1.
Dan Ariely, a leading behavioral economist, my inspiration and the reason I first got into behavioral economics (alongside Uri Gneezy, another brilliant mind), wrote extensively on the allure the FREE price tag has on us. See, for example, the third chapter of his first book, “Predictably Irrational”. Here’s the video cliff notes version:
2.
Prof. Ariely also wrote a blog post titled “This Is How I Feel About Buying Apps” in which he discusses the interesting case of paid iPhone apps. Why is it that people are willing to pay $500 for an iPhone, but are reluctant to pay 99c for an app? I’ve heard many friends and people in my professional network which published apps, complain about this phenomenon. Ariely suggests that we are anchored to expect apps to be free due to the multitude of free apps on the app store. That’s an interesting and plausible explanation I agree with. In addition to it, I have another suggestion as to why (some) people shy away from buying apps. I think that people can justify a one time $500 expense to purchase an iPhone by saying to themselves “This is a great buy and well worth the price tag. It’s THE BEST phone there is and it has everything you’d ever need in a phone!”. Buying apps might make people feel their decision was only partly right, because now they have to pay extra for complementary functions. Moreover, a one time $500 expense is hefty, but you only feel the pain once. Occasionally buying apps, albeit for as little as $0.99 a piece, makes you feel (some) pain in your pocket over and over again.
3.
Earlier this week, the nice folks over at Macadamia Apps offered one of their apps, Groupshot, which usually goes for $0.99 for free for a limited time frame of 24 hours. In a blog post, CEO Yair Bar-On writes on their experience and reveals some numbers. Apparently, in those 24 hours, almost 225,000 people downloaded the app. Quite a boost from regular daily sales. However, only about 100,000 people launched (let alone used) it even once. In other words, more than half (roughly 55%) installed it just because it was free and they wanted to secure the low, limited time, price. Incredible.
To sum up, this is just one more example to the allure the word Free has on us consumers. In this case, at least 125,000 people fell to the free trap. Quite remarkable if you ask me. I wonder what will happen if you poll the different users of Groupshot – those who paid for it and those who didn’t. Who will report higher satisfaction? My hunch is the paid users (see cognitive dissonance, etc.).
What do you think? Are you reluctant to pay for apps as well? Are you more likely to use an app you purchased in comparison to an app you installed for free?
Image credit: Brad Stabler, CC by-nc-sa 2.0.
