Marketing research reveals free apps are bad for business

A recent marketing research published in the Journal of Marketing reveals that offering a free version of an app reduces the speed of adoption of the paying version of the same app. In other words, you will reduce the odds of selling your mobile app if you propose a free version. This is especially true for hedonic apps (gaming, fun), the study reveals. This study was carried out on the basis of 12315 apps covering a 3-year period of time.

How the data was collected 

The authors used a dataset of 7.7m observations on 12315 mobile apps
The historical data on the apps was scrapped from three different sources for a 3-year period (feb 2009-Jan 2012). Information for more than 460000 apps was collected; eventually only those apps were considered for which the data was complete.

Can product sampling be compared to free app strategy ?

The authors make an interesting parallel with past research on “sampling”, a common practice in the retail sector. They stress however the differences that exist with the digital economy. There is no recurrent purchase behavior for information goods (like mobile apps) and the cost of giving a sample (the acquisition cost) can therefore not me amortized over several purchases.
Converting users of free app to the paying version of the same is therefore a totally new situation that can hardly be compared a situation of the past.

Conclusions 

There are 4 main conclusions

1. the existence of a free app negatively impedes the adoption of the paid version. This effect is even stronger for fun and gaming apps.
2. at an early stage of a paid app, the developer reputation plays a bigger role on the app adoption than the app rating
3. at a later stage of a paid app, the app rating plays a bigger role on adoption than the developer reputation
4. the effect of rating on app adoption is much smaller for hedonic apps (fun and games)

By Pierre-Nicolas Schwab Pierre-Nicolas est Docteur en Marketing et dirige l'agence d'études de marché IntoTheMinds. Ses domaines de prédilection sont le BigData l'e-commerce, le commerce de proximité, l'HoReCa et la logistique. Il est également chercheur en marketing à l'Université Libre de Bruxelles et sert de coach et formateur à plusieurs organisations et institutions publiques. Il peut être contacté par email, Linkedin ou par téléphone (+32 486 42 79 42)