As more and more games attract players to convert at lower prices, whether the first charge is too low will affect the willingness of subsequent players to pay for other items or services in the game has become a question for practitioners to consider.
A few days ago, Julian Runge, a game data researcher, released a research survey on the pricing of free game first charge packages on the website of foreign media DeconstructorofFun, and collected many opinions from overseas game practitioners on "whether it is a problem that the first deposit amount is much lower than other recharges".
The following is an article published by Julian Runge, with a slight change to the top:
I went and asked game and app developers how they price their first recharge packages and found out why they do it.
The right first charge package is indispensable for effective monetization of free games and the habit of players to pay.
Therefore, for a long time, I have always believed that many games have priced the first charge package too low in order to increase the user's payment conversion rate, which may lead to a large gap between players and other high-value payments, resulting in resistance.
Of course, I can also understand that since it is almost impossible to count the behavior data of the initial players in the early stage, in order to allow everyone to pay immediately, it is set up as a first charge package such as "one discount purchase" to attract users.
To confirm whether my speculation is valid, I recently published a survey on the practitioner distribution website (see the full results at the end of this post). The purpose of my research was to find out how game players price their first packs, and why they chose to set low prices.
Almost all (96.3%) of those surveyed agree that promotional offers are an important monetization strategy for free-to-play games, and that strategy has been good so far. And 96.3% of respondents said they would price a first pack under $10, and 59.2% would set it under $5. Given that promotional packages of $99.99 or more are often part of an active free-to-play price promotion program, these first recharge points already seem low.
Now, what is it that causes people to set the price of the first charge so low?
When asked to choose between "offers that attract users to make a quick purchase" and "the highest price users are willing to pay", 85.2% of respondents chose the former. In addition, 61.1% of respondents agreed that "the price is lower than what users are willing to pay", and less than 40% of respondents believed that "the price should not be set too low".
As a result, it may be common to believe that once a player has purchased a game, it is easy to sell them more and more expensive game packs. However, I think this kind of thinking underestimates the power of player fixation in habitual products like apps and games. In these cases, the player's first deposit may have a significant (collectively) impact on their future deposits.
The speed and information asymmetry of day-to-day game operations can lead to biases and misunderstandings in management decisions.
There are two common situations: one is worried about "fishing with all the water", and the other is hoping to "put it in the bag".
Since game analytics often can't go beyond simple descriptive ratios, averages, and totals, the observed situation where a relatively high conversion rate, i.e., more short-term revenue, can give a sense of security. And the respondents to the survey confirmed this. First charge in the following options (assuming the same ad revenue):
The average lifetime value of user A is $10, and 1% of users spend $1,000 per person.
B. The average lifetime value of a user is $10, and 10% of users spend $100 each.
C. I don't care about either option.
Approximately 81.5% of respondents chose option B (13% chose C. 5.5% of respondents chose A). In the absence of more information about the distribution or long-term results, a setup that allows the game to maintain a more stable income is an option for more people than to earn high income in a short period of time. This also explains why low-priced first-charge packages are preferred: low-priced packages increase the number of paying users and give a sense of more solid income – even if the low price adversely affects repeat purchases and long-term monetization behavior of high-value users.
In particular, in free-to-play operations, a number of factors may further amplify this bias in favor of conversions:
- the intensity of day-to-day performance marketing, in which case the early conversion of the player base is often seen as the main signal of product quality;
- The pressure of operating online, conversion rates are also the main signs of success;
- Without collecting player behavior data, it's difficult to personalize the experience for players as soon as a game is downloaded and installed.
Combining all of these factors can cause your first charge to be underpriced. When increasing conversion rates is the only goal, the $2.99 offer is pushed to players who are more interested in a $19.99 or higher package.
This bias towards conversion rates is especially noticeable when companies are only using simple descriptive analytics methods, but the importance of early conversion rates as a predictor can be overwhelming, even in predictive analytics models.
(Editor's note: The author wants to remind everyone that low-cost first charge packages have become a consensus, on the one hand, there is still room to explore upgrades, on the other hand, in addition to blindly "cheap", other options and practices that may be effective should not be ignored.) ）
A well-designed trial to evaluate the long-term effects of a first pack can be a solution. These experiments, and their careful analysis, can inform an effective personalization strategy to deliver the content players want at the price they want.
Experimenting with personalized paid settings is even more important for cross-platform free-to-play games
The survey I did showed that while 70% of respondents believe that offer and price personalization are necessary tools for successful free-to-play game launches, only about half (53.7%) have tried it. It seems that there is still room for development and optimization!
Full Survey Questions and Answer Data:
Q1: How many years have you been using mobile games/apps?
Answer: Average 7.9 years, median: 4.4.
Q2:What types of products have you developed?
Answer: 90.8% have worked in games, and 66.7% have only worked in games. 9.3% have only developed other apps (ride-hailing, news, lifestyle, social media, travel, etc.).
Q3: Does the free-to-play game you are working on offer in-app purchases, subscriptions, or both?
Answer: 53.7% of the games developed by the respondents provide both in-app purchase and subscription services, 42.6% of the games developed by the respondents only provide in-app purchases, and the rest of the games developed by the respondents only provide subscription services.
Question 4: How many teenagers have received professional marketing training?
Answer: 44.4% have received zero years of professional marketing training. The rest have received an average of 3.2 years of this type of training (an overall average of 1.8 years).
Question 5:In which position do you work the most?
Answer: 16 respondents work primarily in product design or management, 14 in marketing, and 14 in data science or analytics. Ten respondents did not provide an answer.
Problem 6: User monetization and retention are a challenge. In your opinion, is it necessary to offer promotions and offers to users in order to successfully enable players to pay for free games?
Answer: 96.3% of respondents said they would do so.
Question 7: What do you think is more important when a new user downloads a game?
Answer: 85.2% said they focused on providing them with attractive offers to get them to spend quickly.
14.8% said it was important to offer them the highest price they were willing to pay.
Question 8: Building on the previous question, which of the following statements do you think is more correct?
Answer: 61.1% believe it's safer to sell premium gaming experience services for less than users are willing to pay – because they can sell more products to them later. 38.9% believe that the key is not to set the price too low, because the low price will affect the user's willingness to pay for other products in the future.
Q9: If you had a choice, which in-app purchase plan would you prefer to set up in your game (assuming the same ad revenue)?
Response:
5.5%: Users have an average lifetime value of $10, and 1% spend $1,000 each.
81.5%: Users have an average lifetime value of $10, and 10% spend $100 per user.
13%:: It doesn't matter if it's either.
Q10:Which price do you think is suitable (after discount) for the game's first charge?
Response:
Less than $3: 25.9%
$3 to $5: 33.3%
$5 to $10: 37.1%
More than $10: 3.7%
Problem 11: Retaining and engaging users is key to building a user base. In your opinion, when a user buys, they are in:
Response:
18.5%: Because they got a gaming experience to enjoy.
81.5%: Because they get a gaming experience they enjoy, and paying for it makes their gaming experience better.
0%: Pay to make their gaming experience better.
Question 12: Many games sell premium gaming experience services at different prices in different countries. Price personalization refers to setting different prices for users based on other characteristics, such as the device on which the game is downloaded. What do you think this price personalization is...
Response:
70.3% believe that it is necessary to increase user monetization;
27.8% believe that the risks outweigh the effects;
1.9% said not applicable.
Q13: In addition to country-based pricing (through promotional offers or direct in-game purchase prices) in the games you develop, have you used price personalization in any other way?
Response:
44.4%: No
53.7%: Yes
1.9%: N/A
Question 14: If you'd like, please share more thoughts:
Response:
- Personalization of service – tried, personalization of prices – there are some, but it has had a great negative impact within the community.
- During special events, we use user behavior to personalize IAP prices.
- Although I think it is worth testing the price segmentation in each country, although in my experience it has not been successful.
- In my previous job, we had more users on Android than on iOS. But they generate about the same amount of revenue. So, we tried to lower the price on Android (which is not possible in the App Store's fixed-price tier system), and as a result, the number of consumers increased, and the total revenue increased.
- Segmentation-based tools may not be successful in simulating user preferences, so machine learning can be used to classify user types for price personalization.
- I've never seen country-based pricing result in a higher average revenue per user. I don't think it's risky, I just don't think there's any value in the extra work because you get the same reward. However, it is also a way to get features that justify the extra effort.
- Don't discriminate against players because of weird choices, and provide good and affordable products for everyone.
- I think price personalization is crucial. Some demographics, such as students, seniors over 65, large families, etc., have lower spending power, and tailoring prices to them can help retain users. Most of these concepts have been socially accepted, so people tend to accept them (e.g. museums, public transportation, etc. discount these groups).
- We offer flat pricing for all users in all countries and regions.
- If it's important to build a healthy community within your game (which is very important for gaming), I'm willing to bet that price personalization will cost you more than you gain, simply because players will interact with each other, and that would be considered unfair.
Original source:
https://www.deconstructoroffun.com/blog/2024/4/8/free-to-play-starter-pack-pricing-when-conversion-is-king-we-may-price-too-low