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In-app purchases outstrip upfront payments

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Mobile app users spend 24% more on in-app transactions than on upfront app payments, according to an online consumer survey by Gartner.
Consumer preference for in-app transactions indicates that the flexibility they offer is delivering a better customer experience than paid-for downloads.
“Overall, the survey results showed that mobile app users are spending $7.40 on paid-for apps every three months and $9.20 on in-app transactions, resulting in a quarter more spending on in-app transactions,” says Stephanie Baghdassarian, research director at Gartner. “This confirms that once users are confident that an app delivers the expected value without having to pay upfront, they then find it easier to spend on in-app transactions.”
Baghdassarian addes that not all users will activate in-app transactions, especially those who cannot see the value of the app. However, those who see the value are more likely to spend higher amounts, with one user in three spending, on average, more than $5 a month.
The survey found that younger people are more confident with in-app transactions than their elders.
Although in-app transactions typically drive higher mean spending across all age bands (except for the 35-44 band, where in-app transactions equal upfront payments), the gap between the two models is wider among the younger users — the 18-24 and 25-34 segments.
Younger users are more confident in spending within an app than older users, who are more comfortable with the classic model of buying to own and use. For mobile app providers, going forward, younger generations are unlikely to lose confidence and expectations about in-app transactions.
The survey also found that more than 655 of respondents said their spending remained the same across paid-for downloads and in-app transactions.
However, among users who have changed spending levels on mobile apps in the last year, 62% have increased their in-app transactions, versus 55%for paid-for downloads.
“There is appetite for in-app transactions, as they allow users to ‘try before they buy’ and validate the offering before committing further,” says Baghdassarian.
“A great customer experience leads to users advocating a product or service; it also keeps the user a loyal and returning consumer of the service,” Baghdassarian says. “Mobile app providers should consider recurring in-app transaction options, as well as an all-encompassing one-off upgrade to a premium version of the app.
“A good approach is to sprinkle in extra features that drive in-app transactions along the life cycle of the app, so the user has the choice of what to pay for à la carte, while still offering the option to purchase the full package if desired.”
Providers wishing to focus on offering the best customer experience should be wary of in-app advertising, which, according to the survey, has yet to prove that it delivers value to the user. Only 20% of survey respondents indicated that they “often click on advertisements contained within mobile apps.” More importantly, almost two-thirds said they do not click on ads within mobile apps.
“Whatever the nature of the app — be it for a game, productivity, fitness or entertainment — there are opportunities to deliver extra value through in-app transactions. Delivering extra value will drive users’ engagement and, eventually, satisfaction,” says Baghdassarian.