For existing brands, having an app just for the sake of it could be a bad move. But, with the right engagement and pricing strategy, apps can still make sense for brands, according to new research.
The thinking around apps has evolved over the past few years to where it is widely accepted that not every brand needs an app, especially as opportunities proliferate for engaging with mobile users via chatbots, digital voice assistants and other means that are typically not as heavy a lift as apps are. However, apps are still the gold standard for providing a robust and engaging mobile experience and may make sense in certain scenarios. If marketers continue to focus on making incremental improvements to apps, there chances of a successful app increase.
Once brands decide on developing an app, one of the first questions they encounter is should it be free or cost to download. This is one of the issues looked at in the latest report by researchers at Flinders Business School and LIUC, Bocconi and Loughborough universities. The research, which originally appeared in The Journal of Advertising Research, examines apps as brands and offers some specific guidelines around what marketers should do with pricing when choosing between very common scenarios such as launching an app for an existing brand versus launching an app with a brand that is new to the world. It turns out that the answer to pricing depends on the lifecycle of an app.
"The main takeaway is that managers of existing brands should launch apps primarily for the purpose of engaging consumers with the brand seamlessly, and should give out the app for free," said Lara Stocchi, professor at Flinders University in Australia and a co-author of the research.
On the other hand, Stocchi said that so called "new to the world apps," "offer opportunities for entrepreneurship and innovation and should be given out at a price to convey the sense of uniqueness and coolness to consumers."
Leading brands should give away apps for free
According to the Flinders Business School report, which cites data from Statista, there are 2.6 billion smartphone users worldwide and 2.2 million apps on the leading app stores. In addition, apps make up about 3.8% of the gross domestic product in the U.S. alone.
The report correlated brands' apps with their brand perception and found that an app's market performance is tied greatly to its ability to attract as many users as possible, which leads to a stronger brand image. According to the report, "apps linked to an offline or online brand attracted more users and obtained stronger brand image if made available to consumers at no cost."
Apps can serve brands as an owned media channel, the report found, noting that Tiffany & Co. saw sales spike 20% after launching its Ring Finder app and that Domino's Pizza upped its revenues 19% after introducing its app that lets consumers order food directly. By investing in developing apps with good content and functional usage, brands can increase revenues.
Consumers will pay to support non-branded apps
The report offered its authors some surprises, particularly in regards to how to price apps that aren't attached to an existing brand. Hint: consumers are willing to pay for a high-quality app.
"Paid apps branded independently attracted, on average, more users than paid apps linked to an existing offline or online brand," according to the report.
"Having an app just for the sake of it might be detrimental to the image of the brand."
Flinders University professor
Apps such as Shazam Encore, Angry Birds and Fruit Ninja, which offer paid versions, were high on the list of paid apps ranked by usage.
"Many app developers and providers might think that to bolster downloads it might be best to give out the app for free, but here we see that they should charge a small price and that the fact itself of charging a small price can influence consumer perceptions of uniqueness and coolness in a positive way," Stocchi said. "Consumers are also actually inclined to support developers through the payment."
Advice for marketers
Marketers should take heed of this data when developing their mobile strategy. Existing brands with established apps should take advantage of the medium as a way to connect with consumers and increase engagement, which can in turn help drive sales. In this scenario, it pays to take the time to develop an engaging app that provides value to consumers, such as the ability to seamlessly order products or be entertained via compelling content. These apps should be given away for free.
"For managers of existing brands wanting to offer an app as an additional digital touch point, cutting through the clutter and the abundance of options is essential," Stocchi said. "Having an app just for the sake of it might be detrimental to the image of the brand. Therefore, offering an app that can be turned into a venue for consumer engagement and entertainment is paramount."
On the other hand, startups that are looking for monetization vehicles should be aware that consumers are willing to support apps by paying for them. In fact, an app may be perceived as having a higher quality if consumers have to pay for it.
"For startup and new entrepreneurial ventures, apps are likely to continue to be a possible pathway to market, as long as concrete considerations on branding and pricing strategies are in place, because positive perceptions of quality start from the basics of branding also in the digital world," Stocchi said.