of learning how to hack it.
Ah, of course as I read this I was sitting in a coffee shop with my $5 egg nog latte and earlier today decided to refrain from purchasing a new app because it was not free–and here I sit, guilty as charged.
Generally speaking built-in marketing brings two problems for developers :
a) Development and maintenance costs of built-in ads.
b) Advertisements cause poorer user experience. They consume valuable user interface real estate and steal time from otherwise satisfactory user experience. Especially in mobile devices you have a very limited real estate and app runtime is short so inevitably advertisements become intrusive and annoying that would make your app quickly unpopular.
Some made assumptions that there is only one-off cost of making an application which is false. There are on going costs. Apple will charge $100 for a yearly development subscription fee. Your product’s domain registration and product website, Internet access, anything that is necessary to keep your app on the market will cost money. Note Apple charges 30% off from your earnings, wiring costs between banks is $30 per $100, and you pay GST (in Australia) for every dollar you earn. These costs easily justify $1.99 for a modest app (majority) in order just to be able to cover costs for a typical AppStore app.
C’mon Dan… you know better.
Prices *ALWAYS* migrate to the lowest possible point the market will bear, given greater supply than demand (which is absolutely the case for apps.)
As pointed out; “free” apps drive the sales of “expensive and profitable” hardware. They also have the ability to carry and deliver income-producing advertising.
If frappamacroonfrescocachino latte’s, given away free, averaged a $1,000 meal sale along with… I can personally guarantee you’d see premium coffee fountains spewing perpetual rainbows of jo for the drinking for free outside of restaurants.
“Know your market” is the prevailing advice here to any app developer. There are 2 working revenue models (and direct sales ain’t one of them!)
A) licensing to the hardware manufacturers for hard installs, or
B) eyeballs! (Advertising sales to drive exposure… pay per view, or pay per click, or similar.)
Since the app market’s consumer pricing default has already been driven to zero, it is virtually guaranteed not to every make any real rise, overall. All app provider upside has to come from other tie-ins (as above, or some other unique angle.) Consumer-direct revenue is extremely unlikely.
Because… if I spend $4 on a latte I know it will taste good, satisfy me and give me a jolt for that moment in time, it’s great. Many times I’ve spend 99 cents on an app and it’s crap, and then I have to deal with it being in my purchases forever. But I think it’s more about satisfaction, that we’d rather have a good 4 bucks worth than crappy 99 cent stuff. Not all 99 holds true, and Angry Birds is the best deal on the planet right now! But many are not so good, and so we hesitate, I think that’s what we do.
Mary you are right, good point. A few bad apples are ruining the case for the rest of us.
Unfortunately for small developers even if we make a great product we cannot possibly gain momentum if we start with a high price. Price is the only significant variable we can play with, as you would appreciate we don’t have budgets to pay for marketing. We have to start around free-99c margin.
The problem I guess would have been avoided perhaps with a ‘try before you buy’ policy. Or without such a policy, small developers would have no option but start with ‘free’. If they have a really good product they may gain viral momentum with ‘free’, but sooner or later they will have to set the dollar price and loose the momentum they gained if it isn’t significant enough.
Therefore an optional ‘try before you buy’ scheme would be an ideal solution for everyone. I.e. The developer should be free to choose ‘try before you buy’ scheme just as any other commodity seller.
Note that “try before you buy’ was much discussed in the Apple developer community
“But Apple has some pretty strict rules about doing so: every app on the store needs to be fully functional and stand on its own. You can leave out some levels of your game, for example, but you can’t put a timed limit on it or remove features that are central to the app itself.” (see http://www.tuaw.com/2009/02/08/app-store-demo-no-lite-yes/ for the rest).
Note that a ‘Lite’ version is not always possible. In may case I developed a free Lite version of my password manager app in which I limited number of passwords the user can store to 3, but Apple rejected it. So it is really up to Apple to improve the situation here not us.
I don’t have a problem paying the 99 cents, there’s not much you can get these days for a buck, but it’s probably more about the unknown, I payed $8 for a list-making app and I don’t like it, and I don’t think you can return these apps, so there is a bit of throwing bucks in the wind aspect to this, so that’s why I made the coffee comparison, because I know what I’m getting.
It comes from our experience in using Internet. Anything on net is considered free. Email, Chatting, Google Docs, News…
We really haven’t moved from that mindset for mobiles as the association with Internet behavior is strong. This behavior towards apps will change maybe over a period of time when the Internet apps become paid.
It’s funny, I am sort of the opposite. I will try some cheap apps or short Kindle books; I figure if I don’t like it or never read it, I haven’t spent much. On the other hand, I am particularly picky about something that is a recurring cost, so I am wary of an expensive daily coffee, and I still don’t have a smartphone with a high monthly cost.
One more thing: talking about believing that things are free… Dan, you apparently violated the copyright of The Oatmeal by copying the cartoon in full with the only credit being the link back to the original site. There’s no reference to getting permission, and you didn’t include any copyright notification. Unlike XKCD, The Oatmeal is not licensed under Creative Commons.
To be clear, I think copyright law is grossly out of line with reality today. We technically violate copyright every time we forward someone’s e-mail. I think we’d be better off drastically reducing copyright than trying to stifle our normal tendency to share ideas and media with each other.
I’m just pointing out that this plays into the whole discussion. I’m not sure what the best balanced solution is, but I’m pretty certain it is closer to free open-source software and Creative Commons media than to pricier proprietary software and rigid copyright restrictions…
I’ve only purchased one app ever, and I regretted buying it at $10. The app worked, but I wasn’t any better with it.
I have this feeling that all the apps even the books, music, and games that are available have this feeling of dispensableness to them.
I think that Andrew Hart has a nice point there, but I would also add that some people have the idea that software is available for free. And by free I mean free/opensource software or piracy. So why pay 99 cents for something if you can download it (legally or illegally) for free?
Another possible explanation popped into my head while reading this: The psychology of making an online purchase is different than that of paying somebody in person.
Even when I started downloading free Android apps, I would freeze when the “Permissions” dialog popped up. Instead of risking money, I’m risking my own privacy and security.
But if I were to walk into a brick and mortar store, pick up the same app off a shelf (the way us old folks used to buy ALL of our software), I’d feel very different about making the purchase.
Another example: I have a really hard time picking out MP3s to buy on Amazon.com, but I would carelessly lay down $20s like nobody’s business when shopping for CDs at FYE.
Perhaps it’s the social environment, the human interaction that puts the consumer at ease. Whereas with online spending, we’ve been trained to take extra care for our privacy, security and spending habits.
The lack of recourse is probably the biggest hurdle. If my coffee is bad I’m confident that the establishment will make me whole. My anxieties are managed by the coffee shop, but not at the Apple Store. All sales are final.
I think if Apple made it easy to get refunds or if purchases could have a trial window built into the process it would allay this anxiety of buying a lemon. Given the number of “lite” versions of apps there is a clear need for this but the proliferation of lite and full apps creates more confusion than it helps.
First, I agree with Duane Gran about the lack of recourse if the app is a dud/sham. I’ve paid $15 for an iPhone app but don’t want to plunk down $1 if the proceeds are going to enrich someone undeserving schmuck with a good idea for an app but poor execution (get 10 million people to pay $1 for a POS app and you’ve made some good cash – even if the app is crap and fails to meet expectations).
Second, Dan Ariely, why is the Kindle version of your “Predictably Irrational” book more expensive than the paper version?
Spot on Duane. I agree with you.
@Duane I think you’re spot on.
To counter-act buyer’s remorse you have the ability to justify to yourself that at least if it is bad you can choose not to buy your coffee from that store again. Perhaps the analogy for app purchases is outright vs subscription purchases?
It’d be interesting look at a comparison between paying, say $1 for an app, or paying $0.25 a month for the same app. I would hypothesise that people would be more willing to pay the $0.25 for one month (to at least trial the app for one month before paying the full $1) so they can “choose” to stop or not pay for the app in full even though this would mean that they’d have to “reject” 1 in 4 apps to just break even.
The cartoonist is right. I view apps as typically severely under-priced, which is what drives the creation of mountains of crap apps and basically malicious apps pooping out of app mills; making it very hard for useful apps to get noticed. The average iPhone/iPad app developer isn’t even making enough to compete with a low-end day-job (indeed, losing money!); but the public image is the false one of App Lords rolling in money. Look at what has come with the $1 and !FREE! game… Zynga and their ilk; a category could be classified as a sort of malware. At ridiculously low prices, the business model turns to deception that begins with attempting to get users to spend more than they believe they are spending. It will end at the same malware universe that has already destroyed the PC (which not coincidentally had quite a bit to do with shareware meeting up with everything being connected to the internet). Microtransactions also add up to creeping credit charges.
You can pay the price now, or you can pay it later. But you will eventually end up paying the cost.
I also believe it has to do with uncomfortability. In your mind what do you feel more comfortable with- walking into a nice warm restaurant with other people and buying a physical drink that you know will taste good and enjoying the atmosphere, or being(socially) by yourself buying an app while possibly hungry and having to go thru the technophobia of it all? Food beats games.
Sorry, but I have to dissent. As one of those folks who is very careful at buying apps, I think it’s because of two reasons.
The first is the inability to get a refund for buying complete garbage on app stores. If I’m served the wrong entree or a poorly cooked entree at a restaurant, they usually not only credit me that value, but give an additional entree for free. If I buy an app that’s a total lemon, the most I can do is leave a bad review and vent in the comments.
The second reason, which works in conjunction, is the belief that I represent a class of people, as with voting. My individual $1 is meaningless, just as my individual vote, but a politician gains power through the sum of these little votes, and an app developer similarly gains prominence through the sum of these little $1. Voters do their research, they fret about their vote, despite the meaningless value of their one, single vote, because they understand how they represent a class and if _every_ member of the class felt their vote was meaningless, no one would study the candidates before voting.
Dan, I believe you even did a lecture about how people will use money to punish others. I vaguely remember it went something along the lines of getting $20 with the option to give some portion of that to a stranger, where the amount would be doubled, and the stranger would get the same deal to give some portion back to the original person. The original person then had an option to spend money punishing the stranger if they chose to keep everything.
I’m very picky about spending $1 because I have no option to punish bad apps. Leaving a 0/5 star review is not a meaningful punishment. With any other retail purchase, I can easily return or exchange. That lets me make uninformed purchases, try it out, then retrospectively make an informed purchase through the option of returning it. If Apple wants more app sales, they need to have an easy return policy!
I’ll also add that with the case of Starbucks, or a similarly large franchise, patrons hold a lot of leverage in the form of being a repeat customer. And, therefore, Starbucks is more likely to refund $5 or resolve whatever problems you faced because you’ll spend another $500 on coffee over the course of the year. The authors of $1 apps are mostly unknown figures, ones from whom you’ll never see another app. And, therefore, they often treat their customers like crap because they have no need for repeat customers. That forces the customer, with no ability to punish, to be extremely cautious and do a lot of research to make sure the $1 ‘vote’ is going to a non-douchey person.
Leaving a bad review is a pretty good punishment for a bad app. Reviews make apps. My most popular app, “Sleep Sounds” seems to make people happy. They buy it and leave good reviews. Every once in a while, I’ll get a bad review from someone because of who knows why. It’s usually vile and immature and doesn’t actually point to a problem or issue. Those bad reviews take a long time to recover from. 5 stars is the average everyone shoots for. Unfortunately, a single 1 star review per every *10* 5 star reviews will bring your average down significantly.
People are more concerned about fairness than they do about prices. The emotional loss that you get from the feeling of being ripped off matters more than the effect on your bank account.
The availability of so many quality free apps makes people feel like the are being taking advantage of even more.
Agreed, I think the consensus here is that we’re buying something that we can’t return or even sell used, we know we’ll be stuck with it no matter what, until we have virtual app yard sales! This is what makes digital content so problematic, but I still think it’s all wonderful, even with the duds.
If there was a pricing model for apps and computer games too where you get it for free for first few days or first level and then pay a low fee for continued use only if you keep using or playing, I think I would happily pay a few dollars a month if I’m using the app constantly instead of the initial $0.99. For games $2 / hour or $5 / some kind of episode might be ok. It should be based on actual use instead of some automatic recurring monthly fee so that it wouldn’t feel like they trap you and punish you for not canceling.
This of course would push the developers into making their products good enough for customers to keep paying, adding new features or game content.
I know developers who have apps they have different version for, a free version, and an ad based version. They much prefer people buy the ad based version. They make far more in revenue through ads than from selling the app direct. And if they’re making more money through ads, that means the ad provider, which at least in the case of the iPhone is often Apple, is making more money as well. In addition free apps make the device more appealing, which is what the hardware manufactures want as well.
Alex as a developer I am the complete opposite, my primary objective and criterion for success is to provide superior user experience. Because of limited screen real estate most apps have to live with (especially on mobile devices), ads become inevitably intrusive, annoying and counter-productive for most users. I’d rather keep my app ad free and focus on the value I provide for users.
You can’t compare a latte to an app. Lattes are mostly the same. A $1 app may be lousy, acceptable, or even change the way you use your gizmo.
It would be very easy to drink a few lattes in one day but it would be much easier to buy a lot of lousy apps in search of the “acceptable”.
I definitely think the moment of consideration – which is often over-critical – is definitely a control mechanism so that we don’t foolishly indulge.
Many of the free apps are demos. It’s irresponsible and stupid for a company to ask you to shell out $8 for a product that cannot be freely previewed.
Others are intended to be open-source contributions or freemium ware, where forcing a fee would be entirely against the best interest of the creators.
A min charge would be stupid and destructive.
Well, i really believe that this depends on what are we willing to buy.
2 examples for you notice about it.1 person & 2 things to buy.
1,-Now days many people want to have SIRI so bad on their iPhones(non 4S ones) but MAYBE we are not willing to pay an upgrade for the “almost” exact same phone(assuming you have an iPhone 4), some of us are not willing to pay an upgrade just for SIRI. So what do we do ?. Find some alternatives like SiriProxies servers,similar SIRI APPs on AppStore,etc, and if we have some good references about it,at least i may be willing to buy it because of his functions like siri. BUT
2,- What about if Apple would mind to release SIRI for non 4S devices in the AppStore for some dollars let’s say : 19,99$.
I’m really sure many people would not think twice and buy it,because of they are buying what they know that they want & know so bad. And not paying for something they consider “useless or a scam or something bad”.
So for me, its about we may value depending if it can be touched ot not. because at the end of the story, it can be used which is the same as touched
!
people don’t like paying for items that are not tangable.
I think the real reason people agonize over spending money on apps is that the product isn’t fully known. People know what they’re buying when they purchase a $200 smartphone or a $4 cup of coffee (and they can return it/get a refund if they’re not satisfied).
When buying an app, the feature set isn’t always known until you’ve plunked down the money. Even then, you can’t get a refund if you’re dissatisfied.
For me it’s the “buy an app one day and the next they have it for free for a limited time” yes I love SOME of the apps I have payed for and yes on those apps I did like, felt like my dollar (or $2 ;P) was well spent (and i do want to support the developers of my hour long poop breaks ;P) but that’s kinda like paying for your $4 latte (let’s say you don’t get one every day, since I don’t with apps) when you can treat yourself to a free coffee on your birthday! You never know if/when an app will go free but more than likely the price will at least drop! Wouldn’t you buy more drinks at happy hour?
The reason Apple allows free apps is easy. Apple sells content in order to sell hardware. Content moves devices, and Apple has treated the iTunes store like this since day one when it was the iTunes Music Store. (iTunes online sales are still big, at $1B or so, but nowhere near the sales of iDevices or Macs).
Free apps == more apps for people who will buy more devices.
Contrast this with say, Amazon and what they’re doing with the Kindle Fire. Amazon’s strategy is the total opposite of Apple’s. Amazon’s goal is to sell hardware to sell content. Every Kindle Fire sold represents money spent by the customer buying Music, Movies, Apps and such. And Amazon’s using Amazon Prime to help tempt people to buy.
Considering that my company pays something like 25-35 cents per transaction for anything that uses the credit card networks, micro transactions just don’t make sense for apps. Apple would lose money selling anything for 15 cents. The free apps do make sense in this sense. Android has free apps too, and there are more Android users. So why do developers sell so many more iOS apps than Android apps? There’s something more subtle at work here than just categorization.
Why pay for something I can COPY for FREE? yarr commrade, everything should be free
People that think open source is the answer are idiots. Yes it is free to copy without guilt but the economics don’t work out for most types of software. There is too much software that will only be developed if x number of people pony up y dollars and competitor z isn’t allowed to copy it.
I think the issue is that charging any money at all, even 15c forces people to make a purchasing decision. It is not really the amount of money that is the issue, it is the fact that they have to decide, without first seeing the app in question whether or not it is worth spending money on.
When people go to Starbucks for a coffee, they have already decided they want a coffee, they’ve been to Starbucks before and they know what they are going to get, so it is quite an easy decision.
I think the cartoon isn’t that accurate for what happens when someone buys an iDevice. People do spend a lot of time on research before they make that decision. For example, should they go for the Samsung Galaxy instead? Yes, by the time they go to the Apple store for their purchasing visit, they will have made up their mind, and it will be an easy sale, but they have probably been there a few times already to try it out, and to other stores that sell different types of phones and tablets to try them out.
A buyer is concerned about being ripped off, regardless the price. A buyer doesn’t like to _give_ away money, no matter how small … or else pan-handling would be an honourable and profitable profession.
The $4 latte will be what the user wanted/expected. If not, it can be returned and a new one made. Satisfaction guaranteed.
The app is $1, or more, for something that may not work as advertised, or at all. And no refund.
I think the mental barrier is significantly higher for the first app you buy than for later purchases. Example: I have an android phone and an iPad. I use the phone 5 times more than the iPad but I made a few purchases with the iPad and none with the phone (yet). Why ? Proabably because giving a credit card number to Apple is a more streamlined process. For android I’m going to get there eventually, there is great stuff.
I think it’s not easy for people to accept paying money for software because it is not something you can see or touch, on the contrary, it’s a virtual thing. I believe that as humans, it’s instinctively difficult to comprehend the value of virtual things.
It wasn’t always easy to pay $4 for a latte. If you take a time machine and go back to before starbucks was created in the US coffee was not a premium item. Something has changed over time and now the norm — for a certain segment of society (not everyone) is that its completely acceptable to pay beaucoup $$ for a latte. Things change and norms change over time.
an interesting conclusion, though personally i disagree.
the reason I wring my hands when considering an app purchase, is security and practicality.
My phone is a portable device so it may not always be in my hands. as such it should never contain information about me that be can used by others to my detriment. this includes CC info, check-out account info, wallets, etc.
yeah the app may only cost a dollar, but if the payment info is subverted, then it will cost me far far more than that.
another thing you may want to consider: I never buy ANYTHING on a whim, and I’ve only ever seen one app that i still wanted to buy the next day.’
Lastly as an open-source proponent, i am offended by the idea of commercial closed-source software, so I will always look for OSS alternatives (Free licensed or not) before making a purchase.
oh, and very few people comparatively drink 5$ coffee. nowadays teh middle class is brown-bagging it for lunch, and are eschewing the starbucks for SAMS club.
>Lastly as an open-source proponent, i am offended by the idea of commercial closed-source software
I’m sorry but that isn’t very insightful. Linux/FOSS is what it is today because commercial closed-source software companies invested in it heavily. An “offended,” really? really?
sounds like you are offended that i am offended by closed source code. I’m sorry you don’t like it, but that is my opinion. also I think you’ll find that most of the companies that have heavilly invested in common oss technologies are companies that produce lots of opensource products like RedHat, IBM. Novell, and sun.
besides, if you are looking for insight, why don’t we discuss the security angle, which comprises the bulk of my post and is my primary motivation for posting. as it stands now, your reply seems to be more troll than comment.
Great point, Dan. I think if Apple had set the “standard” price at $0.99, as they did for songs, consumers would have a different expectation. They could have also enabled a free trial period of 7 days, after which you would have to buy or delete the app. They could have also enabled promotions to let apps become free without making free the standard comparison.
You guys can justify all you want about how low you feel the prices should be. The fact will remain that developers will resort to ‘creative’ ways of making money if people don’t pay what it costs to get it created. Low prices induce devs to put as little thought into apps as possible, and induce them to resort to deceptive tactics to get paid. Developers that are making enough that money is not an issue will put a lot more pride into their work.
People are ultimately getting what they are asking for, and this should not be a surprise.
Hi Dan,
I need a huge favor from you.
Could you please change the font on your site to a more traditional one (Arial, Tahoma, Verdana or anything similar)?
I am used to highlighting text that I read, just so I can get back to the right spot when I switch tabs/context etc. But the font you use on this site creates a shadow effect when highlighted that makes it really difficult to read.
On a different note, I am a huge fan of yours, and have recommended your books to dozens of people. Loved your first two books, and looking forward to the next one.
What I find that when you show people they are irrational they will try to rationalize it with more flawed rationality.
The worse thing I find is to insult them or tell them they are being irrational… there are a number of people posting here that are trying to deal with the uncomfortable feeling of being irrational and being
exposed…
To answer some of the points…
1. Not all coffe is the same, You can get a crap cup of coffee even at starbucks. I was sold one that after it burnt me, I got them to give me thermometer and it was a 79C. US$4 refund…. of what use is that?
They can screw up the coffee…
2. You may not get a refund for the coffee, the house may not be able to give youa better coffee. Eg my friends own a restaurant and it sucks they
know not to offer me their coffee.
3. Apps do have reviews. Read them make an educated guess.
IF the screw you, you leave a shitty review
and warn people not to buy it. I bought an offline reader that would not scroll down a web page for US$3.
4. There are free versions you can try. There are in app purcahses now..
…. and what IF you get ripped off, it is worth the risk
the other aprximately US$20 I’ve spent on 18 apps
had been well worth it and have improved qualify of life or saved my time.
Or provided my hours and hours of entertainment.
I find that a lot of people have never bothered how much their time is worth, how paying US$2 will save them US$2000 and can’t make a valid decision.
5. You can waffle on about risk of buying apps, but those people are very cheap, grown up in great financial hardship or have psychological issues which drives them to abandon logic and justify doing something unethical or stupid or will go without.
MSL — you are right to point out that many of the concerns being expressed are irrational. But, as Dan points out in his books and lectures, the goal isn’t necessarily to eliminate irrationality (because we can’t). The goal is to understand it so we can deal with it. And irrationality isn’t necessarily always bad. People here talking about how irked they are when they feel suckered into a bad deal are NOT saying that this feeling is rational — they are proposing that this irrational disproportionate reaction (which they aren’t criticizing — they are accepting it as part of human nature) might explain the phenomenon in question.
But the more important question is the one I posted early on, that nobody seems to acknowledge: Is the phenomenon in question EVEN TRUE? Is there ANY evidence that people who impulsively buy movie tickets do not impulsively buy apps?? I expect that some purchase decisions are different than others but that apps do not actually stand out like the cartoon suggests at all. Nobody so far has provided any legitimate evidence (aside from personal anecdote) that the entire phenomenon is real!
As a developer this has been a tremendously interesting topic. Many thanks Dan and all of you who helped me figure out many questions I have been asking and not getting answers for.
I would like you to consider:
1- Not all developers have the same motive. For majority in our community I believe it is not certainly about money or quick revenue. For me I would like to get paid only if my product has good value for the user and only if it is superior in terms of user experience. It won’t make me happy if you buy my product, you feel ripped off or you are not happy using it. I want a mutually satisfactory experience.
2- The price tag does not always reflect the value. Most of us are small developers. We would like too build reputation and establish relationship with users. Price is the only significant variable we can play with. Don’t judge a product simply by its low price. There are so many highly valuable products with low price out there. Check out other quality indicators.
3- Make an informed decision. Check out reviews if any. Have they got a good website? Do they have support pages? Can you ask them questions and do they respond? Do they have built-in Help in their application? Note that majority of developers will be happy to help if you have problems using their product.
4- Most developers would like to see a ‘try before you buy’ scheme as much as buyers if not more. Most developers trust their products. Buyers want, and we want this to be a fair game. However this is not entirely in our hands. It’s Apple’s call (for Apple products).
A big factor nobody has mentioned yet: choice paralysis and the size of the market.
Starbucks might have lots of options, there might be many different movies at the theater etc. etc. but that’s nothing like the quantity of apps available. When you choose to see a movie, you know it’s that one movie you’ll see now. There’s no concern that you’ll be worried about which of the 10,000 movies to watch. And you don’t worry about that choice from Netflix (or the public library for that matter) because it won’t affect your payment, you’ll only lose time if it turns out bad.
With apps, it’s easy to see that we could spend thousands of dollars pretty quickly on 99-cent apps. And anyway, with hundreds available in even a restricted search, we go into a different less impulsive mindset just because we are faced with the task of overwhelming choice.
Traditionally, Apple’s strongest suit has been to limit choice. You don’t have to choose among 17 different phones or tablets. There’s ONE iPhone with just a couple variants of scale for memory. There’s less reason to hesitate, because if you want it, it’s the only choice, so that’s that.
If the phenomenon in question is real, my hypothesis is that choice paralysis may be the primary factor in our mindsets. Just the knowledge that there are so many other choices makes us hesitate even when focusing on just one app in a given moment.
There may be an element of “established value to the purchaser” here. We took the decision to buy our first coffee a long time ago, we know the product and we have established our perception of what value it brings us, so the buy decision is simple because we know what we get for our money, it’s “do i need that particular value right now.”
However, if a new type of coffee comes out, “the blueberry mocha with Ketchup”, for instance. The decision to buy that is really different, we don’t know the value it will bring, so we agonise over it.
Everytime we look at a new app we are starting from scratch, we don’t know what value it will bring us , so we have to sell it to ourselves, which takes time.
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Perhaps it’s because most of the apps are completely useless. if apple users are stupid enough to pay twice or more for a comparably equipped machine then they are dumb enough to pay for these idiotic apps
Dan, I like your site.
There is a lot of good info here; except I am a little disappointed that I found this site only now.
I could have learned a LOT for FREE before I bought your book.
Yep, we are used to the free app, however they do take advantage of the try b4 you buy mental loophole, which is paying the price of having something halfway there.
So is crippled-ware the best option? You get 99% o it free, but the price of not having that 1% is bigger than 0.69p (in the uk).
I wonder what would be the effect of making a time-bomb ware? So that you can use it fully but you would get that annoying red counter; would we pay the price of not having that stressing number next to the app icon?
Very nice
cess – minijuegos
I think there are a couple of other considerations here too:
There are so many apps – I might find another one I like better so why commit to this one I have to pay for? If I pick up a free one I’ll dump it if I don’t like it, but to pay any price at all feels like a commitment.
Part of the ‘price’ is the time and effort it takes to download. I am new to the world of apps (Android) and don’t even know how to pay for one (do I have to have an account? Do I have to give credit card details?) It’s all effort – and risk – that I don’t have to expend if I am downloading for free.
Still, you’re right. I feel lousy that I avoid paid apps. Lousy and irrational.
There is a big difference between tangible and non-tangible goods.
Hi,
please help to apply your theory to my wife.
A lot of software developers are really hooked to the idea of Freemium, and in many cases rightly so.
Why would you try to sell your app for $1 when through advertising, in app purchases, subscriptions, and upgrades to premium apps you can get much much more value out of each individual consumer.
A great example of this is Google. Google gives its amazing search system away for free to everyone in the world, however they are monetising this in a simply brilliant way through advertising.
At least with a crap coffee you can take it back and complain about it with the potential of getting a free one or your money back. With an app, if I pay for it and discover it’s a load of poop, it seems a much more difficult process getting that money back. Give me a free cut-down version so I can play with it then I’ll decide if I want to buy an upgrade for the full functionality. I would rather not waste my money on items that I get no value out of regardless of how inexpensive it may seem.
Nick absolutely. A free trial period is the best option for everyone.
Note that cut-down (lite) version is problematic: Apple for instance is very strict about lite versions; they do not allow those unless essential features remain untouched and this is not always possible.
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I quite agree with your cartoon. may i say this, do you know that people place vaule on place of purchase of product? if Amazon places value on Apps. The general beleive is that people may possibly buy and feel ti worths the value, that is not really so.
now as marketer if you have made a trend of observation then consider lowering the price to get more cleints and later build reputation of your product. then you can place your product to say 99 cent. this can be applicable to all product.
App prices are set by the developer, not Apple.
I thought this $1 app thing was the entire business model. How many millions of dollars have been spent on the store for apps that were used once and never again? It was my understanding the success of the App Store is, at least partially, based on how readily people will throw $1 at something without being too stressed if they don’t use it that much, cos, y’know, it’s only $1.
I found it very funny. It not the 1$ that make the different here to pay or not. When you think about it rationally, it not lot of money to spend on a good app. BUT the different here is that in some ways you can get it on free. So when you have on one hand the option to download it on free or pay for it that not a hard choice for most people. Try to put some drink you made for free and write sign that if he like the drink put 1$ and no one will be close to this place. i believe most of the people will not pay even they like that. try to put the one who make that drink there and he will give the people the drink and i believe most of the people who will drink will put the 1$. so what i am saying, people are don’t see the developers and it easy download it on free without paying because you don’t feel you hurt them on this way.
I think after you pay for the iPad or the iPhone which is already a big chunk of money, and you still are paying dollars here and there my inner cash register is still totaling and it still feels like I am paying for it. So now i am on alert to use the “critical” “rational” thinking on full tilt like an over reactive immune system. it would be the same thing with the latte, etc. another part of buyer’s remorse, maybe buyer’s guilt?
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i will buy for me iphone but i’m not sure Which one ? apple product every year comes new one , therefore its very difficult to decide me . Do you have any idea ?