University of Twente Student Theses


The mobile moneymaker: how tuning the configuration of product characteristics and pricing can increase profitability of app developers

Spriensma, G.J. (2010) The mobile moneymaker: how tuning the configuration of product characteristics and pricing can increase profitability of app developers.

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Abstract:PURPOSE – Mobile Appstores only recently attracted attention after Apple introduced their Appstore. With the tremendous increase in the number of smartphones the mobile ecosystem is to become important. With expected app revenue of 30 billion in 2013, price discrimination methods, already used in other types of markets, happen to be increasingly important. This study aims to map the mobile ecosystem and find feasible price discrimination methods, with a specific focus on virtual goods, which turns out to be a major revenue driver. APPROACH – This study is founded on extensive literature about price discrimination and information systems aimed at the mobile ecosystem. By following a structured literature search much effort has been done to not miss important papers. Based on existing economic models, a model aimed at the virtual goods situation could be derived. Because one of the variables in the model was unknown, a survey, based on prior literature, was developed to use as a measure of correlation. To show instrument validity, conceptual validation, pretest, pilot test and statistical controls are used. FINDINGS – This study shows that virtual goods are from both a product characteristics perspective and a price discrimination perspective the best monetization method. Furthermore, the results of the study show, that although literature suggests different, bundling, versioning and virtual goods are actually different sides of the same concept and hence one economic model could explain all three. The economic model shows that offering goods together in a bundle is always favorable regardless of the correlation between goods, although the degree to which bundling is favorable differs. Additionally seven measures, to estimate the correlation between two goods in the mobile ecosystem, are proven to indeed influence the correlation between two goods. VALUE – This study contributes in many ways to the academic world. First it contributes to a deeper understanding of the mobile ecosystem as almost no prior literature is available. Secondly it connects two research streams, about bundling and versioning and offers a theoretical solution for combined offerings. Finally this study elaborates on the, unexplored, virtual goods territory and partly validates preliminary research about motivations to purchase virtual goods. NEXT STEPS – To implement the findings of this study, mobile developers should reconsider their functionality offering based on the measures found in this study and aim for the most diversified (low correlation) offering. While diversification yields higher profits in general, bundling high correlated goods is relatively more favorable over the a’-la-carte offering so with an existing set of functionalities, it is recommend to bundle the highest correlated goods. Several interesting further research ideas can be derived from this study. Most importantly is how a’-la-carte pricing and bundling can be mutually used within companies and how bundling affects competition. Moreover, validation of the measures for correlation should be replicated in more reliable and representative sample populations. Lastly customized bundling i.e., variable good choice within bundles is based on unrelated literature a viable research opportunity.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
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