Elsevier

Information & Management

Volume 53, Issue 6, September 2016, Pages 727-739
Information & Management

Investigating decision factors in mobile application purchase: A mixed-methods approach

https://doi.org/10.1016/j.im.2016.02.011Get rights and content

Highlights

  • Sales of mobile applications as a key revenue source in the App economy.

  • This study examines what factors people consider in deciding to buy mobile Apps.

  • Mixed methods investigation by adopting both qualitative and quantitative approaches.

  • Direct and indirect effects of five decision factors on App purchase.

Abstract

The growth of the smart devices market and the development of mobile applications (Apps) for them have given rise to an App economy. Sales of mobile applications are a key revenue source in this economy, with the expected worldwide market growth of US $75 billion by 2017. Despite the trend, many mobile Apps fail to attract customers, yet there has been a lack of research and understanding of the factors that affect the decisions to buy them. This study is thus motivated to examine the factors that people consider in their buying decisions of mobile Apps for their smartphones. This mixed-methods investigation first adopts an exploratory and qualitative approach to identify the purchase decision factors based on interviews with consumers. It then undertakes a quantitative, confirmatory study using a survey to test the model derived using mental accounting theory and the findings of the exploratory study. The results show the direct and indirect effects of five factors – word of mouth about App, App usefulness, monetary value of App, App trialability, and App enjoyment – on the intention to purchase an App. In this manner, this study advances our understanding of the decision-making factors leading to the purchase of mobile Apps. It also facilitates developers and marketers to promote the sales of their Apps for revenue generation.

Introduction

With the rapid growth of the smart devices (e.g., smartphone and tablet PC) market and the development of mobile applications (Apps) for these devices, a new economy called the App economy2 has emerged. As of August 2015, the two largest App markets, App Store3 and Google Play,4 offered approximately 1,700,000 Apps each. About half of them are paid Apps (average price estimated at US$1.24 [3]), with 50% of iPhone users having downloaded at least one paid App a month [57]. In 2012, App Store's daily revenue from App sales amounted to over US $15 million, while Google's corresponding figures totaled US $3.5 million.5 As the number of global smartphone users increases with more than 2 billion users in 2015,6 the worldwide smartphone App market is also expected to increase to US $75 billion by 2017.7

In the App economy, although companies can generate revenue from other sources, such as advertisements within Apps and selling digital items for Apps [43], App sales constitute the largest component. Indeed, consumers’ purchase and use of paid Apps is essential for the business success of developers and service providers. As a result, App developers have been exploring ways to increase their sales revenues, and App markets (e.g., Google Play and App Store) are adopting marketing practices such as online feedback mechanisms (e.g., customer reviews), ranking Apps in terms of popularity and sales, and allowing trial versions of them. However, a large fraction of Apps do not break even – 17% of developers generate no revenue and 52% make less than US $100 per month.8 With relatively high development costs and low prices of Apps, sales must be stimulated significantly to recover costs and generate profits. Encouraging sales requires understanding the factors affecting customers’ decision to purchase Apps.

Despite the need to understand what consumers are looking for in order to enhance App sales, little research exists on how and why people decide to buy them. Research in this area has mainly addressed issues of App market analysis [21], App design and development [42], App adoption [3], and App usage [80], as will be seen in Section 2. In this study, we would like to clarify that App adoption differs to some degree from App purchase. In particular, purchasers of paid Apps, who are the focus of this study, play dual roles of technology buyers and adopters, that is, they must buy the paid Apps before adopting and using them. Indeed, most people purchase Apps for personal use, with the cost of such voluntary purchase being borne by the individual. This differs from people's adoption of free apps or information systems (IS) that have been provided by the organization. In this respect, we see a limitation of technology acceptance models in explaining decision making of App purchase, which can be overcome by drawing from theory on consumer decision making. Overall, missing from previous research is an explanation of individuals’ App purchase decision factors that can lead to revenue generation for developers and marketers. This gap in the literature and the practical problem it represents provide the motivation for this study.

This study, thus, aims to investigate the key factors underlying consumers’ decision to buy Apps for their smartphones as its research question. For this purpose, we adopt a mixed-methods approach of an exploratory, qualitative study followed by a confirmatory, quantitative (survey) study [53]. A mixed-methods approach is potentially superior to a single method design, because it can provide rich insights into phenomena and develop novel theoretical explanations [72]. Of the seven different purposes of mixed-methods research described in the literature [72], we subscribe to the “developmental” purpose, in which a qualitative study is used to identify or develop constructs and hypotheses, after which a quantitative study is conducted to test the hypotheses. Thus, in our research, the exploratory study identifies potential purchase decision factors based on interviews with App buyers. Because an individual's decision to buy an App involves framing and evaluation of the purchase transaction, we interpret and interrelate these decision factors based on mental accounting theory [67] to develop a model, which explains consumer decision making for App purchase. The model of the decision factors affecting App purchase intention was then tested through a survey of 411 respondents and largely supported.

This study contributes to IS research by adding to the mobile Apps and online purchase literature and extending the use of mental accounting theory. In particular, it advances the understanding of mobile App purchase decision factors and their interrelationships using a mixed-methods approach. It can also facilitate developers and marketers to promote the sales of Apps for revenue generation. The study starts by reviewing the previous literature on online purchase and mobile App adoption to position our study and identify the gaps that it seeks to address. This is followed by a description of our exploratory study and its findings. The main, confirmatory study section begins with a discussion of the framework of mental accounting theory and follows with our model development. After presenting the empirical results of the model test using a survey, we discuss the limitations, theoretical and practical implications, and conclude with a summary of the study.

Section snippets

Online purchase literature

We classified the findings from the online purchase literature as per four essential elements (vendor, transaction channel, customer, and product) of an online transaction between a vendor and customer. On the basis of our review (Table 1), prior research on consumer decision making in e-commerce suggested several purchase decision factors related to the vendor, for example, trust and risk [23], [25], [37], [61], [62], transaction channel, for example, website design and quality [23], [28], [39]

Research method

Following the guidelines for developmental mixed-methods studies [72]. we adopted a qualitative research method first to explore the potential purchase decision factors for mobile Apps by interviewing mobile App buyers. An interview approach has several strengths such as the capability to focus directly on the research topic and deliver perceived causal inferences [79]. We conducted interviews with 30 randomly selected buyers who had purchased Apps at least once for their smartphones in the

Theoretical framework

Mental accounting theory explains human decision making under conditions of risk and uncertainty from a value (i.e., utility12) maximization perspective [67]. In purchasing a new mobile App, there could be a risk that the App does not meet the buyer's needs [47]. There could also be uncertainty in the buyer's mind about the App quality [47]. Thus, people often make decisions about

Discussion of findings

This study, consisting of an exploratory, qualitative study followed by a confirmatory, quantitative study, provides several important results. Foremost, the results reveal four decision factors (monetary value of App, App enjoyment, App usefulness, and App trialability) that have direct impact on mobile App purchase intention. The influence of the monetary value of App, representing acquisition utility in our theoretical framework, indicates its importance in decision making about the purchase

Conclusion

Sales of mobile Apps are a key revenue source in the App economy. Nevertheless, little research has been conducted to understand the individual purchase decisions that fuel this economy, with many Apps being unsuccessful [34]. Motivated thus and following the guidelines for mixed-methods research [72], we explored the decision factors in the purchase of mobile Apps through a qualitative exploratory study and then tested the significance of those decision factors through a quantitative main

Hee-Woong Kim is Underwood Distinguish Professor in the Graduate School of Information at Yonsei University, Seoul Korea. Before joining Yonsei University, he was a faculty member at the National University of Singapore after spending several years as a senior IS consultant in the banking industry. He has served on the editorial boards of the Journal of the Association for Information Systems and IEEE Transactions on Engineering Management. His research work has been published in the

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  • Cited by (0)

    Hee-Woong Kim is Underwood Distinguish Professor in the Graduate School of Information at Yonsei University, Seoul Korea. Before joining Yonsei University, he was a faculty member at the National University of Singapore after spending several years as a senior IS consultant in the banking industry. He has served on the editorial boards of the Journal of the Association for Information Systems and IEEE Transactions on Engineering Management. His research work has been published in the Communications of the ACM, European Journal of Operational Research, IEEE Transactions on Engineering Management, Information Systems Research, International Journal of Human Computer Studies, Journal of the American Society for Information Science and Technology, Journal of the Association for Information Systems, Journal of Management Information Systems, Journal of Retailing, and MIS Quarterly.

    Atreyi Kankanhalli received her B.Tech. degree from the Indian Institute of Technology Delhi, the M.S. degree from the Rensselaer Polytechnic Institute, New York, and the Ph.D. degree from the National University of Singapore. She is an Associate Professor in the Department of Information Systems at the National University of Singapore. She had visiting stints at the London School of Economics, University of California Berkeley, and Indian Institute of Science Bangalore. She has considerable work experience in industrial R&D and has consulted for several organizations including World Bank and Bosch SEA. She conducts research in the areas of knowledge management, virtual teams and communities, and IT in service sectors (egovernment and healthcare), supported by government and industry grants. Her work has appeared in the MIS Quarterly, Information Systems Research, Journal of Management Information Systems, IEEE Transactions on Engineering Management, Journal of AIS, Journal of the American Society for Information Science and Technology, International Journal of Human Computer Studies, Communications of the ACM, Decision Support Systems, and the International Conference on Information Systems and HICSS among others. Prof. Kankanhalli has been awarded the Infocomm Development Authority Gold Medal, IBM Faculty Award, and the ACM SIGMIS 2003 Best Doctoral Dissertation award among others. She has been listed among the leading IS researchers globally and in the Asia Pacific region. She serves or has served on a number of IS conference committees and on the editorial boards of the MIS Quarterly, Information Systems Research, IEEE Transactions on Engineering Management, and Information and Management, among others.

    Hyun-Lyung Lee received her master degree from the Graduate School of Information, Yonsei University, in Seoul Korea. She has been working at LG Electronics after finishing her master degree.

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