Allowance Account: iTunes’s secrete weapon

Both my teenage boys have an Apple’s allowance account. I set them up few years back, when they first started using iPod. To me, the most brilliant example of Apple team’s user-centered design approach is this allowance account.

When Apple designed iTunes music store, one of the things that they had to solve was teenagers. That is, how would they pay for the music that they want to buy? They learned that a large percentage of teenagers were willing to pay for the music, if there were easy way to do so. (Of course, it is not their money anyway.) Most of the internet transactions require credit cards and parents are not going to log in each time their teenage boys and girls want to purchase $1 music. So, Apple created an allowance account. Once parents can link allowance accounts to their primary iTunes account, each month kids get their “allowance” automatically. And, they can buy music in anyway they want. Win-Win for parents and kids. Of course, this is a great business for Apple. While music record companies were criminalizing teenagers, Apple wanted to design a solution to solve that problem. (A lesson here is that you will do well if you pay attention to hidden, and often vulnerable, stakeholders. These hidden actors rarely show up on your CRM database.)

Now, once Apps became available, iTunes allowance account became even more important. Most of the Apps cost few dollars. Many of them are silly games. Who do you think buy those games? Of course, some adults who have nothing else better to do. But I suppose a large portion of those might be coming from kids who have an allowance account. Again, who wants to open up their wallet and enter their credit card information each time his 13-year old boy wants to buy new Angry Bird Space?

It is no surprise to see in Rovio introduced only free version of Angry Bird Space for Android, but paid version for iPhones. I suspect that the allowance account has a lot to do with this difference. Of course, this is a pure speculation on my part as I could not find any data about the number of allowance account. What I do know is that there is no equivalent of iTunes Allowance account in the Android ecosystem. Of course, there are many other factors that made iOS as more attractive for paid apps than Android, but the payment system including the allowance account certainly is an important factor. Once you create an initial condition, given a huge positive network effect, this type of slight design difference can make a huge difference in the long run.

Professor | Writer | Teacher Digital Innovation, Design, Organizational Genetics Case Western Reserve University

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