Game UX — Use of Price Elasticity of Demand Curve in Games Currencies
The only method of monetisation in free game is through In App Purchases (IAP) which can be through store(directly buying through real money) or using in game currencies. With monatization through IAP, we usually are dealing with sales of additional content which is otherwise unavailable or rare to get in games. Here I will talk about in game currencies which a player can buy from store or earn by doing some rare actions in game.
What is the motivation for a player to spend in game currencies?
A player can use these for acquiring additional levels or abilities or to spend on other things within games to keep themselves updated — FoMo(fear of missing out — mostly in social gaming). They are used to fast forwarding the process like generating weapons, unlock chest, buy higher level weapons or upgrade player level. You will see this in many games like Delta-T, Clash Royal , Golfclash and many more.
How to motivate players to spend in games?
Mostly, all games categorize all players into two types:
- Non-paying users — price sensitive, not content sensitive.
- High spenders — content sensitive, not price sensitive.
If we are successful in serving these two type of user, boom our game can make good revenue in no time. Most of the games use Price elasticity of demand concept to attract both type of users to spend in game. What is price elasticity of demand?
Definition: Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price when nothing but the price changes. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price.
PED curve : Effect on NPU’s
PED in above figure shows the relationship between price and quantity demanded. NPU’s are extremely price sensitive & responsive to price elasticity. We can see above (right image) P0 (24 TM) is the initial cost for completing weapon generation at 2hours 23minutes, but as time passes, the price decreases P1 (12 TM) is offered at 1hour 23minutes and then on — P2 (6 TM) at 23minutes. This increases NPU affordance to spend TM and generate weapons as time passes leading to higher conversion. So non-paying users who don’t want to spend, can wait till it fall and amount they can afford. This creates conversion opportunities for NPU’s and hence help create premium currency sinks.
PED curve : Effect on high spenders
High spenders like to acquire new content fast and quick, irrespective of the price. This makes the price elasticity curve quiet inelastic for high spenders as they will make purchases even at higher price to progress faster . We can see from above that the curve has become quiet steep & inelastic implying high prices don’t discourage high spenders to purchases. This combined with FoMo to manage slot inventory creates higher premium currency monetisation sinks. These user also make lot of store purchase to keep themselves upgraded.
PED can be implemented at a lot of places in games or in apps. Hope you like this article. Do share your views on it. Feel free to comment below if you have any questions or thoughts.
Image Source: Delta-T
About Delta-T: Delta T is a location based Augmented Reality MMO based in an exciting time travel universe. It is now live on the Play Store in early access. Download the game now https://goo.gl/c5G8pt
