Page 86 - MYM 2016

Engaging Customers in the App World
that he made a poor investment. is paradoxical form of behavior, which is called dead-loss e ect, provides us with the prediction that on average, once a customer is tied up with a membership (in our case a subscription), he or she will use the app more frequently compared to someone without a membership.
Prospect theory (Kahneman & Tversky, 1979) argues that the value function is normally concave for gains, convex for losses, and is generally steeper for losses than for gains. Building from prospect theory, aler (1985) investigates integration and segregation of gains and losses, and shows that an increase in a loss should be integrated whereas an increase in a gain should be segregated. e loss
on consumer’s perspective is the monetary amount given up in exchange for a product or service. According to the theory, spending $1 on ve dif- ferent occasions (i.e. IAP) results in less value than spending $5 on one occasion (i.e. subscription). erefore, this well-established consumer theory also supports our argument that subscriptions will be a better alternative to IAP. A combination of
the two models, subscription and IAP, would be challenging since the customers would expect to have access to full content, and it may back re if they have to spend more money through IAP while already paying for the subscription.
It is also bene cial for the company to imple- ment the subscription model to create an exit
barrier, especially in non-contractual situations where switching costs are low (Shapiro & Vivian, 2000). Even though customers of subscription ser- vices could exit without an additional cost, they would still need to take the action to opt out, which is expected to occur less likely because of inertia and app stickiness.
e new subscription model is great news for companies that strive to keep their customers sat- is ed, and a push for others to do so by focusing on the quality of the app, customer experience, and customer engagement far more than they used to. In terms of analytics, the new structure creates an exciting opportunity for marketers in terms of obtaining highly relevant information about the customer. Subscriptions provide relevant, up-to- date information about a customer versus paid apps that could generate outdated and potentially misleading information. For example, a customer who has a paid app on their device might be dis- satis ed with the app but could continue using it since there are no additional costs involved. is would prevent the developer from understand-
ing the users’ true feelings about the app and thus provide incomplete information about the custom- er’s perception and/or satisfaction with the app. Alternatively, a customer with a paid app on their device may no longer use the app, which could lead to out of date information about the user. On the other hand, regarding subscriptions, one can infer
fig. 2: suggested revenue Models for Di erent types of apps
86 | MINd YOUr MarkETING OCTOBEr 2016