Tag: pricing

A fun topic and one that warrants discussion – how to price your in-app currency?   And related topics.   A lot of really good online MMO’s have gone Free to Play with in game stores to buy everything from potions to mounts to extra content like character classes and adventure packages / add-ons.   In consequence, some games have come to be termed truly “Free to Play” and others “Pay to Win”.

Long before computer games were readily accessible, there were Arcades – with… gasp… Arcade Games – like Space Invaders, PacMan, Galaga… and before them – Pinball Machines.  One game was a Quarter ($ .25).   A game would last according to how good you were — and if you were good, you would get an extra play, sometimes several.  When you lost your last life, it was “GAME OVER!”.

Computer games with a retail box typically run $29 – $79 on first release, gradually decreasing in price over time to where they get into the bargain bin for $9.99 or less – though it may take a year or three to get there.   Full game downloads typically run about $10 less than boxed copies – no Shipping & Handling involved.

Many MMO’s frequently involve a purchase of software (slightly reduced in price) because the publisher intends to make the majority of their money from subscriptions which run $9.99 to $14.99 per month – with savings plans for customers subscribing 3, 6 or 12 months in advance.    Where the boxed software or download runs $40 – $50, the subscriptions raise $120 – $180 over the course of a year…

Nowadays, “GAME OVER” has far less to do with a player’s skill as it does the developer’s skill.   Everyone gets to respawn – as many times as they want, sometimes with a small delay, maybe a small penalty…  sometimes you might actually lose a lot of valuable in-game stuff.  Worse comes to worse, you get to re-roll.   “Game Over” is now what happens when a player decides not to play a game again… for whatever reason.

There are lots of games out there.  Competition over a player’s time is immense.  So, when it comes to introducing “in app currency” to your app – pricing it is very important.

One of the main factors that distinguishes an MMO from most regular computer games is that it involves “massive numbers of players” – in a semi-perpetual, semi-to-ultra competitive environment.  There is ONE THING more than any other that helps to increase the value of a  game and its “economy” relative to the end user.  It is called Vanity.   It is the idea that a player’s character is, in some way, better than the average — exceptional by “virtue” of character stats, equipment, hard to get trophies, rare mounts, an innovative build, accomplishments out the yin-yang, faction scores, or even the uber hardcore PVP arenas.

Within a competitive multiplayer environment — all of these things can stand as a testament to “I’ve played the game and have a lot to show for it” which can be very important when it comes to getting into elite raids.   In many cases, it is what gets you into elite raids, unless you happen to be in a very good guild – with lots of other players able to organize these kinds of “multi-player events” on a regular basis.

Vanity and Pride — these do have a dollar value.   At one point, and probably still, the kind of epic gear needed to compete against top tier arena teams for one popular MMO (through various “gold vendors”) cost more than one could purchase a real T-72 tank.  I always look at that with a sort of amazement and fascination…

But when your app or game is simply a one-player affair, or occasionally gives way to a few multi-player possibilities, your Vanity Value drops too much to use Vanity as the main selling point for in-app currency.   There, you have to rely upon the “real fun/excitement/suspense” — what if and what next — kind of elements inherent in your game.  If players know that they can expect lots of grinding regardless how much they spend… that grinding better be a lot of fun.  It better be a lot more fun than other games that the player could be playing.

The objective of in-app currency is to make your game more profitable — not to set the “threshold for serious play” beyond the scope of most players.    This is not to say that you need not aim for “vanity value” – only that you need to structure it accordingly using… Teasers & Temptation.  We’ll cover that Wednesday.

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If you intend to market globally, it helps to understand it is comprised of many different markets and almost every one of them is different. Applying dynamics specific to the North American Market won’t work very well in Southeast Asia or South America. Localization covers a lot of the topics inherent to international marketing. Localized pricing is the focal point of this article.

The cost of tailoring an app to a specific market usually runs a fraction of the overall cost of producing an app.

In the North American and European markets, average income is dramatically higher than many developing markets – Southeast Asia, Eastern Europe, South America, the Middle East and North Africa. Overall population by mobile device and platform, income distribution and local market nuances all play a role in finding optimal pricing.

Pricing Segmentation is an approach to customize the price of a product to a specific market for maximum gain. What is affordable in one country may not be affordable in another. The Big Mac Index is a really good example of price segmentation. In 2012, the price of a Big Mac in Norway was $9.63, but only $2.44 in China. Profit margins on each product vary from store to store.

Electronic downloads largely bypass costs of packaging, storage, shipping and more. The cost of development and production of software, including mobile apps, does not radically differ whether you produce just one copy or millions of copies (vs. physical production).

Another factor that must be considered is the relative ease of doing business in the mobile app market. Getting your product on the shelf is far less of an issue in mobile than in a software store or supermarket. As a developer, you can add your product to Opera Mobile Store in a matter of minutes.

Of course, for an app to be profitable requires recovering all of the costs involved with its initial research, design, development, testing, and other overhead. There is also a development and marketing cost for each localization effort. Finally, there is the cost of distribution via different advertising models. Each of these expenses needs defined so that you know your breakeven point for the main product, each localization effort and per install within each market segment.

These points considered, localized marketing efforts need to recover the cost of your localization work and advertising costs per install.

One point frequently heard is that the profit margin in developing markets is lower. Yes, that is usually true – but your ROI per market is tied more to the cost per localization than the overall app. More importantly is whether you see your app as an end unto itself or as the means to further ends?  Are you mainly trying to sell apps or win customers?

Cost and effectiveness of advertising varies by ad network, by region and by app genre. It is a mistake to ignore developing markets just as it is to enter a market without researching it. Every app is not going to fit every market equally. Some may not fit at all.

There is ample guidance available simply by looking at where and how “big companies” do business in countries you might ordinarily dismiss.

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