Why Some Features Work Better Than Others To Boost Firm Value
Companies win when you put their branded mobile apps on your smartphone. Once the download is complete, they can engage you with contests, games and real-time promotions. But if the goal is to maximize stock market returns, designers should focus more on social features.
New research co-authored by P.K. Kannan at the University of Maryland’s Robert H. Smith School of Business confirms that firm value goes up when companies launch a branded mobile app regardless of the functionality. But the payoff is highest when an app promotes connectivity within a peer-to-peer community.
“We find that the launch of a branded mobile app indeed increases firm value,” Kannan and two co-authors write in the Journal of Marketing Research. “We also find that stock market returns are higher when a branded mobile app’s design offers features that emphasize social-oriented touchpoints.”
Kannan, the Dean’s Chair in Marketing Science, says peer-to-peer interactions contribute to a sense of empowerment that boosts engagement at every phase of the customer journey. “This can hasten the decision to purchase,” he says.
He and his co-authors, Eric Boyd from the University of Central Florida and Rebecca J. Slotegraaf from Indiana University, analyzed 455 branded mobile app launch announcements from 2008 to 2014.
They sorted app features into three main categories. All have a positive impact on firm value, but some work better than others.
Good: Transaction-oriented features focus on the purchase event itself. “Emphasizing a single phase of the customer journey limits the touchpoints that a brand can establish with customers,” the authors write. A Walmart app, for example, provides access to eValues and discount notifications. Features such as these sometimes function as a substitute for other channels such as mailers. “Consequently, the app may merely displace revenue from an existing channel and not increase cash flows,” the authors write.
Better: Personalized features focus on interactivity between customers and brands. Examples include games, contests and the ability to track loyalty program rewards. Similar to social-oriented features, personalized features promote engagement at all stages in the customer journey. However, personalized features do not allow engagement with other customers.
Best: Social-oriented features focus on interactivity among customers. Users can post reviews, upload other types of content and respond to each other in peer-to-peer channels. TripAdvisor’s mobile app, for example, lets travelers submit their reviews while still on the road when their experiences are still fresh in their minds.
“Beyond the direct effect of branded mobile apps on firm value, apps designed to emphasize social-oriented features will offer higher future cash flows and less variability in these cash flows, heightening the positive impact of mobile branded apps on firm value,” the authors write.
Learn more: Branded Apps and Their Impact on Firm Value: A Design Perspective, is featured in the Journal of Marketing Research 2019, Vol. 56(I) 76-88.