Posts about consumer behavior by Jordan Cooper

consumer behavior

Free Trials Are For Freetards

Posted on May 10, 2013

It’s nice to see there’s a developer that actually understands business.

If you sell a low-priced app in the App Store with no free version, you make money from every tire kicker.

Free “tastes” work out best financially only when the cost of purchase (or lifetime customer value) is high and target market size (or sales conversion rate) is low. Consider the difference between Mac apps like Photoshop, Final Cut Pro, Logic Pro and their cheaper/lighter brethren Elements, iMovie and Garage Band.

Almost all potential customers would want to see what they’re getting before plunking down several hundred bucks for the former – the advanced, pro products. Yet if they do like what they see and go on to purchase it, you’re getting a huge chunk of profit from each conversion regardless if the overall rate is fairly low.

For the latter applications that are feature-light and cheaper, you’re relying on a larger market of much more casual users. Yet if they have any mitigating need for the solution you’re offering, a high percentage of this group would indeed pay for it given the right price point.

Developers are doing themselves a disservice to their bank accounts by offering any free trial period at this level for one of two reasons:

1. When given the choice, a large portion of users that would have paid outright will opt for the free trial instead, many of which never converting past that taste test.

It’s like if a car salesman who has just filed all the paperwork, financing, insurance; the customer is in the middle of writing the down payment check; and right before they sign, convinces them to go take a test drive. The biggest sin in sales is not knowing when to shut up and take the money.

2. Most opting for a free trial will not pay regardless of how cheap or great the app is.

Studies in behavioral economics have shown that the psychological difference between $0.00 and $0.01 is enormous. The mere act of opening up one’s wallet is a giant leap that certain people will just not take.

Anyone who fits this demographic will never be your customer. Never. Stop trying to get them. It’s a lost cause. These folks aren’t tire kickers. They don’t even own a car in which to kick said tires. Fuck ‘em.

Selling a thousand dollar piece of software with no free trial period or not even a lower priced feature-light version? You’re probably doing it wrong. If not, that must be one insanely valuable, life-changing, orgasm-inducing app.

Selling a 99 cent app that has a free trial period? You’re probably doing it wrong. Actually, you probably, have a really low threshold for failure, deep-seeded self-esteem issues and should go see a therapist immediately.

apps, business models, consumer behavior, economics, sales

We’re All Tired Of Daily Deals For Shit We Don’t Want

Posted on November 11, 2012

Daily Deals Are Unhip & Groupon Isn’t Disruptive

In North America, where the daily-deals business is now shrinking, the reasons have to do with a longer-term trend Groupon is unlikely to stop. The group-buying fad has passed. A core market of bargain hunters will keep going for Groupon deals, but Groupon is likely to face the kind of slow bleed that eBay saw in its online-auction business.

In the same way that those weekly circulars and ‘value pack’ coupon envelopes in the mail have come to be merely a straight-to-trash annoyance by most folks, these daily deal sites have quickly became the online equivalent.

The reasoning? Because we’re fucking tired of them. Especially when most offers are for products, services, establishments that we can frankly not give two shits about and probably suck anyways. Why else would a business run a Groupon that lops off 75% of their gross income anyways? Successful places don’t need to embark in this type of exorbitant loss leader.

Now, when offers like this were scarce (you know, when daily deal sites only had one fucking daily deal), people were willing to take a chance on the unknown. But with all these players in the space nationally as well as hyperlocal versions of the same model, consumers now have an abundance of choice and it’s not as urgently enticing to jump on a deal like they’re getting a steal. Tragedy of the commons rears its ugly head in yet another industry.

On top of that, there’s just not enough inventory to go around. Can someone tell Groupon that I don’t want a fucking manicure, horseback riding lessons or a shitty custom bobblehead doll? When I’m opening their app less and less and I’m more surprised when there actually is a deal that comes anywhere close to of interest to me, the writing is on the wall.

You’d have to be a lunatic now if you still don’t think Andrew Mason and friends should have taken that $6 billion from Google two years ago.

A decade ago, eBay auctions were a cultural phenomenon, with many consumers drawn by the thrill of winning an auction. In time, the allure of that challenge passed, prompting eBay to adopt a fixed-price model. Some eBay users still love auctions, but that business has become more of a niche for eBay. Just as the group-discount business will become for Groupon, LivingSocial, and others, as online consumers move onto the next buying fad.

The value proposition is in the product you sell, not the method of payment.
Now can someone tell me where I can get a horse manicurist bobblehead made?

consumer behavior, daily deals, groupon, small business