How to Make Dynamic Pricing Work for Free-to-Play Mobile Games
Many free-to-play developers have considered adjusting their prices for different types of users. Say Player A lives in the U.S., and Player B lives in India. Everyone knows that the average Indian user has a far lower spending ability, so it seems logical to charge Player B less than Player A.
Unfortunately, it’s not that simple. What if Player A is on a low-end Android phone and Player B is on the latest iPhone? What if A is a skilled player and B isn’t? What if one of the two players has already paid, or looks likely to stop playing? And the most dreaded question of all: what happens when you only give Player B a discount, and Player A (and his cousins C, D and E) finds out? At this intersection of complexity and potential harm to the mobile gaming community, most devs give up on the idea altogether.
In other industries, however, adjusting prices, aka “dynamic pricing,” has become a fixture: from airlines and Uber to everyday retail. The mobile game industry, reliant on a small number of players making purchases at variable prices, looks primed for dynamic pricing, too. The potential benefits in conversion, retention and monetization are too large to ignore forever.
Dynamic baby steps
Many developers have the misconception that, to implement dynamic pricing, they should change their real-world prices. But modifying the prices on Apple or Google for each country is unwieldy and doesn’t address the strengths of dynamic pricing.
Good dynamic pricing is multivariate—it doesn’t rely on a single factor. “All inputs by themselves generate comparatively low uplifts,” says Niklas Herriger, CEO of dynamic pricing company Gondola. “The true power of dynamic pricing comes from the ensemble of all of these inputs working in harmony.”
“The true power of dynamic pricing comes from the ensemble of all of these inputs working in harmony.”
Gondola itself is living proof that indie devs can venture into dynamic pricing: it got its start as a developer adding multivariate tests to its own casual game in an attempt to marginally improve its metrics. “Boom, retention up 18 percent, monetization up 22 percent,” recalls Herriger. It was really staggering, and that’s when we realized we were onto something.”
Taking it to the next level
Dynamic pricing works best when devs use inputs that are more specific to the player on the other side of the screen. The most powerful of all [inputs] is the player’s progress in the game. As every experienced dev knows, players can be radically different from each other in terms of skill, motivation and available time. Dynamic pricing addresses these differences by raising or lowering the prices of items the player can buy in-game—power-ups, characters, equipment or anything else specific to the game’s mechanics.
The most powerful of all [inputs] is the player’s progress in the game.
“Player progress and predictive measures can often generate double-digit revenue uplift numbers in a game, but they require significantly more simultaneously run experiments, computing power and experience to optimize,” Herriger says.
Beyond powerful inputs like progress, there is an ever-growing list of factors that can make for meaningful improvements in uplift. For instance, the social impact of players can be broken down further into inputs like posting activity on Facebook or Google, viral activity, numbers of followers and friends, clan membership and so forth. Even a metric like device isn’t limited to the device model: inputs such as the manufacturer and OS version can also make a difference.
The larger impact
Herriger reports that any single factor will only offer small improvement, but in sum the inputs can increase ARPU by 30 percent or more and have the potential to double 10-day retention stats (which tend to be unique per game). Increases in retention, conversion and revenue all tend to be interrelated. For example, a player who stays longer is more likely to spend; vice versa, a player who spends is more likely to stay longer.
As for the worry that players will catch on that prices aren’t identical for everyone, Herriger says it’s rarely a problem even when games have strong communities: “The user response is essentially the same as it is in all the other industries it has been applied to. I guess when the airline industry deployed it they were probably worried that two passengers would be sitting next to each other and talking. Nowadays we probably all embrace it.”
Free-to-play games will likely end up much the same.