• by Gavin O'Malley , Staff Writer @mp_gavin, August 17, 2017

It may be a little late in the season for beach-reading recommendations, but -- if you haven’t already -- you need to put Daniel Kahneman’s “Thinking, Fast and Slow” on your list.

In relatively simple terms, the book summarizes the psychologist’s Nobel Prize-winning research into decision-making, cognitive biases, and behavioral economics.

“Thinking” was published in 2012, but I was reminded of its worth this week, when I read about the release of a report from app marketing and retargeting startup Liftoff.

Specifically, the report touches on the fallacy of “sunk costs” -- a favorite of Kahneman’s and his longtime collaborator Amos Tversky, which refers to a cognitive bias that compels people to stick with existing products and services only to avoid feeling like they’ve wasted their time and money.

“Think of the times you watched a movie to the end -- even though you didn’t enjoy it -- because you didn’t want to waste the money you spent to rent it on-demand,” the new report explains

What’s the connection between sunk costs and app subscriptions?

Well, Liftoff thinks the concept partly explains why some subscription-based apps seem to sell better at higher prices.

Specifically, the firm found that apps in the medium price range ($7-$20) converted at a rate that was more than 500% higher than the low-cost subscriptions category of $6.99 and below.

In fact, apps in the medium price range had the highest conversion rate (7.16%) -- and the lowest cost to acquire a subscriber ($106.35) -- while the conversion rate in the low-cost category came in at just 1.37%.

 “The sunk-cost fallacy reminds us that it’s human nature to value things based on costs and commitment -- and apps at the low end of the pricing scale naturally have the toughest time tapping into this psyche,” Liftoff explains. “It may be you can win more users by asking for more.”

For its findings, Liftoff tracked the cost and conversion rates during the key event for subscription apps -- namely the subscription -- for the past year. It used internal data spanning over a billion ad impressions across more than 14 million clicks and about half-a-million app installs.

Across all categories of subscription apps, Liftoff also found that the average cost to acquire a new user is $4.40.

The cost to convert that user to complete a registration is $30.51, resulting in an install-to-registration rate of 14.43%.

But the real prize is a subscription, an event that costs more because it yields more.

At $161.38, the cost to convert a user into a subscriber has a high price tag compounded by a comparatively low install-to-subscription rate of 2.73%.

Of course, Liftoff’s data is based on overall cost and conversions for all subscription apps, which vary in the value they offer and the monthly subscription fee they charge.

Drilling down into the data, the overall cost to acquire a new user for gaming and shopping apps hovered around the $4 mark, which resulted in an install-to-purchase rate for both app categories that was several times higher than for subscription apps.