5 Tips for Using Discount Pricing to Maximize Revenue in Social Games

[Editor’s Note: Bobby McFarland of Super Rewards, part of Adknowledge, provides some tips on techniques for making money through virtual currencies in social games.]

Discount pricing programs have been used for years by online and brick-and-mortar businesses to acquire customers, promote products, drive brand loyalty, and materially increase profits. Similar programs have been proven to work extremely well for virtual currency and goods inside social games. Below are some discount pricing tips that social game publishers can use to maximize ROI and more deeply engage their players.

1. Tier Discounts for Virtual Currency

Creating different tiers or levels of discounts is a proven way to keep users engaged, especially for “hardcore” gamers. The Facebook game Country Life does a good job at this: gamers can pay $5 for 50 coins, $10 for 105 coins, $20 for 220 coins, etc. But once these direct pay ratios (or exchange rates) are set, it’s difficult to change them without irritating users who’ve grown accustomed to the pricing. One concern is that players will spend less when they get more. But this is a well-debunked myth. People will buy more than they need today, have a flush account, and then spend it all much more quickly than they intended. Brick-and-mortar stores have been proving this for years with massive bags of tube socks and ‘family-sized’ portions. Super Rewards provides simple tools for building these types of dynamic ratios.

It’s also very important to balance the payouts received from direct payments with those received from advertising offers to avoid cannibalizing offer revenue. For example, it would not make much sense to offer 100 coins for $10 via direct pay if the payout from a Netflix offer is $20 for 100 coins. Also, note that will cause some currency inflation as now you may have on average 125 coins going into your system for every dollar a user spends instead of your expected ratio of 100 points per dollar.

2. Set Proper Exchange Rates

Publishers and developers are increasingly using multivariate and A/B testing to help set their discount levels and currency exchange rates. Super Rewards is working with developers to help them set up accurate testing models to better understand user behavior in various scenarios. We encourage developers to build testing technology into their game designs to continually improve user experience and to maximize ROI. Many game developers have a ‘set it and forget it’ mentality when it comes to their exchange rate and use a number that they initially ‘felt’ was right. Virtual currencies are a science: go with facts not feelings. The Super Rewards Game Advisory Team or even our Account Managers can help with this, in addition to A/B testing tools.

3. Reduce Inflation with Dual Currencies

But over time, even smart discounts and exchange rates cannot completely escape inflation, which is the main reason why some games have developed two currencies (more details, here). The model works because it motivates both new and aggressive gamers to continue buying currency as they climb different levels. The model also improves user retention rates, enhances the overall game experience, and drives sustainable revenue for publishers. Mob Wars is a good example of the dual currency model in action. A user at level one will happily buy 10,000 coins for $10. A user at level 30, for example, may earn 100,000 coins a day on their farm. Make sure there is a compelling value proposition for all levels of players. This is where a dual currency easily allows you to offer more coins for the same price.

4. Tie Currency Discounts to Holidays & Special Events

Virtual currency discounts (e.g., a 20 percent off “across the board”) are also effective, particularly for casual gamers. While these “across the board” discounts are more volatile than the tiered discounts above, they can produce significant revenue spikes. Holidays (e.g., Christmas, Black Friday, Easter, 4th of July) and special events are good opportunities for publishers to offer this type of discount. For example, Galacticos Football has tied its discounts around World Cup soccer events, generally for one to two days. A pitfall to watch out for here is having players “wait” for a sale. If they know every Sunday is discount day, they will wait until Sunday to buy. Mix up the discount percentages and their frequency. You don’t want to be predictable. Having a sale will likely cause a dip in revenues as people ‘stock up’ on sale day, but the dip is always much less than the spike.

5. Discounted or Limited Time Virtual Goods

Finally, another simple but effective way to engage gamers is to discount virtual goods for short periods of time, usually one to two days or even for a few hours. This is most effective for role-playing games like World of Warcraft, or games where the goal is to accrue goods over time, such as Pet Society and FarmVille. In FooPets, you can find discounted water bowls or leashes for your favorite virtual pet. Having an ultra-rare item that is only available for a few days and then is no longer available or expires can often see spikes in revenue of 3-4x your usual daily rates with little residual revenue down turn effects in the following days.