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Is an App in Your Business Future?

SHERRY GRAY, @sherisaid

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Are you planning to develop an app for your business? Let's talk about the logistics: cost, competition, and failure rate.

Forrester Research keeps on top of mobile trends, and is a good source of information about what's happening. In 2015, they predicted that businesses would underinvest in mobile presence, and they were woefully correct. They expect this to continue. Is you just heard a cartoon cash-register sound in your head, congratulations. You get it.

How profound is the gap? More than 50% of consumers are using mobile devices to find information as they make buying decisions. And only 14% of companies use mobile effectively to transform customer experiences.

Mobile – not just content, but an app developed to meet the needs of your specific customer base – seems like a ground-floor opportunity, right?

Not so fast. Let's look at some hard facts.

Competition and User Behavior

Every day, about a thousand apps are added to the Apple App Store. Apps fall in different categories, of course. Among them are games, phone function enhancements, streaming radio and TV services, shopping, and virtually (no pun intended) everything else.
Business apps are among them.

On average, smartphone users say they use about 25 apps a month, and most of their time is spent on social sharing sites, like Facebook, Snapchat, and Twitter. Which makes perfect sense. The average consumer isn't going to spend a ton of time on a shopping app, they're going to look up the info they need and move on.

Realistically, competition is the least of your worries. If your app is targeted to deliver value to your customers, it will work as intended. The key is in making that happen.

Failure Rate

Would you be surprised to learn that 41% to 69% of all apps flop? This Venture Beat post is from 2013, but knowing that 9 of 10 businesses fail, I'm surprised the number isn't higher.
When I said don't worry about the competition, I wasn't kidding. It's not the competition that will kill you. It's simple lack of planning. They run out of money, don't research the market, or pursue an idea that simply will not fly.

The Cost of Developing an App

Before I lay the big, scary numbers on the table, remember, not every app is complicated...or needs to be. The simplest, most genius thing I can think of is Domino's brand new Zero-Click app. Holy cow. You set up a pizza profile, presumably with your favorite pizza order, your address, and a payment method. Then you touch the app and your pizza is ordered. At first glance, this seems a little dangerous for a notorious butt-dialer like myself, but you have to open the app, tap the order button, and then you get 10 seconds to change your mind before the order is placed. If that seems like too much work, you can send a pizza emoji to Domino's on twitter. Genius. Sheer genius. Glad this wasn't around in my drunken college days. I'd be way deeper in debt. My guess is that this kind of app comes in on the lower end of the scale. It's simple and the function is limited. Domino's has a history of using technology to its advantage. In the 2011-2012 fiscal year, they raked in a billion in digital sales in the U.S. alone.

The cost of apps can vary widely, depending on the number of features. Research by Formotus showed an average of $270K, spread pretty evenly across each price range from under $50K to over $500K.

It's a big investment, but if it pay off, it's well worth it.

Mitigating the Risks

Given those numbers, it makes sense to do everything you can to make sure your money is well spent, especially if you're looking for investors.
Your plan should include:

  • Finding the right development team.
  • Researching the market, the industry, and your competitors.
  • Defining and refining your vision.
  • Developing an MVP – Minimal viable product.
  • Test-marketing your MVP before going all in.
This approach requires a much smaller investment than jumping in to unknown waters with both feet. It's faster, too. According to Neon Roots, their Rootstrap program takes just two weeks from idea to MVP.

"The beauty of something like Rootstrap is that it answers the big questions before spending the big money," says Ben Lee, CEO of Neon Roots. "Within two weeks, we define the core concept and value proposition, validate it in the marketplace, and build a high-fidelity clickable prototype that's perfect for beta testers and investors alike."

A solid plan will validate your idea before you hock the family jewels. If you watch Shark Tank, you know how much investors like proof of concept. Even if it's rich Aunt Phoebe, she wants to know whether her investment will be worth it. Before you go to your board of directors, an investor, or even Auntie Phebes, you owe it to yourself and to the future of your company to make darn sure your idea is a good one.

And then do it, because according to all the research, your future business success might depend heavily on an app.

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