The Implications of Premium Version Adoption on Customer Relationship Management: An Empirical Study of mHealth User Engagement and Retention

30 Pages Posted: 13 Apr 2020 Last revised: 8 Jan 2021

See all articles by Linda Hagen

Linda Hagen

University of Southern California - Marshall School of Business

Yikun Jiang

University of California, Berkeley

Bärbel Knäuper

McGill University - Department of Psychology

Kosuke Uetake

Yale School of Management

Nathan Yang

Cornell University

Date Written: January 8, 2021

Abstract

There has been a rapid rise in new mobile technologies at improving health-related behaviors. Many of these mobile health (i.e., mHealth) applications use freemium business models (i.e., availability of free and premium versions for the app), yet little is known about the impact that freemium has on user engagement and retention. Using large-scale data from a popular mobile fitness application, we study the differences in tracking propensity and inertia between free-version and premium users. Our analysis reveals that premium adoption leads to a boost in user engagement (i.e., more calorie tracking activity) and retention (i.e., lower likelihood to quit using the application entirely). To address the endogeneity issues in our empirical estimation, we adopt a commonly used instrument-free Gaussian copula approach. Estimates from this method reveal that the existence of freemium has direct implications for customer relationship management, as differences in the inferred premium effect across users (based on their historical tracking patterns) can provide opportunities for user segmentation.

Keywords: Behavioral Analytics; Commitment Device; Consistent Behavior; Habit; Freemium; Health and Wellness; Mobile Health Application Design; Self-Control.

Suggested Citation

Hagen, Linda and Jiang, Yikun and Knäuper, Bärbel and Uetake, Kosuke and Yang, Nathan, The Implications of Premium Version Adoption on Customer Relationship Management: An Empirical Study of mHealth User Engagement and Retention (January 8, 2021). Available at SSRN: https://ssrn.com/abstract=3573193 or http://dx.doi.org/10.2139/ssrn.3573193

Linda Hagen

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Yikun Jiang

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Bärbel Knäuper

McGill University - Department of Psychology

1205 Dr. Penfield Ave.
Montreal, Quebec H3A 1B1
Canada

Kosuke Uetake

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Nathan Yang (Contact Author)

Cornell University ( email )

Dyson School, Warren Hall
360E
Ithaca, NY 14853-6201
United States
6072551590 (Phone)

HOME PAGE: http://dyson.cornell.edu/faculty-research/faculty/ncy6/

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