Pricing model based on social mechanics of multiplayer games

“The players, realizing it or not, are evangelizing the product among potential users for the sole purpose of being able to play the game themselves.”

Pricing model based on social mechanics of multiplayer games

Although I have much appreciation for addictive games and have always considered myself a gamer I rarely find myself in a situation of comfortably spending time enjoying them. Yesterday Andy took me by surprise in the middle of my testing the Editorial’s website performance on iPad by persuading me into buying an multiplayer iPad game titled Asphalt 6 HD.

The incident sparked a potentially interesting idea for a business model. Even though I almost changed my mind after glancing the $6 price I bought the game because of the following two reasons:

  • not only did it came with a recommendation from one friend but it was introduced as being regularly enjoyed by most people in our social circle
  • being invited by a friend put a certain amount of social pressure on me—not being willing to spend $6 to have fun with a friend could easily be interpreted as being a cheapskate

Either way I found myself in a situation of buying software I was very unlikely to spend my money on. Contemplating about this experience made me realize that in the realm of multiplayer games this is probably a very common situation. Since they depend on the initial player to find a gaming partner there is a social mechanism already embedded in the system. The players, realizing it or not, are evangelizing the product among potential users for the sole purpose of being able to play the game themselves. But the best part of this is that players who get converted are very likely to perpetuate the spread for the same selfish reasons.

A bird in the hand is worth two in the bush

The gaming industry seems to be playing it safe when it comes to pricing model. There is a fixed price per license with occasional exclusive price drops and other types of sales techniques. Yet considering the social mechanics mentioned above there are numerous alternative models begging to be explored.

On the assumption that the first comers are very likely to influence additional sales it would make sense to award them with the lower initial price. In theory, this should increase the speed of reaching a desired amount of early adopters needed for a viral effect. Assumption that as the audience reach increases the less need there is for players to evangelize the game suggests that the price should rise proportionally to the number of players.

For the sake of argument let’s say the game authors were able to sell only 100 copies of the game for $4 each. Obviously, that translates to $400 of revenue.

Having the same amount of customers we could set the price proportional to the audience reach starting with the initial 5 copies for $2, followed by 10 copies for $3, 15 for $4, 30 for $5 & 40 for $6 with the nice sum of $490.

There is also another potential element of motivation hidden in the equation. Audience reach does not only increase the chances of players being able to play but also the amount of interest for the game. The later the users joins in the greater the more likely is for him to feel he’s missing on something cool and fun. Which I’m sure could be leveraged to motivate the potential user to pay that higher price.

However it does seem quite obvious as well that this model does have a price threshold after which the number of people willing to pay exponentially lowers. This problem could easily be solved by switching to fixed price model after the certain price is reached.

Difference between theory and practice

There is a lot more work to be done before this theory could be put into practice. Decent amount of risk involved would definitely require a proper market research and study of online viral (marketing) in order to get as precise information on setting the price threshold & the number of levels and corresponding prices.

Nevertheless I think there is a decent amount of the potential in this idea and I feel quite tempted to explore it further in the near future.

Comments

  • Retro

    This kind of model is getting popular lately with alpha-funding. That means you are funding the game’s development by selling a pre-order of the game, but also giving the buyer an early chance to play the game (the latest in-development (alpha, beta …) version).

    While some just charge the full price, many are discounting it. That’s quite common for any kind of pre-order, but in combination with alpha-funding the price starts low (or even free) and increases towards the full price as more and more of the game is built.

    The most prominent example of this system is Minecraft. Notch started free (that version is still available free), but as the popularity of the game grew, the alpha version was priced at 10 eur. The beta incresed the price to 15 eur and the final game will cost 20 eur.

    I think the incentive to get in early on the action, while the price is still low, should be quite a good marketing tool.

  • zigah

    i agree that this idea is all right when combined with meaningful and substantial updates to the game, i think the psychological factor of annoyance should be considered, when obviously a lot of people could find themselves not knowing about the game early and being annoyed about having to pay a higher price now. With games that cause a big hype with their first alpha release this factor is obviously less important, but this is 1. Very hard to predict/create and 2. Whatever the price, highly talked about games will be successful. In the end i think it.’s about reaching the critical mass which enables the “explosion”, which is obviously only possible with the right idea at the right time (oh, and all the planets should be aligned in a certain geometric form), which causes the critical mass. I think that you could also try re-evaluating your $x00 calculations to $x00k quantities. I personally think that for non-niche ideas the minimum price of 0.99 is the way to go – in the end, to me at least, 2mio and 6mio eur are not much different. But, i have to admit, that the threat of the game being more expensive later surely helps sales – but also if this is the only drive, will anyone else buy the game after reaching the price threshold? Wouldn’t then eliminating the threshold help? But also, never reaching it. :> i definitely agree with your closing words above. :)

  • Tadej

    I think the Minecraft example makes for a great and inspiring labor of love story, but I would be reluctant to acknowledge it as a basis for a viable generalizable business model, at least until we have seen more games being successfully marketed this way.

    I love what the Humble Indie Bundle has done for indie games – I think there is potential in using promotions to highlight otherwise less mainstream/visible titles this way.

    What you are saying about tweaking the price based on the growing user base makes sense in terms of being basic economics. However, the bulk of revenue for casual games seems to be shifting towards in-game purchases. The models there are quite different, although they also benefit strongly from the reciprocity mechanic you described above.

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