App Marketing

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There’s a lot of data available to help you decide which app to buy for your smartphone, but which you let you influence your choice depends a lot on where in the world you live

You might think that having the same product at the same price across countries would mean they were purchased in exactly the same way. However, there is much more that goes into the decision to buy a product than just price – and this changes depending on where you live and what culture you associate with.

With smartphones and internet access becoming more and more widely available globally, apps are becoming seen as a cheap alternative to forking out hundreds and thousands of dollars for services and equipment like healthcare, finance, navigation, and electricity management. Alongside innovative start-ups and established tech companies, brands from all industries are developing apps not just to provide a service or sell a product, but to just be present in the App Store.

This world of app overload has become so competitive that consumers are being presented with a slew of information – from ratings and reviews, to rankings, categories, updates and, of course, price – to aid in their decision making. But with so much data available, which is most important in the decision to download or not to download?

The more common smartphones are, the savvier consumers become

Price and ratings are generally considered the most significant influence on sales, but there has been limited research into how that differs across countries and markets. In particular, there’s been little work on how factors such as culture and social influence affect consumer decisions around the globe – an important insight needed by developers and marketers.

To investigate, my colleagues Raoul Kubler, Koen Pauwels and Thomas Fandrich, and I looked at data on thousands of apps across 60 countries, and discovered substantial and systematic differences in sales sensitivity to price and ratings. Our resulting framework is able to explain such differences based on the different meanings of price and ratings within different cultural, economic and structural circumstances.

For instance, we found app price sensitivity is lowest for countries that have a less ‘masculine’ culture, such as Scandinavia (e.g. Norway, Sweden) and Central America (e.g. Costa Rica, Panama). For economic factors, app price and ratings sensitivities are higher for countries with lower income inequality, including much of central Europe (e.g. Luxembourg, the Czech Republic) and Asia (e.g. South Korea, Kuwait, Lebanon). In countries with a higher number of smartphone users, consumers are more sensitive to both price and ratings: the more common smartphones are, the savvier consumers become.

With so much data available, which is most important in the decision to download or not to download?

Interestingly, while price sensitivity for apps increased with smartphone penetration in the market, and is thus higher in mature economies (e.g. South Korea, the United States) than in emerging ones, in contrast, average income levels had no significant impact. This means low income levels and the classic definition of price as a cost may be trumped by other factors such as reviews and ratings in determining the market’s price sensitivity.

While seemingly straightforward, price has a more nuanced interpretation than just its face value: it represents both a cost to the consumer and a signal about the likely quality of the product. Culture also has a big role: the importance of price in relation to quality is learned from an early age through socialisation with family and friends, as well as other cultural dimensions such as familiarity with the product.

The opinion of other product users is particularly important for consumers uncertain about a purchase. Because they are user-generated, ratings have to be both given by users and interpreted by other users to influence their decisions. Research has shown a higher importance of brand credibility in cultures with a high level of ‘uncertainty avoidance’, meaning the higher uncertainty avoidance in a culture, the more online ratings could drive purchase.

App price sensitivity is lowest for countries that have a less ‘masculine’ culture

So the big question is: do these large cross-country and cross-cultural differences mean developers need to devise a separate offer for each country? Simply speaking, no: similar countries often have similar sensitivities, providing a means of grouping countries. East Asia (specifically Malaysia, Indonesia, Thailand, Taiwan, South Korea and the Philippines) and continental Europe (specifically the Czech Republic, Luxembourg, Spain, Italy, Greece and Poland) appear to be the most price sensitive, while Central America (specifically Panama, Costa Rica, El Salvador and Guatemala) and Scandinavia (specifically Norway, Sweden and Finland) appear to be the least. Developers could thus consider charging lower prices or bringing out cheaper versions of their apps in East Asia than they do in Central America. Of course, the potential benefits have to be weighed against the costs of price discrimination, including physical costs and (of course) consumer fairness perceptions.

Developers with knowledge of those factors can customise price and product characteristics and stimulate positive ratings. Our research provides a first step toward such an understanding. There will always be those tech savvy consumers who use an alternative country’s App Store to purchase if they are aware of different price points or availability, but these insights could help companies identify where other factors such as word-of-mouth might be more influential in certain countries than in others.

Our findings run against the simple ‘developed versus developing’ distinction, and instead reflect consumers’ purchase behaviour and marketing effect differences along several cultural, economic and structural dimensions. Fortunately for marketers, these differences are largely predictable and are related to cultural and other systematic factors shared in groups of countries; that means such considerations could aid in differentiated and locale-specific marketing approaches.

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Gokhan Yildirim

About Gokhan Yildirim

Associate Professor of Marketing
Dr Gokhan Yildirim is Associate Professor of Marketing at Imperial College Business School.

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