Pricing is weird(positech.co.uk)
positech.co.uk
Pricing is weird
http://www.positech.co.uk/gratuitousspacebattles/registernomads.php
11 comments
For anyone interested in learning tons more on the topic of consumer behavior, here's a nice outline of the book "Predictably Rational" containing key points:
http://bookoutlines.pbworks.com/Predictably-Irrational
Plugging that into moreofit.com gives you an endless list of interesting consumer behavior articles:
http://www.moreofit.com/search/?q=http://bookoutlines.pbwork...
http://bookoutlines.pbworks.com/Predictably-Irrational
Plugging that into moreofit.com gives you an endless list of interesting consumer behavior articles:
http://www.moreofit.com/search/?q=http://bookoutlines.pbwork...
*"Predictably Irrational"
For heaven's sake. This is every bad bit of pricing psychology I can think of wrapped into a tiny package of poverty wages for the developer.
How so? He's selling twice as many at full price as the discount price according to his real time stats.
To my mind, that seems like this isn't a failure at all.
To my mind, that seems like this isn't a failure at all.
I didn't think too hard because as soon as I saw his rationale for cost-based pricing I stopped thinking straight. So, just to get you started:
* Don't price things based on what they cost you unless you it's an ore or sorghum.
* Don't solicit customers that don't value your product.
* Don't demand that customers think carefully about which button to push to make a sale.
* Don't make the cheap option the first button users eyes cross.
You could probably go on to pick apart every sentence in the blog post (like his misunderstanding of the concept and purpose of a "sale") or the fact that his rationale sucks all possible incentive out of making his team more efficient at building and harnessing content for his game, but those are the big ones.
PS: if those stats are lying, that'll be the one smart thing he did with this page.
* Don't price things based on what they cost you unless you it's an ore or sorghum.
* Don't solicit customers that don't value your product.
* Don't demand that customers think carefully about which button to push to make a sale.
* Don't make the cheap option the first button users eyes cross.
You could probably go on to pick apart every sentence in the blog post (like his misunderstanding of the concept and purpose of a "sale") or the fact that his rationale sucks all possible incentive out of making his team more efficient at building and harnessing content for his game, but those are the big ones.
PS: if those stats are lying, that'll be the one smart thing he did with this page.
Hmmm... I didn't take his rationales seriously at all. I'm surprised you made the mental leap to think the stats might be made up, but not the leap to think that his cost based price might be fudged and provided solely to encourage sales at the higher pricepoint.
I just looked at the genius of guilt-based discriminant pricing, and was amazed it worked. (assuming honesty in reporting)
I just looked at the genius of guilt-based discriminant pricing, and was amazed it worked. (assuming honesty in reporting)
Guilt-based pricing has been tried in lots of places, and I'm unaware of an example where it's worked well. Radiohead seems to have had the most success, and they grossed less on In Rainbows than any of their label releases (they're a confusing example because their experiment was also about disintermediating the labels, which was a success).
In Rainbows being a failure is the recording industry's spin and, as usual, once you stop taking the cherry-picked data at face value and look at the big picture, you find the complete opposite is true: http://techdirt.com/articles/20081015/1640202552.shtml
No, you are conflating two different issues. On the one hand, Radiohead demonstrated that disintermediating the major labels is a win (naturally, the industry wants to spin that). On the other hand, the response rate they --- one of the most popular and beloved rock bands of all time --- got from this promotion was... disheartening.
Think of it this way: Radiohead demonstrated that anything, even letting customers set their own price, is better than working with a major label. That doesn't mean letting customers set their own price is an economically sound move by itself.
Think of it this way: Radiohead demonstrated that anything, even letting customers set their own price, is better than working with a major label. That doesn't mean letting customers set their own price is an economically sound move by itself.
The penny rule.
The number of people who go from pirates to $2.99 is dramatically outweighed by the people who go from $5.99 to $2.99. (Do the math; that's a net loss.)
The only way this works out for the developer if this scheme results is PR and raising awareness overall amongst people who are potential customers who wouldn't have known about the product anyway.
The number of people who go from pirates to $2.99 is dramatically outweighed by the people who go from $5.99 to $2.99. (Do the math; that's a net loss.)
The only way this works out for the developer if this scheme results is PR and raising awareness overall amongst people who are potential customers who wouldn't have known about the product anyway.
$5.99 is also an absurd price to begin with.
By the way, the next time someone on HN asks what "market segmentation" is or why product managers get paid money, this thread would be a good object lesson.
By the way, the next time someone on HN asks what "market segmentation" is or why product managers get paid money, this thread would be a good object lesson.
Yes, this thread is an excellent object lesson--he achieved self-segmentation in his market using nonstandard practices all without a product manager while simultaneously creating great PR.
I don't know what this comment means, except for the "great PR" part. I agree, it's great PR; unfortunately, since people will clearly pay much more than $5.99 for a solid expansion to a game, you're going to have a hard time convincing me that a confusing pricing scheme that practically begs people to pay less than $5.99 is a success.
> I don't know what this comment means
I think you're a smart guy and being disingenuous here, but I'll play along.
A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function.
source: http://en.wikipedia.org/wiki/Market_segmentation
If there are users who will pay 2.99 but not 5.99, this strategy can still capture their value today, but simply pricing at a higher price will not. You posit that people will pay much more than 5.99 for an expansion pack for this game and I don't think you're in any position to know that about this game.
I think you're a smart guy and being disingenuous here, but I'll play along.
A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function.
source: http://en.wikipedia.org/wiki/Market_segmentation
If there are users who will pay 2.99 but not 5.99, this strategy can still capture their value today, but simply pricing at a higher price will not. You posit that people will pay much more than 5.99 for an expansion pack for this game and I don't think you're in any position to know that about this game.
I don't know what "self-segmentation" means; I'm not being disingenuous. Do you mean "users segment themselves"? Because no, they don't; he created 2 segments, both wildly underpriced, and provided no rational incentive for customers to choose the more expensive one.
I paid $2 for _The Incident_ on the iPhone. Don't me wrong, _The Incident_ is a work of art, but it does not provide the same kind of value as a title as this game does; I play it in 4 minute increments on the elevator at my office. I am not the only person who paid $2 for _The Incident_.
You're right, I don't play computer games (well, I play Starcraft 2 since I bought it for my son --- actually, I bought it twice, so I could play it multiplayer with him; want to guess how much I spent for that?). Maybe this game just sucks and is only worth $6. That's not the impression I got.
I paid $2 for _The Incident_ on the iPhone. Don't me wrong, _The Incident_ is a work of art, but it does not provide the same kind of value as a title as this game does; I play it in 4 minute increments on the elevator at my office. I am not the only person who paid $2 for _The Incident_.
You're right, I don't play computer games (well, I play Starcraft 2 since I bought it for my son --- actually, I bought it twice, so I could play it multiplayer with him; want to guess how much I spent for that?). Maybe this game just sucks and is only worth $6. That's not the impression I got.
By self-segmenting, I mean that his customers are voluntarily sorting themselves into market segments according to what they are willing to pay, and then paying that amount.
Extracting the most value from your customers is a challenge. Ideally since software has no real unit costs to the developer, you'd like to be able to sell the same software for every value from $500 down to $0 with each person paying the max they are willing. The problem is that you can't divine the amount each person would pay and have no way to manage this. I am saying he has his customers sorting themselves based on what they will pay on his behalf, and in theory he could get closer to the theoretical ideal that way.
It is true, there's no rational incentive (although maybe a desire to ensure the developer keeps working on a game you love almost qualifies) but it doesn't matter if using the guilt lever works on irrationality so long as it works, which if his numbers are real, it did to the extent that he sold two at 5.99 for every one at 2.99.
Extracting the most value from your customers is a challenge. Ideally since software has no real unit costs to the developer, you'd like to be able to sell the same software for every value from $500 down to $0 with each person paying the max they are willing. The problem is that you can't divine the amount each person would pay and have no way to manage this. I am saying he has his customers sorting themselves based on what they will pay on his behalf, and in theory he could get closer to the theoretical ideal that way.
It is true, there's no rational incentive (although maybe a desire to ensure the developer keeps working on a game you love almost qualifies) but it doesn't matter if using the guilt lever works on irrationality so long as it works, which if his numbers are real, it did to the extent that he sold two at 5.99 for every one at 2.99.
They should have also made a higher tier price. Some people would have paid that because they love the game, and what is the big difference between $5.99 and $9.99 if you are in a wealthy country and have a full-time job?
Interesting nudge - the background image for the "discount edition" button is a pile of maggots.
Aside from that, patio11 is right - there's nothing good about this idea. If you can't immediately identify half a dozen horrible mistakes in this scheme, your first priority should be to do some reading on pricing.
Aside from that, patio11 is right - there's nothing good about this idea. If you can't immediately identify half a dozen horrible mistakes in this scheme, your first priority should be to do some reading on pricing.
This should be fun. What's your half-dozen?
Ooh, can I play?
1) Both prices are hideously underpriced. There is no difference whatsoever between $5.99 and $9.99 to anyone who has to type in a credit card, so repricing that would double post-fee revenues almost instantly.
2) You critically hit gamers -- who have the attention spans of ADHD squirrels hopped up on crystal meth -- with a wall of text just to get them to make a purchasing decision. You can check this with analytics, not one gamer in a hundred will actually read this argument.
3) The availability of software at $3 compromises any notion of it being valuable. You will not sell software to poor Africans. Do not price to be affordable to poor Africans. (If $6 is too expensive, $3 is not affordable anyway.)
4) Cost-based pricing. Don't mention it. Don't even think about it.
5) Sales work because they are scarce, time-limited events and they effectively segment customers who want the game today versus customers who want the game at the lowest possible price. Its a reverse auction, just like book publishing, AAA games ($60 ~ $70 on release day, $20 in a year), MMORPGs (pay for the box on release day, it will be free within a year), etc.
6) Showing your customers being penny-pinching lameos gives people social license to be penny-pinching lameos. It is like the broken window theory (evidence of anti-social behavior causes anti-social behavior), and you're breaking your own freaking window! If you wanted to highlight this, you would do something like I suggested for the Indie Game bundle here: http://news.ycombinator.com/item?id=1318841 -- give people options and highlight that the correct option is most popular without dwelling on how many people make the wrong choice.
1) Both prices are hideously underpriced. There is no difference whatsoever between $5.99 and $9.99 to anyone who has to type in a credit card, so repricing that would double post-fee revenues almost instantly.
2) You critically hit gamers -- who have the attention spans of ADHD squirrels hopped up on crystal meth -- with a wall of text just to get them to make a purchasing decision. You can check this with analytics, not one gamer in a hundred will actually read this argument.
3) The availability of software at $3 compromises any notion of it being valuable. You will not sell software to poor Africans. Do not price to be affordable to poor Africans. (If $6 is too expensive, $3 is not affordable anyway.)
4) Cost-based pricing. Don't mention it. Don't even think about it.
5) Sales work because they are scarce, time-limited events and they effectively segment customers who want the game today versus customers who want the game at the lowest possible price. Its a reverse auction, just like book publishing, AAA games ($60 ~ $70 on release day, $20 in a year), MMORPGs (pay for the box on release day, it will be free within a year), etc.
6) Showing your customers being penny-pinching lameos gives people social license to be penny-pinching lameos. It is like the broken window theory (evidence of anti-social behavior causes anti-social behavior), and you're breaking your own freaking window! If you wanted to highlight this, you would do something like I suggested for the Indie Game bundle here: http://news.ycombinator.com/item?id=1318841 -- give people options and highlight that the correct option is most popular without dwelling on how many people make the wrong choice.
I don't think $6 is hideously underpriced, considering that it is only an expansion. The core game costs $20. A third of the price isn't that bad a price point for game addons.
Ramen noodles, actually.
Interesting.
This kind of "differential pricing by gentle emotional blackmail" approach seems to work for those who can establish more of a convincingly personal relationship with the customer. Or which at least on a broad economic scale feels like a relationship of equals.
As he points out, bigger orgs tend to fall back on the more traditional and distanced means of differential pricing (sales, selectively-targetted vouchers, student discounts etc)
This kind of "differential pricing by gentle emotional blackmail" approach seems to work for those who can establish more of a convincingly personal relationship with the customer. Or which at least on a broad economic scale feels like a relationship of equals.
As he points out, bigger orgs tend to fall back on the more traditional and distanced means of differential pricing (sales, selectively-targetted vouchers, student discounts etc)
It's strange. As a 3D modeller who loves the game, I would adore making the artwork for free for everyone to enjoy. GSB should involve the community more.
I think this is a great idea and very upfront for the reasoning. There are many games I know nothing about and would like to try, having the discount edition (barring there is a demo) lets me do this at little cost to me, and if it is a hit, I will be a lifelong customer paying full price onward. I dig it.
Isn't this an expansion pack and not the full game? His customers already have a relationship with him! Why is he offering them teaser pricing?
I've considered this as well for pricing our product. We have users from all over the world, all of which have a drastically different spending ability. Additionally, we have a strong connection with our users, so I think the emotional appeal would be successful.
It's just so hard to bet potentially thousands of dollars on it!
It's just so hard to bet potentially thousands of dollars on it!
Biggest mistake - too cheap by half. Best pricing change any online folks can make: double your price, see what happens.
I would assume it's much harder to double the price for what is the third expansion pack in a series, that gives everyone price-points to compare with. Also, if you make a computer game, its price will be compared to every other computer game, and to be at the high end of pricing, you have to release an AAA title that cost millions and had a 100+ person development team, otherwise people will think it's too expensive.
So doubling your price is only a valid strategy if people can't compare your price to similar products.
So doubling your price is only a valid strategy if people can't compare your price to similar products.
Wait a minute? This looks like the best bits of Master of Orion 2, upgraded to modern graphics standards. I've been waiting for something like this for a long time. Now if only this workday could end so I can run the demo... :-)
I still play MOO2. Interested: what are the "best bits"? I adore the tactical combat - can you defeat 3 inbound battleships with 3 scouts and a missile base? Ok it took 10 tries but what a blast when you succeed!
Buildings on the planet were cumbersome - how to improve?
Btw a group of us have designed a MOO-like collectible card game, in beta test, pretty cool if I say so myself. 400 unique cards so far (Stellar Converter! Ion Pulse Cannon!), dozens of deck styles/ways to win.
Buildings on the planet were cumbersome - how to improve?
Btw a group of us have designed a MOO-like collectible card game, in beta test, pretty cool if I say so myself. 400 unique cards so far (Stellar Converter! Ion Pulse Cannon!), dozens of deck styles/ways to win.
The parts I really liked about MOO and MOO2 was that you could design your own ships in minute detail, and then duke it out fleet to fleet. Really matching ship layout against ship layout. The civ-like parts and research.. meh.
MOO3 was just in shambles, I spent years on the message boards of that following the production, and the end result was.. crap. Some good ideas, totally botched implementation.
Sins of a Solar Empire has an excellent starmap and fleet control, but not customizable ships, and a static tech-tree.
Sword of the Stars was pretty good, but only somewhat customizable ships, and I remember it getting a bit of both fiddly and repetitive on larger maps. Random tech-tree was awesome. Should perhaps look at the latest expansions of that.
MOO3 was just in shambles, I spent years on the message boards of that following the production, and the end result was.. crap. Some good ideas, totally botched implementation.
Sins of a Solar Empire has an excellent starmap and fleet control, but not customizable ships, and a static tech-tree.
Sword of the Stars was pretty good, but only somewhat customizable ships, and I remember it getting a bit of both fiddly and repetitive on larger maps. Random tech-tree was awesome. Should perhaps look at the latest expansions of that.
MOO2 could have another improvement: let me design starbases, missile bases and ground batteries! Its so frustrating to capture Plasma Cannon and have all the ground batteries become worthless.
Agreed all all points!
Sword of the Stars is annoying because tactical combat is half-broken - you can't pit fleet against fleet in any meaningful way. E.g. if they can beat 1 of your ships, then they can beat all of them (1 at a time).
Sword of the Stars is annoying because tactical combat is half-broken - you can't pit fleet against fleet in any meaningful way. E.g. if they can beat 1 of your ships, then they can beat all of them (1 at a time).
I wish will make a new version of Master of Orion (the first part). The slider system was brilliant, as was having no `buildings' in your `cities'.
MoO II, while itself a fine game, left that legacy, and feels much closer to Civilization than to MoO.
MoO II, while itself a fine game, left that legacy, and feels much closer to Civilization than to MoO.
You should check out Sword of the Stars, they took the slider system from MOO, and they managed to make each race have a different form of FTL travel with pros and cons.
Thanks. The Wikipedia descriptions reads like Sword of the Stars could be the real sequel to MoO.
No, pricing is fine, it's just that the anti-piracy brigade get more airtime than the validity of their arguments merit... as has been demonstrated ad nauseum by experiments such as this.
It's almost as if they know damned well that their reasoning is wrong, and are just trying to milk as much as they can before the rest of the world catches up. Hey, wait a minute...
It's almost as if they know damned well that their reasoning is wrong, and are just trying to milk as much as they can before the rest of the world catches up. Hey, wait a minute...
So basically your reasoning is that "you" should be able to set the price for "my" work.
Not at all. The reasoning is that it is simply impossible to "steal" a non-rivaled good, and it is absurd to claim ownership of an integer.
That's good to know, since the information required to log into your bank account is also easily represented as an integer. Can I have it, please?
Yes. It should be fairly simple to generate a program that generates all strings of length 20 that will be accepted by Wells Fargo's login page. I would consider such a program a compressed version of a string containing my username and password. If you want to generate a shorter output, you might try the De Bruijn sequence.
edit: I should warn you, though, Wells is likely bankrupt, along with FDIC. If you want to plunder my accounts, you should get to work before accounting fraud becomes illegal in this country.
edit: I should warn you, though, Wells is likely bankrupt, along with FDIC. If you want to plunder my accounts, you should get to work before accounting fraud becomes illegal in this country.
How about I take the easy way out and buy the integer that the Russian Mafia contracted the malware authors to steal from your less technically-inclined family members? They're just integers; who cares how I got them? You violate contracts, I buy them fifth-hand from people who don't track where they came from. 1452373618202299713253502665406299980733506930, right?
6729466257235539554569001718687588373666448683224383231337026
019905073400751018156318144951134485894311062056319984854259
302060891437370381162512635651087373408262536857317506536147
186872170494090165706190665926457868924827595159015446360281
183010218745193464862049820311770912960304161135038871621506
701864534740543956506706066808523426942838251657370223868436
844466943532116866437404057835199710326105051910979218083463
184098377866657027576548215047851405584797025622487788995491
356686114689049989434173534898442252175036069087582093616931
342900502171436833896077813785678367742565874503193480565584
90906414
How exactly did you work that out from what I wrote?
Paraphrased example: There was a newspaper selling three packages: Newspaper only - $40 Online only - $60 Online and newspaper - $60
There is no intelligent reason to select the "Online only" option, as for the exact same price you could get the print version as well.
However, when this professor did two polls in several of his (large lecture) classes. One group was given the three options, another group was given just two options, print or online. The group given three options, predictably, had 0% selecting online only, with (these numbers are from memory) 70% selecting both, and 30% selecting newspaper only.
The group that was given just the two options ended up dramatically preferring the cheaper option with the numbers essentially reversed, 30% choosing online and newspaper. (I looked for the talk to confirm the numbers but couldn't find it - I'd love if someone could point it out and get the correct numbers).
The idea was basically that you could have a throw-away option that actually GAVE MORE (perceived) VALUE and TOOK AWAY VALUE to other options.
This situation may not entirely apply to this example, but I wonder if what's going on is basically: Trying to increase the perceived value of the more expensive product by having a cheaper product right there, even though he acknowledges there is no additional value.