Does price matter? Koen Pauwels investigates where in the world consumers are most sensitive to costs, user reviews and star ratings.
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Today, people can search online to compare prices on any given product, while informing their decision to buy based on reviews and ratings from consumers who have already bought and tested it.
In a recent study, my colleagues and I decided to find out whether these aspects are equally important everywhere ‒ or if there are country-by-country distinctions between what customers emphasize before buying.
We decided to focus on paid apps, for several key reasons. First, they are a global product, available and similar in every country. Second, they are a big business representing many other digital products in their typical price range of $0.49 and $0.99 to a few dollars.
What we discovered is something every manager should be aware of before launching and managing products across markets.
Similar reaction patterns
750 million consumers have bought over 100 billion apps since Apple’s App Store was established. So far, paid apps have generated $72 billion worldwide. However, a closer look on historic app prices revealed something interesting.
When PopCap Games’ «Plants vs. Zombies» cut its price from $2.99 to $.99, it gained a top-5 rank in countries such as Israel, Turkey, Italy and India, but only a top-25 sales rank in markets like the US, Germany, Brazil and the Netherlands.
Such different reaction patterns also appeared when consumer ratings changed.
When ZeptoLap’s «Cut the rope» game began malfunctioning in a few features, consumer ratings plummeted within hours across the globe. Its popularity dropped 35-50 % in countries like China, Hungary and Venezuela, while only dropping less than 15 % in Denmark, Brazil and Vietnam.
So we see that customers in different countries show vastly different reactions. We also think we know why this happens.
Masculinity, income and social approval
We found that consumers were more sensitive to price when their society values masculinity, materialism and strict rules, (e.g. Italy and Malaysia). Consumers were most sensitive to star ratings when their country values individualism (e.g. the US).
Interestingly, the number of reviews matter as well, especially in the European markets that are rich and have strong income equality, (e.g. Luxembourg and Norway). As to cultural factors, consumers particularly appreciate a high number of reviews in societies where social approval is very important.
In other words, the Law of Jante has a strong influence on Norwegians, even when browsing through the app store.
Lessons for managers
Companies would be wise to strive for higher star ratings instead of a large volume of reviews in markets where customers care more about quality than mass appeal, (e.g. North America).
Conversely, managers could increase sales by offering incentives for customers to leave reviews in countries where the number of reviews are more important. In Luxembourg, we found that companies could double the price of their product as long as they doubled its number of reviews.
Managers anywhere should be keenly aware of how these cultural and economic differences across countries cause wildly different customer reactions. Those who adapt their activities successfully will find it easier to accurately forecast and improve sales.
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Kubler, Raoul V; Pauwels, Koen; Yildirim, Gokhan; Fandrich, Thomas. (2018). App Popularity: Where in the world are consumers most sensitive to price and user ratings? Journal of Marketing 2018.
Text: Eivind L. Johansen, Communications Advisor, BI
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