Commentary

Consider Price Sensitivity An Open Invite

While young consumers have been the target market for many technologies, mobile applications have yet to see significant adoption among high school and college students.

The biggest barrier to the adoption of mobile applications is the inexpensive nature of the mobile devices that most teenagers own. While most teenagers have a say in the mobile phone that they use, it's their parents who are footing the bill. Dependent upon the largess of those who are struggling to cope with the financial crisis, strict constraints are placed on the handset that teenagers select. Until price points drop below the $100 threshold and affordable data components are added to family plans, chances are that only the most indulgent of parents will purchase expensive smart phones for their children.

While one doesn't have to have a smartphone in order to download mobile applications, only slightly more than one in three (39%) students have mobile phones that allow them to download apps of any kind.

The second barrier is the nature of the plans that support teenagers' mobile connections (addictions?). Minutes of talk time are secondary to an unlimited text plan for those who utilize texting to stay in constant contact with their friends. While more than two-thirds (67%) of high school and college students have unlimited text messaging plans, little more than one quarter (26%) have unlimited data or Internet plans.

Lacking mobile connectivity, teenagers are downloading games (64% of downloads) and music (55% of downloads), both of which do not need a constant Internet connection in order to be functional. In addition to these first two application types, social networking applications are downloaded by two out of five students (40%), while weather (37%) and entertainment (35%) are downloaded by one third or more students.

Price (77%) is the single greatest consideration for downloaded applications, followed by ease of use (49%), features received for the money (41%), familiarity of the application (38%), ratings of others (34%) appeal of the product description (34%) and ability for the application to enable interaction with others (15%).

Slightly more than a quarter (27%) of apps downloaded by youth are paid for, with high school students being slightly more likely to purchase apps than college students (30% versus 26%). The average price that is paid for an app is $3, with one in three not willing to pay anything at all and less than one in four willing to pay $5 or more for a mobile application.

Companies developing ad-supported applications might consider such price sensitivity to be an open invitation from today's youth. While one-quarter (26%) of high school and college students are not bothered by in-app advertising, slightly less than one in ten (9%) would tolerate advertising within an application that was free. With slightly more than one-third (35%) of app-enabled youth willing to tolerate any form of advertising, chances are that a mobile app has to deliver real value in order to warrant either payment or ad-tolerance.

These are all problems that, fortunately, time will solve. Since mobile phones are based mostly upon silicon subcomponents, Moore's law will apply, driving the cost of application-enabled handsets to a level that is affordable by teenagers (and their beleaguered parents).

Meanwhile, once carriers have caught up to the adults who are currently brandishing smartphones, their interest in adding data connectivity to family plans should develop.

Short handset purchase cycles and heavy inter-carrier churn will allow those who are looking to develop youth-centric mobile applications to overcome the challenges that they face today.

3 comments about "Consider Price Sensitivity An Open Invite ".
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  1. Christopher Laurance from Distraction Marketing, October 9, 2009 at 3:35 p.m.

    I have to disagree that "fortunately time will solve". If you've tracked the electronics or cell industry you've seen a remarkable tenacity to hold a price point merely by adding additional features.

    Just look at Apple and the iPod, the price for the Nano hasn't changed, but storage and features increase dramatically.

    Cell phone carriers also maintain this practice, there is always a price leader, but the "new smart phones" are always priced around $200.

    Your point about costs is interesting, but in the world of ATT&T and T-mobile, you buy an unlimited data plan for either $20/mo or $30/mo so that isn't a huge barrier.

    The comment "it must be free" is accurate. btw- this isn't only true for Millenials, this holds true for Gen X and Boomers as well. The internet and because mobile accessing the net is still the net was created as "free", and so it shall stay. Murdoch can try, but no one will budge, why should they? In today's world, the "real news" could be gathered from Twitter, Facebook or YouTube- who needs filtered news?

    Marketing to Millenials isn't as complicated as everyone wants to make it. They buy what they want when they want and aren't heavily influenced by ads.

    They are heavily influenced by peer groups, forums, etc. and of course the never ending desire of every "young" generation to be "cool" via fads, etc.

  2. Sam Brown from Dubit, October 12, 2009 at 6:26 a.m.

    Interesting article - always interesting to see new youth research. How many teens took part in the study?

  3. Daniel Coates from Youth Pulse, Inc., November 12, 2009 at 1:08 p.m.

    Sorry for the slow response Sam (30 days!) ...

    The study incorporated 500 high school and 1,000 college students for a total N of 1,500. Samples were stratified and quotas established across class year, gender, state and race.

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