Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy
joshlehman.com
joshlehman.com
The point about the coffee cup comparison isn't that cups of coffee are the benchmark experience for product pricing; if that were the case, my next root canal would cost $0.20.
The point of the coffee cup comparison is marginal utility: the money you spend on an expensive cup of coffee almost certainly has very little utility at the margin, because you are happy to chuck it away for a bad cup of coffee.
Oh, you really like Starbucks coffee? That's unfortunate, because it's pretty bad, but more importantly: you militantly miss the point of the comparison when you benchmark the experience of installing a new app against the enjoyment you get from a cup of coffee.
This place has an enormous problem with pricing and economics. Unlike Patrick, who really does sweat the fact that developers are making small fractions of their overall worth due to underpricing their offerings, I should be overjoyed at the fact that the biggest collection of new software entrepreneurs on the Internet hangs out at a meme generation engine for exploitable market inefficiencies. But unfortunately, I'm an obnoxious nerd, so all I can think to do about this is yell. ARGH.
A dollar at the margin for a person with a $600 phone on a $50/mo data contract is not an enormous gamble. It is a pittance too trivial for that person to even contextualize. The problem isn't that people are unwilling to give up $1 for apps; it's that they're hesitant to give up $0.25 for anything online. When you start with the understanding that there's huge impedance at "anything above free", it's clear why "$1" is not a particularly great price point, and why "better strategies to motivate people to part with $1" is a terrible meme to propagate.
When I go to Starbucks to buy my coffee, I get a beverage that has a certain level of caffeine I like, lots of milk, is sweet and will last me the better part of the morning. I found out that they have a product that I like and it's a repeatable experience: I go, I ask for my favorite brew and it has the same qualities that enjoy, every time.
When I look for an app for my phone, I can see screenshots of it and see the reviews and ratings. Neither of these are very reliable, for reasons I assume I don't need to elaborate here. At this point, I have the two options: 1) I can go online and do further research to try to separate truth from crap; or 2) I can install the app.
When it turns out that the app is crap after all -- or that it's good, but doesn't do what I need, or that it's excellent but the stuff I happen to need doesn't work for my phone or OS version -- I have to uninstall it and look for a better one. Or give up.
At this point, I've "paid" with my time and effort and hopes, so this is where the difference between free and $1 dollar is a lot more important than $1 dollar and $4 or $10 dollars. If the application was free, I feel disappointed and disgruntled. If it wasn't, I also feel ripped off.
But the most important part is that this whole process is repeated for every app. That is where the comparison with Starbucks breaks down: shopping for apps is fundamentally different from buying coffee at Starbucks. The comparison with movies is a lot better, because every movie is different and every movie is a gamble. Then again, movies still have more alternatives than apps: I usually go to see a movie because 1) I'm so excited about it that it doesn't matter that I'm risking a disappointment or 2) I want to spend some time relaxing with my wife and it doesn't matter that much whether the movie was good or decent, as long as it isn't godawful.
Bottom line: when it comes to purchasing apps, the reliability needs to improve. Alternately, I wouldn't mind if every paid app had a time-limited, full-feature free version. Whatever the cure, the problem has nothing to do with the quality of the goddamn coffee beans.
BTW: the correct order is "short black". "Tall" isn't their smallest size, the un-advertised "short" is. They may not have the proper cups (as most customers don't know they exist), so you may get a free upgrade to "tall". As for "black", why would anyone want to adulterate a perfectly good coffee into a milkshake?
rotten tomatoes aggregates professional reviewers to give a general score
imdb lets people see the entire body of work by directors, writers and actors. So people will see a movie by a director they like the same way they'll pick up a book by a writer they like.
and then you have companies like Pixar and Disney (same, I know) that exist on brand. People will see the movie because it's a Pixar movie and they know what to expect (or not expect).
but what is even more interesting about the movie analogy is that with all these tools for discovering movies, box office take seems to be a function of advertising budget than anything else (to the point where they believe that movies have to hit a certain take on opening weekend to be successful at all).
The barrier to entry to create and deliver a software application is extremely low as compared to creating and delivering almost any physical good. The physicality of a thing - especially coffee - ensures that only one instance of it can be used at any time (and it would probably be "used up" during consumption). Creating a new copy has costs (where copying and delivery costs are zero and more than one copy can exist at a time disorienting the supply/demand dynamics, people would always be reluctant to pay for a thing - hence digital piracy).
Software, has no such restrictions and virtually zero delivery costs. That's why RMS always said that charging for the act of software development is right. But charging for copies of the same stuff (and not providing its source) is not - people may talk about intellectual property - but that's a different debate.
When you buy a car, you pay for it - your neighbour with exactly the same model also pays for it. It's also "open-source" (or at least, it used to be) - you can take it apart and figure out how it works. What you might not be able to do is to create the car from scratch (you may not have the tools, materials, expertise etc.). And that's why you pay a hefty sum for it.
The same does not hold true for simple apps - they are easy to put together, the tools to do so are freely available in most cases and the expertise can be gained in a short amount of time. Hence, the $0.99 price tag - because the developer knows it's easy enough to put something together for free - if you had the time.
Note that this does not apply to high-end software where significant amounts of R&D and engineering effort is required - and hence the end-product can't be easily reproduced from scratch. That's why I still feel slightly guilty (and very privileged) when I can download and use Linux for free and browse through its source all I want - economics says it shouldn't be free - but it is.
That's why RMS always said that charging for the
act of software development is right. But charging
for copies of the same stuff (and not providing its
source) is not.
When designing a new car, a lot of money goes into research and development, money that cannot be recovered (sunken costs). However, once that's over and the assembly line is put together, the cost of creating new copies (while never zero) it definitely converges to the cost of the raw materials involved. The more items the assembly line produces, the cheaper it gets. And when buying a car, you're paying a lot more than that, because you're in fact buying a brand, not just some pieces of metal put together.
I also disagree on a car being "open-source". Assuming you can make copies of your car and give those to other people, you'll be obliterated by trademark, copyright and patent lawsuits. Also many car manufacturers are voiding your warranty if you go to unauthorized car repair shops. And if you can look under the hood, that's only because of strong consumer protectionism laws.
Apple has more than 50% profit margins on iPhones. Is that moral? Well, they need to earn a profit (otherwise they wouldn't be in this business) and they also need to pay the research and development costs for newer versions or for other products. And after all, this is capitalism - if you don't like it, buy from somebody else.
So why can't this rationale also work for pure software? After all, the developer needs the profit to develop newer versions, improvements or other applications from which you may also benefit. And again, this is capitalism. If you don't like it, search for something cheaper, or create your own.
RMS's principle (being paid only for creation of software, not for delivery of copies) does not work because it doesn't scale. You cannot put together an assembly line for software, like you can for physical products. This effectively means that you end up selling your time, which makes a good living, but it won't make you rich and it won't allow you to work on lots of silly things that may or may not pay off.
Also, only simple apps can be cloned easily. No software can currently match Adobe Photoshop, which still deserves every penny, and it wasn't for a lack of trying. I use Gimp because the price of Photoshop is too high for my amateurish needs, but I would shell out the cash for Photoshop in a heartbeat if I would be a professional photographer or designer.
The $.99 price tags is common just because the app stores are filled with crap, with most apps not even deserving $.99 - but create an app that enriches people's lives and even allows them to make some money, and you'll have no problem selling it for $90 or even $900.
2) Granted, there are some arbitrary restriction on cars, but they are still a lot more open than software. You can easily alter them, fix them yourself, etc. None of that is remotely possible with commercially-distributed software. I can't just fork Tweetbot, add in support for Orkut, and redownload it to my phone. However, if I want to install a better radio into my car I can. Software (especially on mobile) exists as an immutable "black box" that you have no access to other than the user interface, and that makes it less valuable.
3) No one is arguing that it is inherently wrong to charge for software. People refuse to pay not because they are principally opposed to it, but because the average price of an app in the app store is far below $.99, and thus $.99 seems like an inflated price.
4) It's true that apps like Photoshop are valuable, but it's apparent that their prices are absurdly inflated. Pixelmator can make an app with 90% of the functionality at a little over 2% of the price. Is that 10% extra functionality really worth all those hundreds of dollars? For most, it isn't. The same can be said of apps. Sure, that $.99 app is cool, but this free one does 90% of what the paid one does. Is that 10% extra functionality really worth all those dozens of pennies? For most, it isn't.
The point of the comparison is that coffee means so little to people that the cost of a cup of coffee is a good proxy for "how much you should spend without thinking".
That it is an imperfect proxy is something that obviously will not be lost on a site full of nerds like us, but s/trees/forest/g.
Ignoring the price effects induced by the supply/demand characteristics and intrinsic nature of the good in question (inelasticity of gas demand, in this case) leads to bad pricing as much as incorrectly estimating the marginal utility of a product to consumers.
The problem with pricing Starbucks that way is that a huge chunk of Starbucks strategy involves there being a Starbucks on every quarter, ready for any passerby be they millionaire or middle class, and while it is notoriously easy to do price discrimination within a band of $1-$10 prices, it is very hard to do price discrimination across a $1-$100 spectrum of coffee.
The other chunk of Starbucks strategy is that it's not about coffee.
Speaking strictly of the product (and not the experience which of course is equally important) Starbucks secret sauce is essentially that it is a "sugar delivery system".
I've yet to be in a Starbucks (and I"m in them every single day) where the majority of the beverages that are sold are not black coffee but drinks with a high sugar and even mocha content that are addictive on several levels.
If they could figure out a way to differentiate the product either in taste or image they actually could sell coffee or a coffee drink at a higher price in addition to what they are selling now.
PR wise it could prove strangely to be a bad move thought and might send the wrong message.
This is currently done with liquor to mention only one product where people pay outrageous sums of money for something that is not clearly better (taste tests of grey goose come to mind). And who would have imagined that people could charge for bottled water? Or that people would pay money for luxury ovens? Unheard of back when I was growing up.
The difference is that coffee is a completely different kind of market: producing a small quantity of very good coffee does not give you much help in producing it in large quantities without at a linear increase in the costs (and actually has hard limits based on growing conditions, available labor, etc.) whereas software can be infinitely replicated.
The price of a cup of coffee is useful only in establishing the threshold for how much money the average person is likely to spend without significant thought.
That happens all the time, including for coffee.
Coffee at a "high end" hotel / coffee shop etc does not cost the same as coffee at your local coffee joint --while the coffee itself has marginal difference. And there are places that sell $30 hamburgers (even $1000 hamburgers).
Same for brand name clothing etc compared to lesser known or bargain brands. The cloth / manufacturing quality in tons of cases is exactly the same, to the point of both being made in the same factory in China.
"Starbucks Craftsmanship"? Please.
Not sure what artisans you have running Starbucks cafes in the US, but in Australia the barristers are largely low paid teenagers using un-cleaned machines and second rate beans. To top it off most of the drinks have dollop of cream or some other sugary ingredient to mask the awful quality of the coffee.
I would gladly 'gamble' 99c with an iPhone developer over a Starbucks beverage.
EDIT: I'm talking specifically about Starbacks. Australia has excellent coffee. I'm drinking a lovely Sprocket coffee as I write this.
a) "Starbucks" serves in this situation as a generic term for an espresso drink of your choice. Like Kleenex or Xerox or what-have-you. When someone says "people will spend $4 on a coffee at Starbucks without thinking about it" they don't mean at Starbucks specifically, they just mean "some coffee shop that isn't 7-11 or Dunkin Donuts or McDonalds".
b) Even within the category of espresso-serving, $3ish coffee shops, the argument still applies. In a strange town (), in the absence of other reliable information, I will probably go to Starbucks because I know that I'll get a somewhat over-roasted, but drinkable, latte. If I walk into a random independent coffee shop, there's some chance I'll get an excellent cup of coffee. But, experience has also taught me that it's more likely that I'll get something that's no better, or frequently worse, than Starbucks. Similarly, if I'm out of saline or need some allergy medicine while traveling, I'm likely to grab it at Walmart, because all their stores are laid out the same and I can find what I need blindfolded. There is value in predictability in many situations.
() caveat that this applies to travel in the US, and generally for work. In various European countries, I'd bet on the random local shop. And if I'm traveling on vacation, there's value in experiencing something new and local. But, if I just want my morning coffee on the way in to the office, easy and predicable wins.
In the absence of reliable information in a strange town I will always gamble on a the small cafe, as they have to work to get customers as opposed to depend on an advertising budget and novelty style sugary drinks.
Now I live in London, and as far as I can tell, all the good coffee is made by Aussies, so I can only imagine how terrible Starbucks is by comparison in your country.
In New York, Swedish coffee (of all things) seems to be the up-and-coming thing:
No idea why. Scandinavia is exotic and hip these days, probably. Then again, a lot of new Swedish things are popping up, like Swedish pizza places (which, if you haven't had it, mostly revolves around unexpected toppings such as banana, cabbage and kebab meat).
Anyway, one reason Swedish coffee culture might be something that can be noticed in NY is that we're pretty good at drinking coffee.
See <http://en.wikipedia.org/wiki/List_of_countries_by_coffee_con...; to get a hint about how important coffee is in Scandinavia.
Sweden is down at #6 these days, but we still clock in at roughly twice the consumption per capita compared to the US.
And the word "fika" which the first place is named for has loads of connotations, it's simply deeply entrenched here.
Going by that page perhaps I should start a dutch coffee house in NY!
I wonder if there are many Starbucks in Scandinavia? I know of only one here in the Netherlands.
Then there is also at least one in Utrecht Central, so we are down to 3 already.
Anyway, I know it was not your point.
Besides, as a Frenchman (living in the Netherlands), I'm not fond at all of Dutch coffee, but hey, it could probably work in "New Amsterdam" ;)
I overheard some people recently talking about how they sometimes take the airport express train just to have coffee at Starbucks. Which is just insane, not just because the coffee isn't particularly good (and Oslo has plenty of extremely good barista places) but because a round-trip ticket from Oslo to the airport costs $56 (€46).
http://en.wikipedia.org/wiki/World_Barista_Championship
So they can at least make a decent cup.
Unfortunately I just prefer Big Coffees off the shelf brand, but don't know what to try. Just that it's not Starbucks.
Is there somewhere that I can order Aussie coffee from and know its actually the coffee you describe and not just branded 'Aussie'?
What they are referring to is coffee made by an Australia barista.
Basically, coffee culture is huge in Australia, and being a quality barista is seen as a cool kind of job to have, despite the generally low pay.
It's not unusual on a city street in Australia to have 5 or 6 coffee shops in a row. At this point, they are competing on coffee + barista quality. With this type of competition, the consumer gets well educated on the nuances between cups, and so it goes.
I had no idea this idea of 'the aussie barista' was being exported to the world, but I guess it makes sense.
In reality, what you're probably seeing is the competitive advantage given from a business cluster in Porter speak. http://en.wikipedia.org/wiki/Business_cluster
Ironically it grew out of Italian culture, mainly through immigrants to Australia. While my best coffee experience was still in Italy, generally I find coffee in other parts of the world appalling in comparison, esp in the USA.
Demonstrably untrue. Like most coffee producers, a lot of the beans are imported, some of it is grown locally. But they are hand selected, blended and roasted here in Australia and are most definitely produced in commercial quantities to be consumed here and exported as far as Korea.
To name but a few Campos, Sprocket, Lavazza.
Australia has very rich Italian and European cultural heritage which means we cultivated a coffee culture quite early on, relative to other western countries.
I guess I took 'Aussie' coffee to be places that marketed themselves as 'Australian', or internationally recognised Australian coffee brands. While everyone can find a bottle of Australian wine, and what it means to be Australian wine, defining it for coffee is a difficult task.
dpark, 'Western' is more of a cultural moniker than a geographical moniker.
If you want to get specific about it, all of Europe west of Greenwich is not 'Western' - and that's most of it. Tunisia is definitely Western Hemisphere but you wouldn't call it west.
By the way, does Australia count as a western nation? It seems to be in the wrong location for that. This is totally tangential to the coffee topic, just something that I found curious.
Good point on Lavazza, was a bad assumption.
My speculation is that this is due to a general lack of hip/divy/young "artisan" cafes/restaurants in Australia (yes, yes, I know there are some, I'm talking purely about prevalence) compared with "hip" American cities. This is particularly true outside of the hip parts of town (Surrey Hills, mostly).
US coffee quality depends greatly on which city you're in, and the barista being a cool job is true in many places as well. The Pacific Northwest (Portland, Seattle -- despite the Starbucks black mark) has really amazing coffee shops, and they're everywhere. If you're ever in Portland, I highly suggest Barista -- http://baristapdx.com/ -- it will change your life.
I think it's mainly a freshness thing - after resting for four or five days after roasting, coffee is only at its very best for 10 - 20 days at most (as whole beans).
It's very good, but you'll wait a long time on weekends.
Hold on a sec. What about Italians?
When I say craftsmanship what I'm really referring to is the overall brand that Starbucks (or other coffee shops) have built. A brand that says "what you get here will meet your expectations".
For me, your first point sums up entirely my problem with the coffee argument -- and specifically why I spend $4 a day on coffee but rarely buy an app (though I wasn't like this initially). Even if I go to [insert coffee shop here (calm down HN)] and the coffee is a bit crappy, it still gets the job done. I won't be as happy that I spent the money on it, but at the end of the drink, I've got caffeine in my system.
The state of the software in app stores, and lets be honest here, is a bit shit. There was a popular post the other day by some guy about not being able to make a living being an app developer, and it was all "boohoo"s.. until you look at what he's made. absolute crap. A concrete calculator that looks like an Intro to Android chapter one exercise? Boy, I wonder why he's not raking in the millions. Look at the top 100 right now. It the same 3 games over and over. My issue is that when I take a gamble on your app, and it turns out to be completely awful I don't get anything out of it at the end of the day, I'm simply out a dollar -- and no, that's not a large amount of money, but it is the principle. I feel robbed of that dollar because I got nothing in return for it.
I travel for work constantly, when I first got my Android phone, I would browse through the Google Market before a flight, and then dump up to $5 on whatever game seemed interesting. I had an initial expectation of quality-- I thought up to $5 was perfectly reasonable. After, I'm going to (hopefully) get a couple of hours of enjoyment out of this app. However, I only did this handful of time before realizing that reading the SkyMall magazine is more interesting alternative to most apps.
"Those of us in app development love to talk about how ridiculous it is that people will drop $4 every other day on a cup of coffee but will not “waste” 99 cents on our hot new app."
For this to be an appropriate comparison, there would have to be a coffee shop that had the massive peaks and nulls like that of an app store. Imagine a coffee shop where getting a bad cup of coffee didn't simply mean, "of less than ideal quality given the price," and instead meant getting a black, undrinkable, coffee-ground-laden sludge that can only be thrown away after the first sip. I think people would be a little less inclined to spend money on their coffee. Only under these circumstances would I view getting a cup as holding the same "risk of waste" as buying a random app from the App store.
Actually, the tragedy of it is that Starbucks uses pretty good beans. If you buy their brand of beans and make the coffee yourself, you can make a damned good cup of coffee.
But Starbucks apparently has standardized entirely the wrong procedure for using those beans, so that the end product tastes like they accidentally dropped a bouillon cube in it.
But I just want coffee flavored coffee.
But I realize that my habits are not exactly typical.
My caffeine/theanine formula:
Caffeine - 1.6g
L-theanine - 3.2g
Water - 2 cups
This makes for 100mg of caffeine per fluid ounce of solution, which makes measuring pretty easy. That is like a cup of coffee on the weak side of average, or 2-3 cups of tea. 200mg is like a strong cup of coffee. I have found that 100mg twice a day is close to the sweet spot where I get energy from it but don't build a tolerance. Obviously if you already have a tolerance, you'll want to use more. This mixture should be refrigerated to keep stuff from growing in it. Also, you can vary the concentration a little, but there is a limit at which the theanine solution will gel into an unusable colloidal mass. Hot water is useful for getting the ingredients to dissolve initially.
The theanine is there for two reasons: 1) it smooths out the jitters from caffeine, and has a mood elevating effect when used with caffeine and 2) studies indicate that combined with caffeine, it has a number of cognitive benefits. 2:1 theanine to caffeine is around the ratio that evidence supports.
My flavoring solution is:
Citric acid - 30g
Malic acid - 10g (optional)
Sucralose - 1.5g
Orange (or lemon) extract (83% alcohol) - 8g
Water - 2 cups
I put this in a squeeze bottle like the kind fast food places sometimes put vinegar and oil in, and it only takes a little squirt (about a teaspoon) to flavor a cup of water. I don't bother measuring this, as it's easy enough to do by taste. But do be careful not to make it too strong or the citric acid will hurt your mouth. Nothing dangerous, but it can make your gums sore.
Malic acid is not strictly necessary. It adds a bit of fruitiness, but it's subtle. You can leave it out and use 35g of citric instead of 30g.
Sucralose is the sweetener in Splenda, but it's important to remember that Splenda is highly diluted with fillers to make it the same sweetness as sugar. Pure sucralose is 600 times as sweet as sugar, so it must be measured with care. Hard Rhino is the only source I've found for it. Other sweeteners like xylitol, stevia extract, and erythritol are easier to find. Xylitol and erythritol are not sweeter than sugar, and I find stevia unpleasant. If you like stevia, it's actually more cost effective than sucralose; it's half as sweet, but it's cheaper.
If you don't want to bother with the flavoring solution, you can also mix the caffeine with anything that is sweet and sour because those flavors mask the bitterness of the caffeine. Citrus is particularly effective.
These are the most cost effective ways I've found to have tasty beverages and caffeine. The caffeine solution comes out to about 7 cents per reconstituted cup (18 cents for the equivalent of a Starbucks Grande). Most of that is actually the l-theanine; if you forgo that, it's only half a cent per cup.
The flavoring comes out to under two cents per cup, or $0.30/gallon, but depends on how much you use.
So basically, if I take this with me on a trip, I can have the same caffeine boost as a Grande, plus theanine to take away the jitters, for twenty-five cents. And as an added bonus, it's actually drinkable.
Edit: One more thing. You can use volumetric measurements if you can find the bulk density for your powders, but I don't recommend it. The scale I have is an American Weigh DIA20, which costs about 20 bucks. The only thing I don't like about it is that its maximum capacity is 20g, but it's easy enough to measure the citric acid in two shots.
Although I noticed one has just opened up on Elizabeth St. I guess they still attract tourists looking for something they know?
The thing is that some people want what they want and they don't care about the long term investment angle. So they're willing spend $8 on a beer at a bar instead of having something healthier and cheaper like water. A lot of those same people won't spend $8 in a year on apps, no matter how rational a case the author might make. In general, food, alcohol, caffeine and cigarettes are more effective than software for generating these kinds of poorly-planned impulse buys (though a lot of Chinese gaming companies have been doing well with free-to-play games and micro-purchases for the past 6 years or so).
In retrospect, I think I've only bought three apps in my nearly 4 years of having an iPod touch, one of which cost 99 dollars. It's a heck of an app, though, and has been in development for longer than the iTunes store has existed.
It is not an iron law that people will not pay $8 for apps because less than $8 is what apps cost, and $8 is what beer costs, and $100 is what pay TV costs.
It is a law, I believe called "gravity", that products that present themselves as market substitutes for other products that cost $1 will have a hard time selling for $8. This does mean that, absent a very effective and inventive marketing strategy, casual games and offline web page readers are hard to sell for $8.
Can any app truly be a substitute good for a sweetened beverage with stimulants in it? I would say no. It doesn't matter how much people are willing to spend at Starbucks. It has virtually no bearing on how they'll value your app.
I know that because I'm in that category.
So, playing some shitty game for 100+ hours instead of watching a movie would be the result of "rational comparison" of time spending? Who would have thought...
Say I make great coffee, I get the beans myself, I ship them by sailboat from Indonesia, and do everything by hand. People would expect to pay a lot of money for coffee like that, more than at Starbucks.
Say I make great software, I have the best designers, work for weeks on user interface details, and make a great web site to go with it. Quite apart from the general expectation that my software should be cheap, or free, there is a logical conclusion that if my software is so great I must be selling millions of copies, and at $10 a copy I'm charging way to much. If I'm selling millions of copies I should be able to price at a volume level. In economic terms my marginal costs are near zero, and if the app is so great that it is selling well then my fixed costs should be divided by a very large number.
So for physical goods, the better the product, the more you can charge. For software the opposite is often true.
At the other end of the spectrum there is software that is not expected to sell in huge volumes, and for educated purchasers they understand that these apps cost more. Probably most apps in the app store that are priced over $20 are in this category. Apple does a really bad job of supporting these apps though, theres no mechanism for trying before you buy, so the risk factor is large. If you are in a market that is well connected though, then this risk is lowered by word of mouth feedback. If your market is not well connected then you have a problem convincing users of your value.
We were in the top paid iPad apps category briefly with an app that was priced at $49, but our market for that app is small. We choose that prices based on an estimate of selling only hundreds of copies, to a user base that had already paid thousands of dollars for the required hardware for the app. We were competing against a $3 app at that time, but our assumption was that price would not be a large deciding factor for our user base, and we were right. We could invest more in the product because our price was realistic (I think) whereas our competitors had very little money to reinvest. They had to sell 15 times the volume to make the same revenue, in a small market, and that didn't happen.
Actually, what happened for the most part was that customers bought both apps. We got $35.00 from each customer and our competitor got $2.50. Once the purchase was made the price was mostly forgotten, it was the reliability and features that mattered from then on. If you do have a high priced app you'd better make sure that it works well.
Convincing people to pay for anything on the web is much much harder. A know few real-estate agents which have all their data in Dropbox but they don't want to pay for Dropbox storage and constantly terrorise colleges with Dropbox invitations so they can get some more storage. Go figure.
If you want me to buy an app in an app store, you've got pretty much the same sell whether you're charging a dollar or five. On the web, if you're not charging at least twenty, I've probably already navigated away.
But with that said, I don't spend much on random apps on the web, either. You've still got to make a good sell. It's just that "low price" on the web is $20.
On the other hand I'm perfectly happy to pay $15/month for a useful web service.
And on the desktop I have no problem with paying $50+ for serious software.
I guess mobile has (to me at least) that shovel ware image.
The marginal utility of a Starbucks coffee is indeed very small, but at least it is known. The marginal utility of your $0.99 app is unknown and possibly even negative.
Of course I agree with you on the issue of pricing, but I think that's orthogonal to this discussion.
It's not a big economic gamble, but there are good chances of getting screwed, which is more important than the money. I believe that's contributing to the prices being pushed down. I don't mind paying for the software I like, but I absolutely mind paying to try out 4 other apps that turned out that sucked. Indeed, because I had to give them money to find out, they will have the funds to keep on sucking. Effectively, I can't vote with my wallet.
Try shopping for an ssh client or a vnc client in the app store. I suspect you'll have that exact experience.
I think the worst example I ever saw was someone implying that a copy of a digital photograph should (!) only cost £0.0001 as that's the cost of hard drive storage.
Actually, you're missing the point here. Yes, marginal utility blah, blah, blah, but you seem to be assuming I have infinite marginally useful dollars to piss away each month. There is, by definition, a limit to how much disposable funds I am able to spend each month.
I only have $X ± Y of disposable income to toss down the drain each month, and I'm going to try and optimize the value for that money.
A dollar at the margin for a person with a $600 phone on a $50/mo data contract is not an enormous gamble.
Sure, I have nothing to loose by buying your shitty app. But I don't have a whole lot to gain, either. I still have to choose where to spend money. I'd rather get my regular cup of coffee that tastes like dirt because I know its going to wake me up for work.
Nobody who makes this comparison gives a fuck about coffee.
I haven't missed the point of this blog post. It suggests that developers should find ways to make their "craftsmanship" show in order to get prospects to part with $1. I find the idea of "$1" and "craftsmanship" sharing a sentence to be disturbing.
I do not go to Starbucks for "good coffee." Ironically, I have given up on finding "good coffee" in the US for one of the reasons mentioned in the article: going somewhere else is a gamble and I have yet to find a decent cup of espresso. I go to Starbucks for exactly the reason that he mentions: it is a known quantity. I want caffeine and I know Starbucks will give it to me in a drink that is consistently good. It is not great and it does not really qualify as coffee, but it tastes good and it does not change (if it does they remake it free of charge).
The main point I took from the article is that comparing a cup of coffee to an app is not a useful comparison. Even though the marginal utility of both is low, the pattern of buying is very different. People don't get in a habit buying their daily app like they do coffee. Personally, I ran out of apps I wanted to buy on my phone--or even download for free--about three days after I got it. Now I only go to the app store when I hear about something that sounds interesting or I think of something new I want my phone to do.
I do agree with a higher price point than $1. If one of the problems with app purchases is finding a well-made app amidst the crowd of crap, then using price to signal higher quality makes sense, from both a marketing and business perspective.
The real sabotage comes from Apple who are encouraging 99c ents applications. It fits well in their strategy to commoditize software so their hardware becomes more appealing.
The problem is that this strategy works: For every "homeless" developer who gives up there are waiting 10 in line to flood the market with their 99 cent apps.
Just from the first two pages of my phone: Rdio, Downcast, Google Authenticator, PCalc, Songkick, Ratio, and the This American Life app are all things I installed because I went to the App Store to get those specific apps. (Top Shelf, Star Walk, Flashlight, Fruit Ninja, and Osmos are examples of apps I "discovered" in the app store; those are probably not great app categories to compete in).
One of the best and most precise and enlightening comments you have ever written. Thanks for this.
I personally find this post very insightful. Just yesterday, I bought the EA Tetris app for $0.99. I played it for three minutes, and decided I hated the "touch" interface for Tetris. It isn't Tetris at all. And it pissed me off that I paid money for something useless. It doesn't matter if I paid $20 for it or $0.99. It just makes me feel like a fool, like I got taken in.
When the author says "Your $1 App is a Total Gamble", that's exactly the point. And it has nothing to do with it being an app or an online purchase. It's the same way I feel about buying a new snack for $0.99 and discovering it tastes like cardboard, or a shirt from a new store that turns out to shrink unexpectedly in the wash.
People hate buying things they'll regret, particularly when they're buying blind, or have no idea of the risks. It's psychological, not necessarily economic, but it's true. And in app stores, there's rarely a trusted brand to rely on, or anything at all, to tell you you're not being taken for a fool. Customer reviews tend to be worthless, and you're not going to spend 20 minutes researching a $0.99 purchase. So you just won't buy it period, because you hate feeling like a fool. Psychologically, it makes perfect sense.
But what if the app stores switched to a subscription model? Pay $10/mo for unlimited apps. Suddenly, no regret. Pay developers based on their proportion of hourly usage across all phones. All of a sudden, no regret, and developers are paid based on people finding their apps useful, instead of their ability to convince people to buy them...
There are a few instances where you "wont know till ya try it yourself"... but they're few and far between with proper research.
I think it really speaks to the expectation of developers here that users are expected to "gamble" on app purchases without knowing whether the app is good or not by reading reviews, and general consensus. Thats a really exploitative purchasing pattern to expect from your users...
Not saying there arent plenty of dumb people to pray on, but... yea.. wow. A lot of app store developers here on HN just expect their users to be dumb ill informed "johns" to exploit for a dollar on a gamble... That really says something.
Logically, it seems like it should. But a lot of apps are just good fits for some people and bad fits for others. Some people love Angry Birds, and some people hate it. For a lot of apps, it doesn't matter how many reviews you read -- you just can't tell if you'll like it or not.
I bought the $0.99 Tetris app because it was getting rave reviews. And after just a few minutes, I realized I hated it. In my experience, reviews/popularity are a very bad predictor of whether or not a particular app will be useful to me.
And you only have to experience this once to "double-negate" the gamble. One time is enough to make a user realize that it's still a craps shoot. Reviews online are often a very weak signal for quality.
Works great since you can pretty much get the crux of the quality of an app in an extremely short time (sometimes as little as several seconds).
I like to occasionally take a flier on a new application that's not gotten enough attention to have research and reviews yet.
This is the same strategy cut the rope, angry birds, use. They started before inapp purchases became available but clearly demonstrated the concept.
This is the model that works.
They also has been found to regret less when they buy the experience[0], which is what coffee in Starbucks is more about. I wonder where do apps fall—are they things or experience? Or does it depend on how you market it?
I guess it's pretty hard for an app to offer unique experience, in comparison with a coffee shop.
[0] There were studies, paper posted here on HN some time ago (“If money doesn't make you happy…”)
Try out this app and spend five minutes on it? Eh, maybe.
Subscription music services work very nicely because the time investment for listening to new music is essentially zero. There's no download or queuing wait at all.
People try new restaurants all time spending between $10-$75 per person. They are often disappointed.
People try new foods all the time (hey look at these new nuts, this new sports drink, this new natural pasta, this new gluten free cereal)
Starbucks is a known brand. If you liked the last game made by Sid Meier you'll probably like his next one. Starbucks vs Apps is the wrong analogy.
Spending a few bucks on a movie or a meal or a drink or a snack is exactly the correct analogy. I spent $11 on several movies recently and was often disappointed. How is that different than an App? I've tried several restaurants I'll never go back to as they were mediocre at best. How is that different from an App?
With the app store, there's no recourse. I bought several apps that didn't work. It's not that they weren't as good as I expected, not that they crash occasionally. I wasn't disappointed. I was SOL, having received no value for my money. Sure, it was only couple of bucks, but I hate being a sucker.
If the app store would let me delete an app in the first 24 hours for a full refund, I'd buy a lot more apps.
You CAN...but legally, you can't walk out on the bill. Even walking out after ordering is illegal, as I understand it. And if one thing that arrives is terrible, then are you really going to trust that something else will be better?
Probably not. So are you really going to walk out without paying? Most people won't, and you would be breaking the law if you did walk out.
Google already did an experiment in a 24 hour return policy. Guess what? A HUGE percentage of games -- GOOD games -- got bought, played for 8 hours, and returned.
A game for $0.99 isn't intended to be a lot more than a few hours of enjoyment. A $60 game may need at least 16-24 hours of solid content, but a $1 game is still a better value if it can entertain you for three hours. The 24 hour return policy was a stated reason several big developers refused to develop Android games, so Google changed it to 15 minutes.
One extreme to the other. Sigh.
Regardless, this whole thread is completely missing the fact that A LOT of good apps have demos/samples that you CAN try for free, and people still complain and whine about having to actually PAY $1 for a game they can find out for free that they like, or an app that they can find out for free works just fine for their purposes.
AND, you can look at reviews to see if the app works. When you go to a random restaurant, you don't get a pile of reviews pasted to its front door that you can read to find out if it's any good. In the world of apps, you CAN see reviews at the point of purchase.
And I hope you posted bad reviews (after contacting the app developers to see if they could help you!) on the apps you bought, to warn others.
And when it comes down to it, my beef with the app store isn't a legal issue either. I might be able to sue the developer for breach of contract or fraud or something, but I won't. That's an even worse move than the restaurant calling the cops.
It may be that 24 hours is too long. Or maybe the return policy should only a apply to non-games. I'd hope a return policy would obviate the need for demo versions and so on. I use them whenever possible, but sometimes it's too much of a pain to be worth it. As for reviews... please. They're too easily gamed. All the apps I've been burned by had good ratings and reviews. If they hadn't, I wouldn't have bought them in the first place.
Perhaps the rational thing to do is just buy more apps and accept that it's always a gamble and sometimes you lose. I don't find myself doing it all that often though.
I have heard of precisely one first hand account of this being used for a truly terrible meal. The police were called and confirmed the dinner's rights.
I've eaten meals that filled my entire body with contentment and happiness.
I've used apps that -- kept me mildy entertained? Were somewhat useful? Somehow that just doesn't seem the same.
Maybe we make those gambles on the first two because there's a 'jackpot' to be hit. It doesn't work like that with an app.
Mental Binning—when we think about buying a $1 app, it doesn’t occur to us to ask ourselves what the pleasure that we are likely to get from this $1 app — or even what is the relative pleasure that we are likely to get from this app compared with a $4 latte. In our minds, those two decisions are separate.
Price Anchoring—we have been trained with the expectation that apps should be free.
1) http://danariely.com/2011/12/25/the-oatmeal-this-is-how-i-fe...
The coffee cup analogy is about putting the price of mobile apps back into perspective, getting people to not feel ripped off because just they're paying $1.99 instead of $.99.
There are various reasons why this happens. Partly it's the fact they wasted time researching and purchasing the app, and people's time is usually more important than $0.99 or coffee. Partly it's an innate sense of justice. But the main factor is that we don't like to feel that we screwed up. Even worse if you just paid for an app before learning there's a better one that's free.
A good book that covers this is The Paradox of Choice (http://en.wikipedia.org/wiki/The_Paradox_of_Choice:_Why_More...; credit Build and Analyze podcast for raising the topic a while back.)
Joe tells his neighbour Bob of his ordeal and how he got his $11 back, Bob has the same problem and asks whether the Joe could take care of his billing problems with the phone company for $11, but Joe refuses insisting he isn't being paid enough to deal with the phone company for hours.
The goal is to make it not worth the oppressor's effort to rip you off.
I'm not sure this is the same phenomenon that's going on with mobile apps, but a case can be made it's related. Arguably, the reference price is $0, so any deviation from that is going to be treated with the greatest significance. But now I'm just getting back to the OP's point that "Starbucks Has No Free Alternative", from a slightly different angle.
I purchased Dark Sky a couple weeks ago on the recommendation of a friend. I thought the $3.99 price tag was way too steep for what is mostly likely another crappy app, and I would never have bought it if my friend hadn't sung its praises.
And it's now one of the most useful apps on my phone, and if it had been a 14-day free trial, I'd happily pay $20 for it.
If free trials were available, like are common in the desktop software world, I think app prices could go waaay up.
For me, the two stellar points were: "The Starbucks Craftsmanship Is On Full Display" + "App Craftsmanship Is Hidden Away".
I'd also like to add that the "Craftsman is hidden away". Apps do not connect at a human level the same way a person selling you a cup of coffee does. Even for mega corporations like Starbucks, at the end of the day, you interact with a Barista or someone at the cash register. We being creatures of habit, tend to go back to the same Starbucks (mostly), and in the process bolster this connection. That doesn't happen with an app. You might go back to the app every day, but there is no tangible connection with the craftsman. So what exactly can be done? For starters, one can associate the developer's name and face with the app. I think this is particularly important for Free apps. If you've ever used Adblock on Safari, at the end of the setup, there's a note that "humanizes" the app as being the creation of a person. You get to see the name and a photo.
One of my favourite mobile apps, Instapaper, has the developer leaving tiny personal messages during app updates. I know his name, the fact that he recently had a baby and at some basic level it helps me connect to the person.
Does this make any sense?
1) Crafting the "image" of superiority that people get from purchasing Starbucks (having that nice branded Starbucks cup, rather than the crappy styrofoam one your office provides, allowing people to order ridiculously tailored drinks -- soy half caff with a dollop of creme...etc) and
2) Providing an ecosystem to encourage the purchase over free alternatives (I've noticed that I'll stop at Starbucks for a snack because I'm hungry in the morning, and pick up coffee/tea as well, just because I'm there)
To bring the analogy back around to apps, let's say there was an Instagram app that costs $9 and a notJimstagram app that does something similar for free. Instagram = Starbucks, notJimstagram = your office coffee. Most people would buy Instagram, because Instagram is well known, has a strong brand, etc.
On the other hand, suppose there was the $9 Instagram and the free Instagram. In that case, most people would probably choose, or at least start with the free Instagram.
"Great software masks it’s complexity"
"Package it such that it shows off it’s craftsmanship"
"I don’t expect it to even last beyond it’s last drop"
"Its like an infant child in that regard"
The original article gives only a Twitter account for contact info, the submitter of this HN post is the same as the author of the original piece, and my comment above is 251 characters.
"Starbucks is a trustable experience." The assumption is that all people all the time buy known brand coffee. From my own, I know I walk into coffee shops I have never been to before. Sometimes good, sometimes bad. Even at Starbucks there are times I ask for decaf and get caffed coffee, or other times, the green tea latte is just not mixed right, or the milk was a bit on the old side, etc.
"Starbucks (or any known brand coffee) has no free alternative." Yes there is, it's water. Or, if you're looking for the substance of coffee, then there certainly are cheaper alternatives --Jolt, or no-doze, etc. Or there is also just plain regular non-espresso coffee for a quarter of the price, or office coffee.
"Apps can be a gamble." Trying a new flavor of coffee drink can be a gamble, but given that Starbucks and other introduce new drinks, someone is taking the chance on unknowns. Well, it's trusted! Sure, but as you know, people will try stuff and will go back to what they always bought. Still, they're willing to forgo $4 to try something new which may or may not suit their palate.
PS. For example, I really doubt people research new flavors before buying a new espresso drink combo but apparently they are willing to devote massive amounts of time and opportunity cost to research a dollar app. It's very lopsided and strange.
Tangible goods are largely non-free. The alternative to a cafe beverage is either one from a competing establishment, or one you make yourself (I'm considering water and coffee to not be directly competitive, YMMV, I don't drink decaf).
I think you're understating the gambles involved in technology products. Or maybe I'm just overly risk-averse.
I guess then, the question is why people find it natural to pay for tangible goods like coffee (a temporary good, but physical), a movie (an experiential good, also ephemeral and not physical) which by the way can be either good or mostly poor, a hammer (an extremely re-usable good and physical good) preventive care (is this tangible? not physical, anyhow) but when it comes to SW, people, depending on platform, perhaps, just don't want to pay, even if it's a nominal amount and go to extraordinary and disproportionate lengths to scrutinize the purchase taking hours perhaps researching an insignificant (in dollar terms) purchase.
>In short, I know what I’m getting for $4 and I’m getting that same experience every time I hit the drive thru.
Drive-through Starbucks? America, you are way ahead.
Also, is $4 the norm for a cup of coffee? Is that standard filter coffee, latte, or one of their elaborate coffee-based concoctions? In the UK Starbucks will sell you a standard no-frills coffee for £1.50-ish.
$4 refers to the venti lattes and other sundry sugary crap. (ie, they're stretching the truth)
"Starbucks Coffee is a Trustable Experience" Not true - I've had mixed results depending on time of day and what barista is making my drink.
"Your $1 App is a Total Gamble" Nope. You have every opportunity to read the reviews, look at screenshots, use Google, etc.
"Starbucks Has No Free Alternative" and "Free Apps Are Often A Great Alternative" I'm not sure how this matters - if you're cheap, it doesn't matter how good the app is. Do you tip waiters? After all, the alternative to tipping is great - you get to keep your money!
"Starbucks Craftsmanship Is On Full Display" Not really. I don't think anyone would agree that "craftsmanship" goes into making a Starbucks drink.
"App Craftsmanship Is Hidden Away" Like I said before, you have ample opportunity to read the app description, check out app store rankings, read user reviews, and look at screenshots.
Reviews can be gamed, even when they're not, the ratings provided are typically highly inflated or simply binary (people give very high, or very low ratings, few in the middle). While descriptions can be useful, in practice most are not ("works great", "does everything I wanted" -- doesn't tell me "... for what" or "... and that was ..."). Negative reviews are often more useful (they're generally specific as to faults), but even then, as apps change over time, it's not clear what reviews relate to the current state of your app (Starbucks generally doesn't radically change its coffee composition from week to week).
Screenshots show a static view of an app but not its flow, responsiveness, accuracy, stability, privacy policy, and a whole slew of other issues.
The best way for me to judge software is to use it. Often for a prolonged period of time.
You managed to say it all better than I did somewhere here.
Let's just hope the message gets trough.
I'm not sure Starbucks does this :-) Overall a pretty good acticle.
People call console themselves by talking about app experience etc, and even though app experience is important, i believe experience is not why apps are sold at shitty 99cents. Apple's strategy was to commoditize apps and guess what they succeeded.
My conclusion is that there is little or no hope for paid app or any breakthrough success for the majority of app developers. It was not meant to be, because that will affect the appeal of the iphone which will in turn lead to a drop in demand which will in turn force down the price of iphone and ipads. Do you think Apple will ever let that happen?
Wake up and smell the coffee.
If I were writing a mobile app, I'd have a free version and a paid version. The only difference between the two would be with the free version, you'd have to look at a screen trying to get you to upgrade to the paid version, and you would be forced to look at this screen for at least X seconds, where X is proportional to how many times you have used the application.
I like this approach because it users could try out my app risk free, but those who want to freeload off of my hard work would be inconvenienced enough where I think I could manage to convert a decent percentage of free users into paid members. Plus, the user can still use the app, but each time they use it you get a chance to upsell them, which you don't get if you just lock them out.
Then you can continue using the analogy and make sure users actually value your app.
Some truly like to have coffee in the morning. I get it. The discussion is about comparing the purchase of a daily cup of coffee with the purchase of software on a daily basis. To me this is simple: Create an addictive software product and you'll have your daily purchases. Hard to compete with a stimulant though.
We're over thinking the problem, and the cup of coffee analogy is a perfect hit, it is a pricing issue. We as developers don't know how to price our products. Just search HN and see how many posts are talking about pricing experiments.
To the post. It mainly blames three areas: customer experience, free/paid issue, and craftsmanship. Which in business talk translate to product, pricing, and promotion.
We first tried to fix this mess by cutting down the price of our products. Things didn't work, sales still going down. And what did we do? Rinse and repeat. We kept doing that until we reached the bottom price, which now seems to be free. Newsflash, the problem stills there.
Worse, to stay in business the only option we had was to keep cutting down on other areas. The candidate picked for the next round of random debugging was the product itself. Quality development costs money, so product quality had to suffer. As a result we've got this endless sea of crapware we see in the AppStore and elsewhere.
That has led to another round of random shooting at business bugs. The next victim is promotion, or in other words, software craftsmanship, which is an attempt to fix the image problem caused by the race to the bottom. It won't work! People don't care about all the sweat and tears that we put into our work, they just want to save money. And thanks to us, they're all doing that.
In the end the problem remains, and we still have to go the the source in order to make the right decisions to fix this mess. The shareware business model sure would be an easy fix, but it won't happen. Another solution, if you aren't in SAAS or IAP, is to raise your prices and pull out the free products. Some developers have done it and they have gotten good results.
Finally, people spend four bucks on a cup of Starbucks coffee because they need the kick to wakeup and go about their life. If you figure an app to do that, please don't sell it for one buck! It worths more.
From the bottom of the article:
> Comments are not currently enabled because the internet has not yet learned how to deal with the ability to post comments. Its like an infant child in that regard. - Josh
He is presenting several facts labeled as such and then follows each fact with a paragraph or more explaining the fact. It's not condescension... it's science, man.
In fact I really hate spending that money on a single cup of coffee since even in the rare case when it's pretty good that merely means it's "almost just about" as good as what I brew myself and the expense puts such a damper on the enjoyment factor I might as well not bother.
But then, I'm probably one of those stereotypical cheap Dutch bastards :-P (that happens to brew a really kick ass coffee)
By the way, Starbucks is not a "trustable experience" per se. Also, the point is about frivolous spending, many people are willing to plop $5 bucks on a new snack at the grocery story, not knowing how it tastes or not, but not willing to pay anything for software. I think the author is searching to make some point but defining some concept called "trustable experience" but I'm just non-plused.
When I buy your amazing app v0.1 I'm also signing up for a time investment of unknown quantity. At the very least I will have to wait for it to download/install, start it up, figure out how to use it, evaluate it, and delete it if it sucks.
Rovio can release Angry Birds N and it will be a hit because that time investment has already been validated and quantified. I liked Angry Birds N-1, these screenshots of Angry Birds N look similar, I will probably like Angry Birds N.
Trustable Experience: Most people make many transactions in a week that are not trustable. The lower the price the lower the hesitation. $0.99 is as low as it gets.
Free alternative: For many transaction higher than $0.99 there are free alternatives. Newspapers, magazines all have free substitutes online. Still people spend on these.
Craftsmanship: True for Starbucks, not for majority of transactions. Maybe be not even... most people are staring at their phone anyway waiting for their coffee.
Does anyone know why Apple doesn't offer this? Are they just worried it will somehow cause customer confusion?
Plus the whole process would be much smoother if baked right in to the app store.
People know Starbucks; people know Starbucks coffee. It's a very stable and well known experience to regular customers.
People don't know you; people don't know your software. I don't know if buying your software will actually cause me more inconvenience than convenience. (Buggy, bad UX, hard to uninstall, installs additional crap like browser plugins)
That's why buying an app is a gamble, and buying coffee isn't. That's why you cant make a good argument by comparing the price of your app to the price of a coffee.
EDIT: Actually I guess the $4 drinks are a gamble afterall. My only Starbucks experience is "normal" coffee. Which I guess is more in the $2 - $3 range.
It's about you knowing that Starbucks is Starbucks no matter which street, city, state or country you find yourself in. Whether you love or hate it, it's at least consistent.
That's why it's not a gamble.
Starbucks sucks.
If you're in New York or San Francisco it's true that Starbucks has chased away the independent coffee shop and you might think it's a good cup of coffee.
It ~was~ a good cup of coffee 15 years ago, but now every population center with 50,000 or so people has an espresso bar that puts Starbucks to shame.
The exception is a few big cities that Starbucks put up a store every half block or so, probably to make Wall Street investors think that every site from Cinncinnati to Omaha is stuffed with them.
Maybe I'm being pedantic but this seems like a contradiction.
I know plenty of office environments with free coffee. There is your alternative, but it isn't relevant. People buy experiences. You go to Starbucks because you like the experience. The terminology. The chatty baristas. The drive-thru you can complain about with your sympathetic co-workers. They could probably charge twice what they do and keep a big fraction of their customers.
I'm a big music/podcast listener so I only afford enough space for about 30 apps. For a $0.99 app to be useful it has to has to beat out apps like Shazam, kindle book reader, bloomberg anywhere, evernote, etc.
The likely hood of an app at any price doing this is pretty low.
For me this is why the analogy doesn't hold. Price has nothing to do with it.
"omg I just PAID for this app!! and you can't even listen to me and add this completely ridiculous feature that nobody in the world except me would use!!11 and btw, the alignment of this grid isn't pixel perfect and you spelled the word calendarr wrong!! i want my money back!"
An app on the other hand, most of the time doesn't give us that same feeling. It's more of a nice-to-have, or nice to play with once and then forget. If it's an utility you use everyday like Evernote, it's different of course.
Fact: Starbucks Coffee is a Trustable Experience
Fact: Your $1 App is a Total Gamble
Fact: Starbucks Has No Free Alternative
Fact: Free Apps Are Often A Great Alternative
Fact: The Starbucks Craftsmanship Is On Full Display
Fact: App Craftsmanship Is Hidden Away
Odds are good that if the Starbucks you go to regularly closed, and there wasn't another one conveniently close by, you would go to that coffee shop on the other corner. Coffee is a good with proven value to the addicted.
It's also highly substitutable. Some people really insist on the specific order that they've worked out in mind-numbing detail, but most coffee drinkers are happy if it's good enough, hot enough, and can be easily doctored to their preference for dairy and sweetener.
On the other hand there are documented cases where charging more like $9.99 instead of $0.99 increase sales because the higher costs increases it's perceived value. People are familiar with the saying: "you get what you pay for."
when the average marginal cost drops to zero (due to all the usual bootstrapping-style content here on hn), so does the average price -- artificial scarcity won't alter that fact in the consumer's mind. so, it's really the value you perceive as coming from your infinite good that actually drives things like app pricing.
if the average price of an app is free and people are willing to pay $0.99 for your app, well, that's what it's worth. if you're not happy with that, push up the price and test out what the market will actually bear.
m3mnoch.
If you try to spend $50 on cups of coffee you'll quickly become twitchy and have to stop, but if you keep pressing the Buy button in the app store you can easily get the thing done.
Oh, and I hate $tarbucks.
- What of my billing information / what billing hassles am I opening myself up for? Considering that app purchases are frequently tied to both credit cards and your comms/telco vendor (and often other integrated services), you're putting a lot at risk.
- What respect (or lack) does this app have for my privacy? I'm very conscious of what closed-source resources I use, and even the fact that every time I'm inputting a PIN on a purchase screen (rarely, preferring cash) I'm opening myself to identity theft / fraud risk.
- What effect is this app going to have on my device stability/integrity? Again, phones, tablets, and laptops are complex devices with extensive user state. Losing this is a real PITA.
- What learning investment must I make for this tool? Will it be worth it?
Coffee, or food, or other concrete, discrete, simple, tangible goods offer a vastly simpler experience and generally (food poisoning aside) pretty minimal downside risk potential.
To throw in a contrasting physical-goods analogy: I'm adverse to trying out new wines. Why?
- I'm very aware that much of the perceived difference in wines is highly subjective, and largely market-driven.
- I don't get all that much from the experience myself. Really, Two Buck Chuck is pretty decent, though there are a few others I occasionally buy.
- The unit-cost is relatively expensive compared with alternatives (forgoing consumption, cheaper sufficing alternatives) -- $15-$25 for a moderately priced bottle, and up into the tens or hundreds if you like.
- Option overload. Too many brands and varieties, far more than I can keep track of. Even if I find something I like, odds are I'm not going to remember what it was next time I'm shopping (not just conjecture, this happens routinely).
- And a bad choice can be ... if not toxic, just really unappealing.
Upshot: I'm not swayed by the hype, I'm risk averse, the good is expensive for the utility provided. I purchase rarely, and conservatively when I do so.
I viewed the one-off small app market for PCs as pretty limiting, in the 1990s and 2000s. I see the market for PDA / mobile apps as similarly limiting.
On the computer side, Free Software utilities and a modicum of scripting / application engineering provide me with virtually all of my needs. In large part because the FS utilities aren't silos, but (often) nodes on a processing pipeline. The extensibility tools aren't yet present on mobile, though Free Software is beginning to make inroads.
While I don't think it will eliminate the paid app market, and for a large portion of the population may not (as was the case with the PC market), I suspect FS will supplant a fairly large share of paid-app opportunities. Perhaps moreso than in the PC market of the past couple of decades as FS has garnered far wider acceptance (it was freaky even in the late 1990s, it's mainstream today).
Edit: wine analog.
So app developers need to judge and price their apps comensurate with the real "effective" cost the user is going to pay anyway to install their app. Pricing less than that, or at least deluding yourself that pricing less than that gives you a competitive advantage, is pointless and sometimes counterproductive (in the absence of other information I will judge the quality of your app partly by how it is priced).
You can't be a stand alone Starbucks in the market. It wouldn't work.
"Fact: Starbucks Coffee is a Trustable Experience"
So the argument here is that brand weight translates into actual value. While this is true across the consumerist landscape, there now also exists these things called reviews. They enable people with no knowledge of something to make a reasonable decision based on the experience of others. For example, I would be willing to pay more at a well reviewed coffee shop than at a Starbucks. For me, reviews always trump brand value.
"Fact: Your $1 App is a Total Gamble" First problem: the logic that x was bad so y must be bad as well is flawed. No one would have Starbucks, hate it, and hate Peet's Coffee by association. Now, it would be reasonable to assume that someone could be turned off by Apps in general the same way someone could dislike coffee, but that makes this whole argument comparison anyway. Second: you're making the same mistake arrogant people make when they write off buying a lotto ticket before a big drawing. Yes, odds of winning might be low (staggeringly low in the lottery, much less so in buying an app), but the potential gain far outweighs it and the barrier to entry is also next to nothing. You might buy a $1 app and have it be worthless, but it also might give you 30 hours of playtime or speed up your tasks by 10 min a day or something wonderful. If it's worthless, you're out a dollar. I'll miss that single dollar... I could have travelled back in time to the 80s and bought a candy bar.
"Fact: Starbucks Has No Free Alternative" Yes they do. Taste tests. But this is harder to argue against, and deserves another debate altogether. If someone provides a better service/app for free, by all means use it. It works for open source, less so for people trying to turn a profit. Expect a paid version to come along that trumps it.
"Fact: The Starbucks Craftsmanship Is On Full Display" Seriously wtf. "The feeling says “lots of work went into this magical liquid pick-me-up”." And apps grow on trees? What an ignorant statement. What do you consider the screenshots and YouTube videos of applications? Whether you meant to or not, you have managed to say that you think it takes far more work to make the same cup of coffee your home coffee pot makes than it does to build an application. "How often have you heard people say “I could have made that app, if only I’d thought of it first”. Or “that’s so simple, I can’t believe its been so successful”." I don't think I've heard anyone say "I could have made that," it's far more likely to hear "I thought of that first." To that I say, "If you guys were the inventors of Facebook you'd have invented Facebook."
Yes, perhaps there is a problem with comparing a cup of coffee with a $1 app. But the problem is not that Starbucks is more valuable than some individual or that a single app developer is to blame for the quality of all software. The problem is that we have allowed computer science to become a black box in our society. It's far worse than even math's "I don't need to know this because I'll never use it." The only people who have any idea of the time and effort involved in software creation are the people who create software. You call it "showing craftsmanship," but I call it changing our damn society to stop trivializing things that take massive amounts of effort while glorifying the ones that take little. The solution is simple: make computer science a mainstay of primary and secondary education. Reading, writing, arithmetic, and computers.
TL;DR: The trivialization of the effort involved with software development is the fault of society and not the fault of software developers.
Yes, there is. But not on a market where $2 is a premium price. If you want to make a living from software products you should stay away from mobile.
At least it plays out well for Apple who wanted to commoditize software for a long time.