Study: High correlation between engaged users and in-app purchases

A recent study from Localytics revealed that building relationships with mobile phone app users is more important than driving an in-app purchase.

A recent study from Localytics revealed that building relationships with mobile phone app users is more important than driving an in-app purchase.

According to VentureBeat, in-app purchases created a total of $970 million in revenue last year, and are expected to reach more than $5 billion by 2015. 

This means building customer satisfaction and loyalty is more important than ever for app developers to create long-term value.

"By building your app's engagement and your brand's presence in a user's mind, you can generate better overall revenue based on a loyal base of repeat users," according to the report.

Specifically, users who interact with an app more than once prior to making their first in-app purchase are more valuable over the lifetime of their usership, making an average of 25 percent more in-app purchases.

What's more, 44 percent of respondents who made in-app purchases didn't do so until they had interacted with the app at least 10 times - with an average of 12 days gone by before they bought something.

"Given the 12 day average time between downloading an app and making a purchase, driving loyalty across a period of weeks will often generate greater revenue," the report states.

Developers of some of the highest-grossing apps increase their loyalty by allowing a free initial download, only to require payment for advanced services - called the freemium model. A report from market intelligence company IHS iSuppli found that by the end of the third quarter of 2011, free-to-download apps represented 45 percent of the top grossing iPhone apps and 31 percent of the highest-earning Android applications, FierceMobileContent reports. It seems that letting users thoroughly explore an app or game prior to encouraging an in-app purchase is the best to way get results.

For instance, the Localytics study found that those who purchased something during their first session will only average 2.8 purchases over their user lifetime - compared to an average of 3.5 purchases for those who become engaged prior to making a buying decision.

Furthermore, 26 percent of apps are used only once after they're downloaded, which means companies might need to entice users prior to the download (whether with a robust marketing campaign or high-quality user reviews) in order to increase second-time usage.