A lot of the debates about game pricing online take no account of different game styles. Nor do they take account of signaling. All people do is compare games as commodities, and end up with the inevitable conclusion that there is a price crash looming and a race to the bottom. No game should be priced above $5, clearly.

I suspect this is not true, and have the Democracy 3 sales figures to back this up, but all blog articles are better with graphs, so I drew one to make my conclusions seem somehow more real :D.

What do we think happens when we price an indie game at $25 and do not discount it? Well several things. As *many* people point out, the number of ‘impulse’ purchases is pretty low. There are also a low number of purchases from people who are ‘on the fence’ or ‘mildly interested’. But what else happens? There are two rather interesting phenomena at play, which are price-signaling and sunk costs.

First price-signaling says ‘This is a game that will provide lots of value. it KNOWS it costs more than those other dozen indie games, and its not hiding the fact. Look, it doesn’t even have a launch discount. it must be good. The developer isn’t nuts, this isn’t his first game. it must be selling. Look! it *is* selling, so it *must be good*. No wonder it’s priced at $25. Etc…’. price signaling works. it works a LOT. Do you really think a Rolex or Ferrari isn’t taking advantage of this effect? (as well as arguably being Veblen goods). Price signaling is a way of stating the developers confidence in their product. I am a big fan of Bose headphones, despite the fact that the internet hive-mind hates them. I’ve owned 2 pairs. They are much, much more expensive than most headphones and they know it. Maybe I’m a mug, but when I was looking for the *best* headphones, obviously I checked out Bose, they must be good at that price etc… Turns out they are, but would I have even tried them if they cost $50? (Note I’m not saying it’s a con, I’m saying the actual price was part of their marketing, and it was for a legitimately superior product).

bose

Secondly, we have sunk costs. If you buy a game or $1 and after 5 minutes you are stuck, bored or confused, who gives a fuck? Just uninstall it. But what if you paid $25 or even $50? At that price, you often ‘force yourself’ to keep playing to get your moneys-worth (partly) but also, more interestingly, you don’t want to be seen to yourself to be an idiot. If you paid $25 it must be a good game right? otherwise you judged poorly, and your subconscious self doesn’t like that. We humans are appallingly poor at objectively judging worth.

But hold on cliff, this all sounds horrid and manipulative, are you evil? is this how you justify your horrible corporate greed?

No.

I have a problem with sellingĀ  my games because they are complex strategy ones. That means they take a while to learn. I bet the first fifteen minutes of Democracy 3 are not that much fun for a newcomer. I bet the ‘fun’ factor only kicks in at an hour. At that point, you understand how to play. At that point you are hooked, its great, you enjoy it, and its hopefully a rich, rewarding experience.

graph

So how do I get people to play for that full hour? I charge $25 and use all of the methods described above to get people to play for that amount of time. Ideally NOBODY would then ‘bounce off’ the game. Ideally then, everyone has got at least an hours play from it (actually the median time played is extremely high), and everyone gets to the point where the game really pays-off in terms of fun.

Because simpler arcadey games can be picked up quickly, they don’t need to get people through that initial period of ‘negative value’, or that period is very,very short. So they can price low. Pricing low can be good, it means you can go mass market and get decent word of mouth. It means more virality. Pricing low isn’t bad per-se (although it brings with it problems of marketing costs per unit and payment provider issues etc). but you have to pick the right price for your game. In short, if you are making deep strategy games or games that are unusual, weird, different and have a learning curve, and you are pricing them at $5, I think you might be doing it wrong.

If you really want to think about this kind of stuff, especially the psychological effects, take a look at Prison Architect, and the brilliant way in which they priced their alpha artificially high in order to ‘only attract serious players‘. Brilliant. You get a game PLUS a feeling of superiority and validation. It’s like those ‘exclusive’ products that anyone can buy. I tip my hat to Marks brilliance :D.

Now go buy Democracy 3, it’s only for really intelligent successful and attractive people like YOU.

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21 Responses to “Strategy games, pricing, and the enjoyment curve.”

  1. Paul Keeble says:

    I played Democracy 2 quite a bit and enjoyed playing it. Unfortunately all the reviews never really compared it to the previous version, likely because none of the reviewers had ever played it. But the pictures make it look very similar and with a near doubling in price I certainly wasn’t going to see for myself. Because in my mind you already established a price point lower than that, you are charging big studio prices for an indy game with questionable value. You might think the above is true, and it might be working on some, but you did loose a potential sale in a previous fan of the series because of the price.

  2. Alex says:

    I am following your game and blog for some time and while I am eager to get some hands on experience with your game and if I really wanted I could since you can find illegit copies of it on the internet, I am holding off, because sooner or later you will discount your game to a better pricepoint and I can wait until then, and given the recent steam sales that are coming I am willing to bet that your game will be among those reduced in price.

    And since you mentioned prison architect, that game is almost always on sale price, and with Steam’s thanksgiving and Winter sale as well as CyberMonday and Black Friday I am sure I can snatch a copy of that at a 66% – 75% off. And if its not reduced in price, I can always snatch something else in the meantime and come back a few months later and then I’ll get the latest patches and the latest game improvements so in the end I’ll have a better experience than someone who bought the game at release

    Been burned too many times buying a game and then seeing it 2 weeks after on a 50% sale. I kinda felt stupid since I do not live in a 1st World Country so money is tight.

  3. Arthur says:

    Hi Cliffski,

    Arthur here from Virtual Villagers, etc.

    Just to stir up the pot, and also because I know you are rather opinionated on the topic of piracy as well, I thought I’d chime in.

    I’ve really come to terms with my games being treated as commodities. I know you were present in the old casual ‘portal’ days as prices dropped from 19.95, down to 9.95, finally settling in at around 7 bucks. This was just before the floor fell out on the entire ecosystem, of course.

    During the death throws of that space some of the distributors even continued selling my games without paying me, claiming that they were insolvent. It was enough money to get angry about, but not quite enough to come out on top if you sued them for it. At that point I realized that my games were selling VERY cheaply, all the way down to zero. Just like with piracy, where the price is, of course, zero.

    Considering both of these unwelcome distribution channels (insolvent distributors and pirates) were not paying me for my work, and not having much that I could do about it, I tried to feel better about it. I’m really a ‘glass is half full’ kind of guy. But guess what? We have realized that it has really helped our brand in the long run.

    We probably ended up with in the neighborhood of 100 million legit installations of the entire series over the years (a small percentage of which converted), and many more copies of full versions that were sold legitimately or pirated. That is a LOT of copies of the game out there. People come up to me all the time, as I know they do with you, mentioned that they know/loved my games. And when we finally moved over to iOS/Android, every title that I launched was already a familiar brand to enough people to get the games up the chart. At least high enough to have a fair chance.

    To me it is just an interesting counterpoint to the concept of high price-point/price-perception. Yes, price compression is forcing the games into commodities. Yes, one price does not fit all. But with signaling, or price-perception tactics, or otherwise, sometimes finding the sweet spot on the price point curve might actually be a little short-sighted, and getting every single copy to as many people as possible on whatever terms are available is an option worth considering, and one with far-reaching benefits that are hard to directly measure.

    Just to beat a dead horse further, would you rather sell 10 copies of your game at $100,000, or 900,000 copies of your game at $1? The latter is even worse than it sounds, of course, as you’d have support and other overhead to deal with. To me the answer to that depends on whether you plan on making any more games in the future.

    Arthur

  4. Ian Fisch says:

    I take issues with two aspects of this article:

    1. The graph showing comprehension vs enjoyment. First, I think there are plenty of complex games that are very enjoyable right from the start. Last year’s Xcom-Enemy Unknown is a great example. I also think there are plenty of games that are fairly easy to learn but get progressively more enjoyable as new elements are introduced. Mario Galaxy 2 is a good example here.

    2. The idea that gamers will assume that a higher priced game is a better game is a questionable claim. Why would gamers assume this? There are tons of crap shovelware licensed titles that cost $50. There always have been. Similarly, there are plenty of free/cheap titles that are brilliant. League of Legends and Rogue Legacy are two examples.

  5. Grogenaut says:

    Interesting pricing info. And good point about Prison Architect. I belive I bought it at a discout off of their premium alpha but still an increased price. It has also turned me off of any “polished alpha” game. Game was bugy, broken, and caused my laptop to overheat a few times. It was fun for about 30 minutes and then that stuff showed through. It’s odd because I’m usually in no hurry to buy games at full price. In fact about the only time I buy things at full price is to have somthing to play with my brother over thanksgiving. Pretty successful at never paying more thatn $10 for any game. It helps that my friends are all crazy and blow through games the week they’re released so I never get to play with them in multiplayer.

  6. CdrJameson says:

    Sunk costs are very important to enjoyment.

    I noticed this many, many years ago when swapping tapes in the playground.

    You played and enjoyed games you actually bought far more than games you just pirated, presumably due to having ‘skin in the game’.

    This is no bad thing (as a developer). It showed me that pirated games will always be inferior to for paid games even if they’re exactly the same thing.

    Using an expensive alpha is a brilliant idea – they want people who are committed to putting in the hours and reporting problems. If you get the alpha on the cheap you’re more likely to complain (or even worse) just ditch it without comment.

  7. Ed says:

    A very interesting point of view–and the replies thus far have also been illuminating. I think $25 for a strategy game with a lot of replay value gives great value for the money, and by pricing it that way you also stand a bit apart from less expensive games. You might not get as many impulse buys, but then again you’re also going to make people happy who are tired of paying $50-$60 for their strategy titles. :P Word of mouth will be important as well–people who see your game lumped in with $1-$10 casual titles might balk, but people who read a review or see an ad who find it that way will probably be less prone to sticker “shock”.

  8. Azusa says:

    Though on the flipside we have Gone Home, which I’ve been told is really short. So, at $20, I decided to pass. But on the other hand, I would totally pay $25 dollars for a weird new kind of game that specifically appealed to my interests.

  9. Rob says:

    And if you’re going to signal that you’ve got a premium product, the “packaging” (everything you see before you buy it) had better look polished…

    …unlike the image compression artifacts around people’s shoulders you’ve got in that image at the bottom of your blog post ;) (http://positech.co.uk/cliffsblog/wp-content/uploads/2013/11/header-copy.png)

  10. Dave says:

    For the sake of discussion I’ll play devil’s advocate, and hopefully, not sound too much like the bullock advising the bull, have you considered the role flash sales can have as a tool for price discrimination?

    For those unfamiliar with the concept it’s basically trying to charge everyone who wants the game as much as they are willing to pay, at the extremes right down to the very last cent.

    To see this in action look at the model Paradox use with there games. Starting with the game at full price for about 3-6 months, after which they assume that anyone who was willing to pay for the game at full price has already done so. They then drop the price for a limited time (24-48 hours, maybe a week by 40-50%). This snatches up another layer of customers who due to income or interest weren’t willing to pay full price. Then they launch regular (every 3-4 months) massive reductions in price (75%-90%) from this point onwards.

    This maximises their revenue, especially with digital distribution with its (I assume) negligible unit costs, by getting everyone with even a passing interest in the game to spend something on it, while ensuring they can still charge a premium to those willing to pay.

  11. cliffski says:

    Yes indeed, it’s a tried and tested technique. But in many ways pricing is also a game of chicken between seller and buyer, with the buyer saying ‘I’m not going to buy this until its cheaper’ (bluff bluff) and the seller saying ‘we aren’t putting it on sale’ (bluff bluff)…
    Someone blinks first, naturally, as almost all products drop in price at some point. The trick is to never ‘announce’ an upcoming price drop, as clearly that eats into full price sales. The seller has to effectively exhaust the patience of all of those who are waiting for a sale, but would actually give in and buy at full price.

    An alternative strategy is to get a ‘reputation’ for never discounting, which may generate more full-price sales from people confident they wont have ‘post-sale remorse’. It’s all a fascinating and complex game in itself :D

  12. ravinhood says:

    I never buy games above their bargain bin prices of $5-$10 as it’s just silly and stupid to do so. You get a much better game and better patched than the newly released version. I’ve monitored this for years and seen every game and I mean every game come down in price in a period of months to years. If you have patience and I do you can save a ton of money and get all the great games in the world for practically nothing. It’s HYPE and IMPATIENCE that sells these craap games when released.

  13. Swankyhank says:

    I love your post here Cliffski, and applaud your courage of talking about your pricing strategy in an open forum with your customers. I feel there are far to few businesses willing to openly talk about their pricing strategies, especially where their customers might hear. Also you are 100% correct that if your publishing a quality product you should charge what you think your product is worth.

    Being an entrepreneur myself I usually use the 10% when it comes to my pricing philosophy. If less than 10% of my customers aren’t concerned about price of my product, I obviously haven’t priced it high enough. Well, I do get a little more in detail with my pricing than just the 10% rule, but it’s still a good yard stick to keep in mind when your measuring.

    Finally, as William Shatner says in “Shatner Rules” about learning a skill and a trade. “You should get paid!” You’ve put the time and effort into learning a skill, a trade to take your creativity and with your own two hands to bring that creative idea into reality. As such for your skill set and your creativity and the time you’ve invested you should be paid.

  14. pkmiec says:

    I read the post and I became interested in the game. I decided to purchase it direct expecting instant gratification. Instead I received the following email,

    “There are several variables that affect how long it will take to complete your order. BMT Micro acts as a fulfillment service for hundreds of developers and each product is handled separately. If we are able to complete your purchase inhouse, you should expect to hear from us quickly. If an order must be completed by the developer or vendor for that product please allow up to 48 hours.”

    This is very disappointing. 48 hours! What am I suppose to do now during Thanksgiving? :)

  15. cliffski says:

    That 48 hours is just covering themselves, I bet you have the game already no?

    • pkmiec says:

      No, not yet. It’s been little over 3 hours. Maybe it is taking them longer because it is a holiday?

  16. cliffski says:

    They definitely work over holidays, I’ve spoken to the owner at his thanksgiving dinner table before :D. It’s almost certainly paypal/the bank that hold things up, rather than the payment provider.
    If it’s not there in the next two hours email me the details at cliff AT positech dot co dot uk.

  17. ExeterDeusMachina says:

    It’s not horrid, or manipulative, it’s just stupid.

    Games are not “Rolex’s” or “ferraris”, they are not physical consumer goods they are intangible mass media artworks. And what kind of mook wastes his money on rolex watches and ferrari cars?

    As I say, games are a mass medium, meant for a very broad audience of common people, they are not prestige objects meant for ditzy rich people with money to blow.

    Gamers want good games, full stop, and as a developer you want the time and resources to make good games. Therefor your price should reflect the lowest price of admission that your development costs will allow.

    Anything else is just pissing in the wind.

    • junker says:

      This. Maybe the price point helps promote the quality, but the idea behind a Veblen good is that people see that you own something expensive and thing better of you for it. The idea that a video game acts as a Veblen good at $25 but not at, say, $10 is more than a little silly.

      I sort of see the idea that pricing a game as high means that people interpret it as worth the money. Sad that there isn’t a way to release your game brand new twice, at two price points, to see which one drives more sales.