I am a tech-geek, who would happily pay 99 cents (Sometimes even more) for an app that I like, or sometimes even to try a cool idea. But most of the times, even I think twice whether I really need an app if I have to pay for it. And i know many of my friends, who would not buy any app, unless they are totally convinced that they need it.

Here are some things that may be affecting consumers' behavior:

  • Anchoring: People are used to have free apps, but not free desserts. An on-the-house dessert at a restaurant always feels like a generous offer. But keep this offer on for about 25 days, and on 26th day, you will hardly find any customers ordering desserts. You have anchored them into believing that desserts should be complimentary with the dinner.
    Similarly, a good number of apps are free, and this has anchored consumers to believe that apps should be free. I find it funny when I see adjectives like "greedy", "not cool" and "unfair" being used in reviews and forum-discussions for app-makers, who try to monetize the efforts that they have put into their app. 🙂
  • Problem of plenty: Gone are the days of "There's an app for that!". Today, it is "There are (many) apps for that!" For free apps, most users won't mind if they have multiple apps serving similar purposes on their smartphone (Example: I have both Shazam and SoundHound). But between multiple paid apps serving the same purpose, the users sometimes need to put some thought to decide which one would you buy. And a good number of times, the comparison never completes, and the purchase never happens!
  • Possibility of substitution:A dessert is a dessert, and perhaps can be substituted only by another dessert. Not so with apps. There are lots of substitution options available. Other apps on the same phone or sometimes their PC equivalents too! For example: Do I really need to pay $1.99 for "Craigslist mobile" for my iPhone when I know that I hunt for rental apartments only in the night, when I can search for it on my PC? And if it is really needed, I can simply go to my iPhone browser and search the listings.
  • Consumption pattern: If you pay $8 for a dessert, you consume it right then: all of it! Now, take out your iPhone and start going through the apps (Both free and paid) that you have used more than 5 times. I bet less than one-third of your apps would fall under this category. This guilt trap of having purchased some apps in past, but never using it, may deter users from spending another dollar for another app, which they know would perhaps never be used beyond the first 2-3 days.
  • Lack of knowledge about legal sharing: This will perhaps affect very few of the users, but the perceived value of an app may increase, and hence, the number of purchases may increase, if people are aware (And I know that many are not)that they can legally share the apps that they have purchased across different devices. Apple allows you to authorize up to five computers to share your iTunes purchases. I guess Android has similar conditions, as long as you are signing in with the same account.

Yes, many of the above would not look sensible (especially considering that we are talking about less than a dollar here) to a totally rational mind. But when it comes to consumers' reaction to pricing, you will always find irrational behavior. (On a totally different note, see this: http://m.theatlantic.com/busines…)

See question on Quora