$0.99 is the most popular price point[From Pinch Media » Percentage of free applications decreasing]
I think this adds something to the micropayments discussion that was revived here last month. Thinking about the psychology, it seems to me that since the price of something is an important subset of the total information about that something, then a price of “free” sends out mixed signals. If I’m browsing through the iTunes Store to try and find a nice business expense collection and reporting application (any recommendations?), then I probably won’t choose something that’s free. I’d wonder if it’s any good, or if the developer will support it in the future. On the other hand, I won’t pay £10 for something I’ve not had a chance to try out. I don’t mind paying £10 for something that I know works and will make my life easier, but it’s too much for a leap of faith. This makes 59p a good choice of price: it’s so low that I don’t mind paying it (the mental transaction costs are minimised) and I can buy it with one click. So I do.
What Apple has done is, because of the “closed” payment system that they have implemented in the iTunes Store (closed in the sense that the account can only be used to purchase from the iTunes Store), tackle the issue of mental transaction costs. How can this be extended? I’d rather like the ability to buy stuff here and there on the Net with one click and a 99 cent charge to my iTunes account… But talking about one click reminds me of another development in the online payments space. Amazon are going to deliver their one-click experience to a wider audience. They announced two new payment services for online retailers:
Both new services essentially allow online retailers that don’t want to spend the time and money to design a custom system through Amazon Flexible Payments to get a hosted payment application that uses customers’ Amazon.com account information. While they share technological underpinnings, Checkout by Amazon has a longer list of features than Amazon Simple Pay. For instance, Checkout by Amazon can identify Amazon.com customers shopping on the merchant’s site and offer them Amazon’s so-called “1-click” experience that allows customers to place orders without leaving that Web site. Checkout by Amazon also calculates shipping rates and sales taxes, supports merchant promotions, and creates packing slips.
Merchant pricing for both services is competitive with Amazon’s rivals. The basic rate is 2.9% plus 30 cents for orders of $10 or more. Pricing under $10 is 5% plus 5 cents. Volume discounts are 2.5% plus 30 cents for monthly charges of $3,000 to $10,000; 2.2% plus 30 cents for monthly charges of $10,000 to $100,000, and 1.9% plus 30 cents for monthly charges above $100,000.[From Digital Transactions | Amazon]
I’m very happy about that, because I spend an absolute fortune with Amazon (which means I can remember the password) and now they are promising me a simple checkout experience elsewhere, I’ll cheerfully use it (which means that I only have to update my payment details one place). What many observers thought was interesting was the scale of the opportunity here: Amazon in the U.S. has 20 million more active accounts than PayPal.
I could see a “dream team” coming along to take over all of my online payment experiences. One click iTunes for payments under a couple of quid, one click Amazon for larger values.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]