Simultaneous or sequential? Multihoming launch strategies for mobile applications with consideration of promotion and switching costs

Xiuyi Zhang, Wenhua Hou and Wenqing Zhang

International Journal of Production Research, 2022, vol. 60, issue 3, 977-998

Abstract: As the number of apps in mobile application markets soars, platforms make significant promotion efforts to help new apps stand out. Some app developers adopt a sequential launch strategy with which they postpone launching the app in other platforms to be eligible for free promotion on the first-launch platform. We model an app developer that considers two platforms. Our results show that for the sequential launch strategy, the developer’s optimal pricing decisions rely on the switching costs to motivate users to adopt different purchase options. Surprisingly, if the switching costs are extremely high, the price on the second launch platform could exceed that on the first launch platform. In addition, we compare the sequential and simultaneous launch strategies and find that switching costs always play a vital role in developers’ launch decisions even when no user switches. Furthermore, developers may prefer the sequential strategy when the app quality is low due to low quality decay. Besides, we extend our model to a situation in which the app is free of charge. While this study focuses on the app market, our results can also be applied to game or video markets where similar phenomena exist.

Date: 2022
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DOI: 10.1080/00207543.2020.1847343

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