8 ms·

Pricing is weird

37 points by v21 16y ago

getonit 16y ago
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...
- tptacek 16y ago
  So basically your reasoning is that "you" should be able to set the price for "my" work.
  - higher 16y ago
    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.
    - tptacek 16y ago
      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?
      - higher 16y ago
        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.
        tptacek 16y ago
        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?
        higher 16y ago
        6729466257235539554569001718687588373666448683224383231337026 019905073400751018156318144951134485894311062056319984854259 302060891437370381162512635651087373408262536857317506536147 186872170494090165706190665926457868924827595159015446360281 183010218745193464862049820311770912960304161135038871621506 701864534740543956506706066808523426942838251657370223868436 844466943532116866437404057835199710326105051910979218083463 184098377866657027576548215047851405584797025622487788995491 356686114689049989434173534898442252175036069087582093616931 342900502171436833896077813785678367742565874503193480565584 90906414
  - getonit 16y ago
    How exactly did you work that out from what I wrote?
gregpilling 16y ago
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?
- eru 16y ago
  Perhaps plus the option to pay even more, if you want to.
- jot 16y ago
  Having a higher tier price would also likely result in more sales of the standard and even less of the discount.
mjw 16y ago
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)
cullenking 16y ago
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!
patio11 16y ago
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.
- ericb 16y ago
  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.
  - sachinag 16y ago
    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.
    - tptacek 16y ago
      $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.
      - ericb 16y ago
        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.
        tptacek 16y ago
        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.
henrikschroder 16y ago
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... :-)
- eru 16y ago
  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.
  - henrikschroder 16y ago
    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.
    - eru 16y ago
      Thanks. The Wikipedia descriptions reads like Sword of the Stars could be the real sequel to MoO.
- JoeAltmaier 16y ago
  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.
  - henrikschroder 16y ago
    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.
jdietrich 16y ago
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.
- tptacek 16y ago
  This should be fun. What's your half-dozen?
  - patio11 16y ago
    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 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.
JoeAltmaier 16y ago
Biggest mistake - too cheap by half. Best pricing change any online folks can make: double your price, see what happens.
- henrikschroder 16y ago
  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.
someone_here 16y ago
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.
PatHyatt 16y ago
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.
- tptacek 16y ago
  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?
zacharycohn 16y ago
There's a lot of interesting psychology in pricing. There was a case study (don't remember the link/source, I think it may have been in a TED Talk) a while back about how the existence of an option that people would be dumb to select can dramatically influence the outcome of the two options that make sense. 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.
- photon_off 16y ago
  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 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.pbworks.com/Predictably-Irrational http://www.moreofit.com/search/?q=http://bookoutlines.pbwork...
  - cjy 16y ago
    *"Predictably Irrational"

37 points by v21 16y ago

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...

tptacek 16y ago
So basically your reasoning is that "you" should be able to set the price for "my" work.
- higher 16y ago
  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.
  - tptacek 16y ago
    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?
    - higher 16y ago
      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.
      - tptacek 16y ago
        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?
        higher 16y ago
        6729466257235539554569001718687588373666448683224383231337026 019905073400751018156318144951134485894311062056319984854259 302060891437370381162512635651087373408262536857317506536147 186872170494090165706190665926457868924827595159015446360281 183010218745193464862049820311770912960304161135038871621506 701864534740543956506706066808523426942838251657370223868436 844466943532116866437404057835199710326105051910979218083463 184098377866657027576548215047851405584797025622487788995491 356686114689049989434173534898442252175036069087582093616931 342900502171436833896077813785678367742565874503193480565584 90906414
- getonit 16y ago
  How exactly did you work that out from what I wrote?

gregpilling 16y ago

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?

eru 16y ago
Perhaps plus the option to pay even more, if you want to.
jot 16y ago
Having a higher tier price would also likely result in more sales of the standard and even less of the discount.

mjw 16y ago

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)

cullenking 16y ago

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!

patio11 16y ago

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.

ericb 16y ago
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.
- sachinag 16y ago
  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.
  - tptacek 16y ago
    $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.
    - ericb 16y ago
      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.
      - tptacek 16y ago
        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.

henrikschroder 16y ago

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... :-)

eru 16y ago
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.
- henrikschroder 16y ago
  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.
  - eru 16y ago
    Thanks. The Wikipedia descriptions reads like Sword of the Stars could be the real sequel to MoO.
JoeAltmaier 16y ago
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.
- henrikschroder 16y ago
  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.

jdietrich 16y ago

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.

tptacek 16y ago
This should be fun. What's your half-dozen?
- patio11 16y ago
  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 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.

JoeAltmaier 16y ago

Biggest mistake - too cheap by half. Best pricing change any online folks can make: double your price, see what happens.

henrikschroder 16y ago
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.

someone_here 16y ago

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.

PatHyatt 16y ago

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.

tptacek 16y ago
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?

zacharycohn 16y ago

There's a lot of interesting psychology in pricing. There was a case study (don't remember the link/source, I think it may have been in a TED Talk) a while back about how the existence of an option that people would be dumb to select can dramatically influence the outcome of the two options that make sense. 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.

photon_off 16y ago
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 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.pbworks.com/Predictably-Irrational http://www.moreofit.com/search/?q=http://bookoutlines.pbwork...
- cjy 16y ago
  *"Predictably Irrational"