Holy moly this is interesting. I have a bunch of reactions:
1. I always get wrapped around the axle on pricing discussions - will x offset y? How will different groups react? I'm not crazy! It is hard and the effects do sometimes totally offset. Radically changing your pricing may in fact have absolutely no effect whatsoever. Whoa!
2. I wish more companies would publish results like this and we didn't have to rely on the occasional (though terrific!) academic study. I'm sure Amazon runs experiments like this all the time.
3. I feel genuinely bad about the mobile game industry and how these "high value customers". Maybe I'm making a bad assumption but it seems unlikely these folks are the idle rich spending their spare thousands on gold bars.
4. There might be metrics in your business that are much harder to move than you would think. Local maximums that might be very hard to change.
Terrific, terrific study. Kudos to King for this, at least.
> Maybe I'm making a bad assumption but it seems unlikely these folks are the idle rich spending their spare thousands on gold bars.
Having worked at a mobile games company: they actually are! We were heavily propped up by, among other things, Saudi oil tycoons trying to out-spend their (equally-rich) friends in cash-shop items, for the sake of being on the team with the highest power-level. We were effectively a virtual arms dealer selling to both sides of each little status-war between these folks. We considered them so important to our business-model that we took their likes and dislikes heavily into account in deciding which new games to make.
I work in AAA and I've heard (anecdotally) that there are people who 'buy the game'. That is, they buy every boxed edition on sale, every purchasable in-game item, every game guide, the t-shirt, every other piece of tie-in merchandise. They just buy the lot in one go, to the cost of $thousands.
This is very interesting, reminds me of the I'm rich app that used to sell at whatever the max app store price. If you could estimate, what percentage of revenue would be from these ultra rich?
Re #3: I have heard of data at three companies, and anecdotes at more, that their whales are mostly upper middle class players who play games instead of a more traditional hobby like e.g. golf. This was against my prior expectations -- I thought "probably Vegas slot demographic of pensioners and/or people w/ depression or similar" -- but despite being skeptical of company PR I have to admit there might be something there.
It matters -- if games just push the buttons of bored engineers/doctors/business owners well and they spend a few hundred bucks a month on them, well, I'll never buy a Hamilton ticket but I won't look down on anyone buying or selling them. If OTOH the entire social industry is exploitative and propped up by vulnerable people then that changes things.
Re. 1: Actually, there is an effect. There are even two effects: medium-value customers spend more, while high-value consumers spend less. Unfortunately for King, these two effects balance out in this specific case.
For other businesses, the gains from the revenue increase in some groups may trump the gains from the losses in other groups, or the other way around.
Your mileage may vary.
Also, I was just at Pocket Gamer Connects and there was a presentation on using massive anchors (like 400 euro for the top tier) driving 3x revenue vs more normal anchors.
No. The anchor tier was a slight discount on the primary currency with a huge amount of some unique special currency. The 100 euro tier also had the unique currency and the existence of the 400 euro tier drove purchases to the 100.
> It looks like they only varied the quantity on a single price tier with no adjustment to the prices themselves.
I can't tell what you're trying to say. Judging by their writeup -- and charts -- they varied the cost of purchasing gold bars in any amount greater than 59, and the largest bundle was always 1000 bars.
I wonder how the price changes were marketed and whether people already used to playing Candy Crush knew the cost of gold bars and so had (permanently) made their purchasing decision pre-promotion. "I know that Gold bars cost X, it's not worth it to me. This new pop-up promoting gold bars to me is unimportant, I shall dismiss it as in-game spam."
Also, this is very interesting: "this experiment suggests that some consumers who would have made small purchases were discouraged from doing so when faced with large-quantity discounts." In other words, a consumer wanting to buy one gold bar observes a fixed price of X but when she sees that ten gold bars only costs X*5, she is discouraged from purchasing only one, feeling that they are being ripped off or unduly profited from.
A very interesting and well-conducted experiment, although I wish they didnt have the limitations they had (no lowering beyond the current 9% rate of discount; no price changes in the < 100 bars quantities; less so - no two-part tariff group).
> Subjects were randomized into one of the four possible price schedules, with a 20% probability of assignment to the standard discount or the radical discount and a 30% probability of being assigned to the enhanced discount or the deep discount.
Does anyone know why they would split the experiment group into 20%/30%/30%/20% instead of 25% each?
If you feel response rates to your experiment are going to be low for a certain group, you make the group bigger so you can have a more robust sample in which to characterize respondents of that group.
Then (more) moral thing to do would be to provide high volume price discounts to shift the burden of financing a game from few "whales" to some more "medium value customers".
Besides, this would allow medium value consumers enjoy game more because they'd be having more paid features then before.
Whales are buying all they ever need (that's the only way I can explain them paying less after volume discount) so their main gain would be paying less money for that.
Some whales just have a lot of money and they like spending it and there's nothing immoral in allowing them to spend huge amount of their money.
Some even have more money than they should have and you can make the case that by taking the money from them you are actually helping them. Like the young men in Saudi Arabia, who, if they didn't spend huge amounts of money and time on your game would buy a fast car instead and with some good likelihood die in it (car accidents are leading cause of death of young people in Saudi Arabia, unlike anywhere else in the world).
But there's this other group of whales that makes it immoral. There are people who are susceptible to addiction. They will spend on the game way more money they can afford just because addictive loop of the game binds them bit too much.
This is as if the games were like kind of "alcohol", mildly pleasant to lot of people, very cheap, but cheap only because industry was selling it at such a low margin that they couldn't support themselves unless fraction of people got addicted to it and used it in amounts that's unhealthy for them spending all of their money in the process. If you add to this that the industry is giving away free samples on the off chance that some new people might get addicted, you can see how that can be immoral.
A) It is one study. Very likely not statistically relevant on its own.
B) It is a certain subset of the pricing world that was tested. It may not apply to yours.
C) They themselves say "we found remarkably little impact on revenue". They looked for something and didn't see it. It's like you sitting in the forrest trying to see a boar. Just because you didn't see one doesn't mean there is none. For instance, one reason they didn't see the expected results may be that their experiment is not the right one, or that the tested population has an exceptional variable they didn't know about.
The value in pricing analytics comes from finding ways to discriminate and/or influence purchase planning, not from blindly optimizing your demand curve.
1. I always get wrapped around the axle on pricing discussions - will x offset y? How will different groups react? I'm not crazy! It is hard and the effects do sometimes totally offset. Radically changing your pricing may in fact have absolutely no effect whatsoever. Whoa!
2. I wish more companies would publish results like this and we didn't have to rely on the occasional (though terrific!) academic study. I'm sure Amazon runs experiments like this all the time.
3. I feel genuinely bad about the mobile game industry and how these "high value customers". Maybe I'm making a bad assumption but it seems unlikely these folks are the idle rich spending their spare thousands on gold bars.
4. There might be metrics in your business that are much harder to move than you would think. Local maximums that might be very hard to change.
Terrific, terrific study. Kudos to King for this, at least.