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Survey Shows Consumers Will Pay More for Sensors than for Apps

A few weeks back, Michael Esquivel wrote for the Life Sciences Legal Insights blog about the challenges of pricing mobile apps. Now, as reported in MobiHealthNews, IMS Research in the UK has collected some hard data on consumer spending habits for sports and fitness apps. Separately, MobiHealthNews reported this week that the average price for a health-related app in Apple's AppStore dropped in 2012 to $2.05 from $2.34 in 2010.

Over 60% of the survey respondents who owned smartphones and exercised regularly said that they would be willing to purchase apps and sensors to monitor their performance. However, the overwhelming majority (almost 80%) indicated they would not be willing to pay much more than $3.00 for an app. 

The good news is that the same respondents said they would be willing to pay significantly more – up to $140 – for a sensor (or companion hardware device) that accompanies a fitness app. These sensors, combined with Bluetooth-enabled smartphones, can replace dedicated devices that would otherwise be purchased separately.

The willingness of consumers to invest in companion hardware for their fitness apps increases the ARPU (Average Revenue Per User) to a more appealing range for entrepreneurs who are considering entering the mobile health (mHealth) or healthcare IT space. At Fenwick's Digital Health Investor Summit in June, Sundeep Peechu of Felicis, said that for many companies a sustainable business model is achievable with an ARPU of $25 or higher. In addition, research has shown that the larger economic investment required for apps in that ARPU range actually helps to keep users engaged and prevent attrition. 

The bottom line of this study is that consumers appear to place more value on sensors and other hardware than on the underlying supporting apps, a fact that companies developing mHealth pricing strategies should keep in mind.