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

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.

KEYWORDS:

• product launch strategy
• promotion services
• switching costs
• app developers
• app platforms

Acknowledgments

We thank the editor-in-chief, the associate editor, and anonymous reviewers for their insightful and constructive comments. This work was supported by the China National Social Science Foundation Project under Grant 15BGL074.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by National Office for Philosophy and Social Sciences: [grant number 15BGL074].

Notes on contributors

Xiuyi Zhang

Xiuyi Zhang ([email protected]) is a master candidate of management science and engineering at Nankai University. Her current research interests are electronic commerce, two-sided platforms and supply chain management.

Wenhua Hou

Wenhua Hou ([email protected]) is a professor of management science and engineering at Nankai University. He received his Ph.D. in management science and engineering from Tianjin University. His current research interests are outsourcing and crowdsourcing, innovation in health industry, supply chain coordination and game theory. His publications have appeared in European Journal of Operational Research, International Journal of Electronic Commerce, Journal of Systems Science and Complexity, Journal of Electronic Commerce Research and other journals.

Wenqing Zhang

Wenqing Zhang ([email protected]) is Associate Professor in Operations and Supply Chain Management at Labovitz School of Business and Economics, University of Minnesota Duluth. He received his PhD in Management Science/Operations Management from McGill University in 2012. Dr. Zhang's areas of expertise include responsible supply chain management, the impact of social responsibility on decision making in operations, operations and supply chain risk management, and game theoretic models. His papers have been published in the European Journal of Operational Research, International Journal of Production Economics, Journal of Cleaner Production, and many others. He has served as a reviewer for many leading academic journals including MIS Quarterly, International Transactions in Operational Research, Annals of Operations Research, International Journal of Production Research and European Journal of Operations Research, etc.