Tuesday, December 2, 2008

Application Segmentation in the AppStore

The Apple AppStore has now more then 10,000 applications on the shelf.

We thought it is time to talk about our findings and assessment of the different consumer and application segments we came across in the AppStore. For the sake of gloabalisation I am going to use US Dollar in this blog entry.

1. The Free App
New iPhone users like free apps because they are free. Isn't it part of our human nature to gather stuff? Yes, iPhone users that are gatherers go for the most popular free apps. What value do free apps offer? Promotional apps and light versions might be nice for a week or so. Apps that complement an exiting service such as Facebook. LinkedIn or Google are actually very useful. It kind of makes sense for those apps to be free since they make their revenue via their web site. I like the Facebook-like apps on the iPhone better than the web2.0 based overloaded desktop browser version. The iPhone forces the app to be simpler than on a large screen browser.

We found: The ratio between downloading a free app and using a free app is very low. Getting 50% of consumers that have downloaded a free app to actually use it regularly is a good result. 

I personally decided to limit my number of free apps on the iPhone because it start to get cluttered. I can see how apps that offer some addition interaction channel for free can justify to be free (Facebook, Linkedin, Remember the Milk, Google, etc)

2. The Almost Free App (aka 99cent app) 
New iPhone users also like the 99 cent apps. Statements like "limited time only" make the common app-gatherer to grab the app. Maybe it has to do with the fact that a song in iTunes is more expensive than a 99cent app - makes the app look like a bargain. Maybe the iTunes Store users are also conditioned by the music downloads. You download a song and keep it forever. Seriously, no one wants to keep an app forever on the iPhone. 

Developers seem to use the 99 cent prize tag to make it from the "recent" page to the "most popular" page. If you don't become popular your sales numbers will degrade continuously. 

We found: People are starting to realise that most 99 cent apps are trashware. Often the app description raises a false expectations and users are disappointed once the app is installed. 

I personally do not longer buy 99 cent apps. I started to be very selective. Most 99 cent apps are trashware anyway. I often ask myself "why are they selling for for 99 cents. Is it value or just a cheap low quality app?". Started last week to delete some 99cent apps from the iPhone.

3. The Value App
Value apps are more expensive than 99 cent and less expensive than $3.99. Consumers see them as being valuable because they solve a particular problem well combined with a realistic prize tag. The app is stylish and simple. Often the developers of 1.99 app wants to distinguish themselves from free and almost free apps by sending the message "We think this is better than the 99 cent stuff"

4. The Quality App
The 9.99 apps covers this segment. I like apps like Things and agree with the price tag of $12.99. The developers did a great job and should be rewarded for their work because we want to see more of those well-designed apps. 

5. The Niche App
These apps can pretty much ask any for any prize. Maybe justified because they will have only a small customer base. I have no niche app on my iPhone but I can imagine that some business or professionals are happy to get an app that makes their job easier.

I noticed some app in the navigation category that offers nautical maps. Why should they not charge $59 for those?

6. The Crazy App
There are always some smart developers that try to charge people $1000 for literally nothing. Get 2 customers and you made more money than the 99 cent apps selling 2000 times. 

My predication is that the prizes will become more real and consumers have to expect to pay between 2.99 and 9.99 for useful apps. 

My personal target is to have less than 7 free apps, 5 apps for 99 cents,  5 apps between 2.99 and 9.99, one app between $15 and $30.

I will not hesitate to delete 99 cent apps and through them out or replace them with new 99 cent apps. I think I would hang on to any value (2.49 - 3.99) and quality app (9.99).

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