A study on consumer spending behaviours to improve business modelling strategy in the Australian app market

The mobile app market is one of the fastest growing markets in the modern technological age. This market started with the introduction of the iPhone to the mobile device market; the iPhone revolutionised smartphones in terms of technology and ease of use, and therefore became an instant hit that dominated the market for many years. Based on popular demand from the software developer community, Apple allowed third party developers to build native applications on iPhone, by creating a software development kit (SDK) and a distribution market for developers to create and sell apps directly to customers. Through these actions, Apple democratised the sale of software by allowing independent developers to sell their own software, and this move attracted hundreds of thousands of developers to the mobile app industry. Today, Apple, and also Android, platforms boast large developer communities and supply over three billion smartphone users worldwide. The mobile app markets have enabled developers to become direct app sellers to customers. However, this has created new challenges for the app sellers. Besides building quality apps, developers now need to determine the right business model for their products or services, determine price, conduct market research, and handle all app promotion. App sellers that have evolved into developer studios with specialised staff have coped better with app market challenges. However, small and independent developers still struggle with the business end of their operation, and as a result suffer low earnings in a highly competitive market. In the mobile app marketplace, business modelling strategy depends, in part, on understanding consumer spending behaviour. Developers need to distinguish and monitor consumers’ spending behaviour patterns that are associated with their products and continuously adapt their business models. Therefore, consumer spending behaviour studies are necessary to inform the market of what consumers like in mobile apps and how they spend money on apps. This study aims to address one of the most important business challenges that developers face, by producing business modelling guidelines based on app product characteristics, which help developers select business models that are more suited for consumer spending behaviour associated with their products, and as a result better monetise their products in the mobile app marketplace. The study paradigm of this research is rooted in positivism, in which quantitative research is conducted to obtain objective truth. Hypotheses regarding associations between pleasure, utility, peer interaction, currency models, and the perception of price and willingness to spend money on the app product are tested using statistical techniques, such as regression analysis, paired t-test, and one-way ANOVA. The tests will address research gaps on what drives users to purchase apps by measuring consumer spending (defined in Section 1.3 and explained in Section 3.3) when buying mobile apps. Study findings showed that mobile app users prefer spending on functional apps rather than entertainment apps; however, they become more willing to spend on entertainment apps the longer they use them. Findings also showed that the use of native currency in apps is associated with more willingness by users to spend money. Results indicated no association between social status or social competition and willingness to spend money, which means that peer influence in mobile game networks does not influence consumers’ willingness to spend money. Further analysis showed that female mobile app gamers are more conservative towards app spending than male mobile app gamers despite reporting their economic means to be statistically equal. Network game players and high-income professionals spend the most time playing mobile app games and are also the most excessive spenders among all sociodemographic groups. Finally, this study’s main contribution is the proposed business model, which is based on factors which influence consumers’ spending behaviours. The study’s practical contribution consists of a set of guidelines and a decision flowchart that classifies Google Play platforms’ monetisation models by earning potential and guides developers into selecting the most appropriate model based on the expected user behaviour of their products.