It’s widely recognised that the success of Apple’s iPhone has a lot to do with iTunes and the mammoth number of apps in the App Store. With more than 100,000 apps available across many categories, it seems there’s an app to suit everyone, for every need.

However, despite apps being a legitimate and increasingly powerful distribution channel for content, services and brand experiences, iPhone users are seemingly reluctant to spend a lot of money to access paid apps.

So, can brands charge for their apps?

Apps are gradually being recognised as a new distribution channel for brands, particularly those that can deliver content, or provide access to their services via mobile Internet. Furthermore, many iPhone users are looking for more brands to engage with them via their mobile device, however, not at a cost.

iPhone users are looking for new interactions or ways of dealing with companies anywhere, at anytime, and branded apps provide companies with another opportunity to connect with their customers. But, most brands cannot charge for access to their own distribution channels, or for content that is not unique – why pay to access something that can be obtained elsewhere for free?

There will be, of course, exceptions, particularly when a branded app can be a primary distribution channel for unique content or intellectual property, and/or the experience has significant benefits and value to the consumer. Although, at this point in time, consumer brands are yet to fully explore how they can become part of their customers’ lives via owning app territory on their customers’ Smartphone.

Latitude Insight’s case study of iPhone users uncovered just what consumers find so fascinating about the iPhone, why they use that four-letter word – LOVE, and how brands can become part of this ‘affair’.

The study revealed that Smartphones change user’s lives. Initially thinking they are getting a new phone, with email and web capabilities, they find iPhone gives them so much more.

It helps them communicate. It makes them more connected because of its web capabilities. But going even further, the real benefits are about being more entertained, more efficient in what they do, having more freedom because they are not stuck to a computer, and having more ability do things away from home and work. It’s a whole new world where users can do things anywhere, anytime.

Smartphone users also admit to relying less on their computer now they have a mobile device. With predictions that by 2011, 85% of handsets will have some sort of browser, it’s important brands recognise the opportunity mobile devices gives them in terms of another distribution channel to engage with their customers.

Furthermore, with over 100,000 apps available, many free, it’s important apps have lasting traction. They need to ‘do’ something and have a tangible impact on time or convenience to be worthwhile and valued by users.

How many take away coffees do you buy a day? Even if it’s only one, that’s probably $3.50 out of your pocket that you spend without a second thought.

So what about spending  $2.99 on an iPhone app – maybe a game to use in your spare time, or a utility designed to save you time. Or how does $1.19 sound, because that seems to be a common price point? Why you could even get three apps for little more than a latte.

You wouldn’t think that it would be an agonising decision, but we were surprised to find that price is a sensitive issue when it comes to buying apps. And iPhone users themselves don’t understand why they waiver over spending less than $3 on something lasts so much longer than a hot drink. Here’s a taste of some of the comments from our iPhone Online Research Community:

“I am dancing around the idea of a $6 app at the moment that I really want (but not rushing in). Weird psychology really since I have no problem throwing far more than that away on far more frivolous things”

“I only pay for stuff with a lot of good reviews and things I know I’ll like. Otherwise it’s free. Even if it’s an app I’m not sure about and it only costs $1.19 I’ll think twice, three times.. sometimes four times”

“I don’t feel like I should be paying any more than I already am/have for the iPhone considering I use it mostly for communication purposes. I don’t think I will ever pay for an app, but I’m waiting for something to prove me wrong!”

Our frugal friends were a bit bemused at their own behaviour, and put it down to both the intangible nature of apps, and the predomiance of free apps which create a mindset that all apps should be free or so cheap that purchasing doesn’t require a second thought.

There are people who are willing to spend ‘big’ money on apps, whether it’s a $9.99 Jamie Oliver recipe collection or a $69 navigation system. But the apps they pay more money for have to do something - they’re rarely games or time wasters. Even so, our ’spenders’ were more likely to trial a ‘lite’ version before downloading the full paid-for version. Try before you buy matters even more in appland, where the refund policy is non-existent.

There’s no doubting that apps are what makes the iPhone eminently attractive and indispensible, but iPhone users are cautious with their money, and while so many apps are free, many users are happy to dabble in app-lite. This may have interesting consequences for iPad, both in terms of users’ propensity to purchase 3rd party content and apps, and the pricing strategies employed by content providers and app developers. And once big brands with big development budgets cotton on to creating new (free) brand experiences via apps, maybe we’ll become even more reluctant to open our wallets.

The last couple of days, all we have heard is iPad, iPad, iPad.  While I’m not sure iPad will be as revolutionary as the iPod or iPhone, what I do know is that Apple will make a lot of revenue from their iTunes store.  Did you know that in 2009, Apple accounted for 99.4% of all mobile app sales?

According to the Gartner report that’s a big chunk of the $4.2 billion in mobile app revenue that Apple scored in 2009 alone.  Apps are growing by the minute with the market estimated to almost double in the next year, to 4.5 billion apps.

For marketers this creates a number of interesting questions and opportunities:
- What makes a good App?
- What are consumers willing to pay for?
- How does the market learn about Apps?
- How do I make sure I get my Apps noticed ?

Over the coming months Latitude hopes to answer some of these questions with their iPhone user research community.  Not only will we ask members to ’show us your Apps’ we want to drill down to understand how they find, choose and interact with their Apps.  Which ones can’t they live without and most importantly, which ones add to their brand experience.

So what Apps can’t you live without?

I’ve been searching for data or case studies on the use of mobile devices in qualitative research and, alas, there’s not much information out there at the moment. A lot of the studies on using mobile devices in market research relate to SMS or survey data capture. Vision Critical has conducted a mobile research study which provides some good insights on quantitative mobile research, but only eludes to the differences in qualitative responses.

But maybe that’s good for us, because we’re about to start a test community amongst iPhone users, that will both provide insights on the iPhone, and how smartphones can be used in online research communities.  Given that, according to Morgan Stanley, the iPhone/iTouch has been adopted faster than any other consumer technology device in history, the research industry can’t afford to ignore smartphones when it comes to engaging people in text based conversations. You can wade through the reams of juicy data on mobile internet from Morgan Stanley here.

Of course, there’s nothing new about using mobiles for social networking. The Facebook app does happen to be the world’s most downloaded free iPhone app.  So if people are already chatting and connecting via mobile devices within these social networks, why not with us researchers via our online communities?

Time will tell…but there’s a clear need for researchers to be able to keep up with our clients who are developing branded applications as another way to reach their customers.  It’s about going to where thepeople are, not bringing them to us for sandwiches and a chat around a table.

So keep an eye out for updates on the iPhone community and the outcomes. We’ll be sharing our findings in coming months.