

Pricing is weird - v21
http://www.positech.co.uk/gratuitousspacebattles/registernomads.php

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zacharycohn
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
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>

Plugging that into moreofit.com gives you an endless list of interesting
consumer behavior articles:

[http://www.moreofit.com/search/?q=http://bookoutlines.pbwork...](http://www.moreofit.com/search/?q=http://bookoutlines.pbworks.com/Predictably-
Irrational)

~~~
cjy
*"Predictably Irrational"

------
patio11
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
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.

~~~
tptacek
I didn't think too hard because as soon as I saw his rationale for cost-based
pricing I stopped thinking straight. So, just to get you started:

* Don't price things based on what they cost you unless you it's an ore or sorghum.

* Don't solicit customers that don't value your product.

* Don't demand that customers think carefully about which button to push to make a sale.

* Don't make the cheap option the first button users eyes cross.

You could probably go on to pick apart every sentence in the blog post (like
his misunderstanding of the concept and purpose of a "sale") or the fact that
his rationale sucks all possible incentive out of making his team more
efficient at building and harnessing content for his game, but those are the
big ones.

 _PS: if those stats are lying, that'll be the one smart thing he did with
this page._

~~~
ericb
Hmmm... I didn't take his rationales seriously at all. I'm surprised you made
the mental leap to think the stats might be made up, but not the leap to think
that his cost based price might be fudged and provided solely to encourage
sales at the higher pricepoint.

I just looked at the genius of guilt-based discriminant pricing, and was
amazed it _worked_. (assuming honesty in reporting)

~~~
tptacek
Guilt-based pricing has been tried in lots of places, and I'm unaware of an
example where it's worked well. Radiohead seems to have had the most success,
and they grossed less on In Rainbows than any of their label releases (they're
a confusing example because their experiment was also about disintermediating
the labels, which was a success).

~~~
getonit
In Rainbows being a failure is the recording industry's spin and, as usual,
once you stop taking the cherry-picked data at face value and look at the big
picture, you find the complete opposite is true:
<http://techdirt.com/articles/20081015/1640202552.shtml>

~~~
tptacek
No, you are conflating two different issues. On the one hand, Radiohead
demonstrated that disintermediating the major labels is a win (naturally, the
industry wants to spin that). On the other hand, the response rate they ---
one of the most popular and beloved rock bands of all time --- got from this
promotion was... disheartening.

Think of it this way: Radiohead demonstrated that _anything_ , even _letting
customers set their own price_ , is better than working with a major label.
That doesn't mean letting customers set their own price is an economically
sound move by itself.

------
gregpilling
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?

~~~
jot
Having a higher tier price would also likely result in more sales of the
standard and even less of the discount.

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jdietrich
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
This should be fun. What's your half-dozen?

~~~
patio11
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> \-- give people options and
highlight that the _correct option is most popular_ without dwelling on how
many people make the wrong choice.

~~~
bobds
I don't think $6 is _hideously_ underpriced, considering that it is only an
expansion. The core game costs $20. A third of the price isn't that bad a
price point for game addons.

------
mjw
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)

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someone_here
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.

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PatHyatt
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
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?

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cullenking
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!

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

~~~
henrikschroder
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.

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henrikschroder
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... :-)

~~~
JoeAltmaier
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
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.

~~~
JoeAltmaier
MOO2 could have another improvement: let me design starbases, missile bases
and ground batteries! Its so frustrating to capture Plasma Cannon and have all
the ground batteries become worthless.

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getonit
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
So basically your reasoning is that "you" should be able to set the price for
"my" work.

~~~
higher
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
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
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
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
6729466257235539554569001718687588373666448683224383231337026
019905073400751018156318144951134485894311062056319984854259
302060891437370381162512635651087373408262536857317506536147
186872170494090165706190665926457868924827595159015446360281
183010218745193464862049820311770912960304161135038871621506
701864534740543956506706066808523426942838251657370223868436
844466943532116866437404057835199710326105051910979218083463
184098377866657027576548215047851405584797025622487788995491
356686114689049989434173534898442252175036069087582093616931
342900502171436833896077813785678367742565874503193480565584 90906414

