

The virtue of price discrimination - rishi
http://keithschacht.com/the-virtue-of-price-discrimination/

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ctdonath
I recall Bauch & Lomb (sp?) doing something like this with contact lenses:
three prices were offered for three different packagings ... and the general
public was outraged when it was discovered the content of those packages were
exactly the same. Dell got beat up for something similar, offering different
prices depending on how you navigated thru the website to a given product's
page.

Price discrimination has its place, and if not handled with care those paying
more because it's worth more to them will resent the treatment.

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lubujackson
These are two different things. Pricing in Farmville is incremental pricing,
where you get incrementally more for more $. Price discrimination is charging
different people different amounts, like charging people to read an article on
their Kindle that they can read for free through their browser, etc. That
being said, much, much, MUCH more complicating pricing is possible thanks to
the Internet, and companies are just starting to explore the possibilities. A
really good example (that is positive for end users) is how Steam does deep
discounts and bundles all the time. As a user you grow to expect these price
fluctuations for games, but most industries haven't been so affected yet.

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Splines
It angers me to see this same logic applied to video games. From a business
perspective it might make sense, but playing a video game that functions this
way (like FarmVille et al), leaves a sour taste in my mouth.

I've tried a few of them, universally dislike the idea, and have yet to pay
for any.

If a game offers IAP, I look to see if it's some sort of virtual currency. If
it is, the developers go on my shitlist and I try to never give them my
business again.

I've seen developers publish awesome fun games with little to no DLC, and it
saddens me when I see their next release to turn out to be a farmville-ish
rehash.

~~~
gte910h
There is plenty of IAP currency that is far far far from farmvilles "annoy you
to death if you don't pay" idea.

For instance, look at League of Legends as an example of a far more positive
type of currency:

You can unlock new characters by playing, or more quickly by by paying. You
can unlock cosmetic skins purely by paying. You can temporarily enhance the
speed at which you unlock players by paying.

You can never play a dollar and play at the top level of the game.

Some people certainly pay hundreds of dollars to play the game, but many pay
$0. Many people who are busy pay some money and then are able to gather the
characters that time rich and cash poor players then spend their time to
achieve.

As to more generic DLC that isn't currency based (A la Mass Effect), I _love_
that stuff. Video games have cost $40-60 bucks for all time. They cost that in
1981, and they cost that in 2011. By putting DLC in, they can not raise that
price yet actually make more money only off the people who really like the
game and wish to go deep into it.

For instance, I have bought the DLC for Oblivion, as I loved that game (it
added about 20 hours of quests in another world). However, I've largely
avoided the DLC in lots of other games that I've bought the other game.
Therefore, I pay more for games I enjoy more, and pay less for games I enjoy
less. Sounds like perfection in pricing to me.

Many people who don't like the more normal type of DLC wouldn't like the game
costing $15 bucks more either. But that's the alternative really, or scaling
back the base game.

~~~
Splines
Don't get me wrong, I do love DLC that adds to the game world and extends the
life of the game. I've bought DLC like this in the past, except they were
called "expansion packs".

Having never played LoL I can't really say one way or another if I agree with
their approach. As long as it's possible to play the game without restriction,
I'm usually ok with it. What bothers me is the "You've run out of energy, pay
$X to continue playing" business model.

Cosmetics, even cheats are fine by me.

It's troubling that what I find abhorrent in game design is succeeding in the
marketplace. All the best to the guys doing well, I certainly don't begrudge
their success [1], except that I will personally take no part in it.

[1] ok, maybe a teeny bit, but what I say isn't going to affect their bottom
line

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Lazare
Back in the day, we sometimes called this "shareware". The first episode of
Commander Keen was free, but episodes two and three cost money. :)

Or we called it a free trial, or a demo. We included a disc with a crippled
version of the game in a video card box, or we glued it to the cover of a
gaming magazine. Or we called the extra parts expansion packs. Or sequels. Or
DLC. Or, yes, we sell them for real currency in an in-game item store as with
Farmville (or League of Legends, World of Tanks, Gunbound, etc.)

All of it boils down to the same thing: Some people pay nothing and consume
some amount of free content. Other people pay $X and get some higher amount of
content, even while other people pay a higher $Y and get even more content.
And still others will pay less, and get the same content, because they waited
for a Steam sale.

And so it goes. Pick any six gamers at random who own Portal, and they all
probably paid different amounts for it: Some bought it as part of the Orange
Box, some individually, some got it for free, some bought it in a store, some
got it for free when they bought Portal 2, some bought it on sale, some bought
it after the price was cut, some bought it in the US, some bought it in
various other countries, some bought it using USD, some bought it using a
different currency. There's probably 500 different prices you _could_ have
paid for Portal. (Actually a lot more, once you include exchange rate
fluctuations for people buying Steam games in USD using a non-USD currency.)

And you know what? Meh. There's not a lot new under the sun. (Especially when
it comes to ways of relieving punters from their cash.)

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kaonashi
Things like this invariable involve artificially crippling a product in order
to create a market segmentation that does not naturally exist. I have a hard
time coming to terms with the virtue of this model.

~~~
chc
Asking people for money before you'll give them the product creates market
segmentation that does not naturally exist. There's no such thing as a
"natural" pricing structure. I hope we can agree that, in pricing a product,
your goal is to offer a fair exchange of value. Since different customers
value things differently (for example, a billion-dollar business stands to
gain a lot more from a 1% increase in revenue than I do), tiered pricing suits
this goal more naturally than flat pricing.

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jessriedel
Incidentally, better price discrimination transfers some of the surplus
generated by economic exchange from the consumer to the producer. Depending on
the situation, this may or may not be a societal good.

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hammock
It would serve the OP well to gain an understanding of the difference between
first-, second-, and third-degree price discrimination.
[http://en.wikipedia.org/wiki/Price_discrimination#Types_of_p...](http://en.wikipedia.org/wiki/Price_discrimination#Types_of_price_discrimination)

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JoeAltmaier
I can't help but think of this as preying on the weak. Who pays 1000's per
month? Somebody with a broken sense of value. This is not a business model I
want to participate in at any level.

~~~
chc
I'll assume you're talking strictly about leisure activities, since obviously
there are business services worth way more than that.

You might be right about some cases, but I think you're painting with too
broad a brush. Some people just have more money than things to do with it. If
I have thousands of dollars in spending cash every month, what's necessarily
"weak" about spending that much on stuff I want in a game? I do think it would
be more admirable to donate the money to charity or something, but if you're
spending it on frivolity, I don't see what's wrong with spending thousands in
one place rather than lots of different places. Do you feel the same way about
other expensive items, like cars and plane tickets and high fashion? (I really
do know a guy who buys cars in much the same way that people buy virtual
hats.)

I once dated a girl who was _shocked_ that I would rather spend $20 more to
get something than drive an extra half an hour. I wouldn't have gotten paid
for that half an hour, so it's not like I actually made money by not doing it
— I simply valued that slice of my life more than $20 minus the cost of gas. I
don't think that's necessarily a broken value system. $20 wasn't worth as much
to me as it was to her.

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JoeAltmaier
I'm sure there are folks like those you describe. There are also many
addictive personalities in the world, spending the grocery money on a
farmville threshing machine.

I aslso suspect Zinga isn't at all concerned with the difference, makes no
effort to distinguish, and for the larger part is preying on the sick and
weak.

~~~
chc
I agree that Zynga disproportionately targets that demographic, and it is a
shame. I just don't think it's fair to equate Zynga with any game that has a
pricing model that scales.

~~~
JoeAltmaier
If the 'scaling' depends on 'whales' (read: suckers) then yes, its fair. In
fact, the article makes it clear the model only works because of whales.

