Product Variety and Vertical Differentiation as a Tool for Revenue Increase of a Mobile Application from In-App Purchases of Virtual Products: the Case of "Topface" Company

The problem is that people in Russia do not pay for intangible products like movies, music, mobile applications and different products in mobile applications. (Lee I., 2017). One of the most popular marketing strategy is differentiation (Chamberlin, 1933). Vertical differentiation of products distributes products in the industry market in accordance with their quality (Dennis Z.Y., 2012, pp. 314–328). The hypothesis: vertical differentiation can serve as a tool to increase the number of purchases and total revenue from sales of virtual products within the mobile application. To test our hypothesis is the main goal of this study. Accepting the hypothesis will allow us to say that vertical product differentiation is a suitable tool for increasing revenue from purchases within an application that uses mixed monetization model. Methods of the research are experiment and statistical analysis. During the experiment, new users were randomly divided into 3 groups and the experimental group was entered a list of 4 products, and the two control groups had only one option - a monthly subscription. The differences of sample means between Eperimental group and merged Control Groups is significant because p-value of Mann-Whitney rank test is 0.0010. Difference in revenue for subscription for premium account between experimental and control groups is 30.36% (210669 cents - Experimental Group, 177247 cents -Control Group №1, 145956 cents - Control Group №2). Based on the above, we can argue that there is a significant difference between the sample means of the experimental and control groups and our hypothesis that vertical differentiation can serve as a way to increase the revenues of the mobile application from the sale of virtual products in the mobile application is confirmed.