Dynamic pricing in games: The opportunities & pitfalls

[Music] hey guys so we're here today to talk about dynamic pricing or right price in your games I'm going to introduce Nicholas and Nicholas will tell a little bit about your company and what you guys do then we have a couple questions if we have time at the end blast audience questions we tend to regarding dynamic pricing and tend to get some questions on that so we're going to try and leave at least five minutes at the end so I sounds good yeah so hi guys I'm Nicholas founder and CEO of gondola in New York we exclusively focus on dynamic pricing for a mobile facebook and browser games and when I say dynamic pricing that means that we provide a service where we take over the pricing of in-app

purchases more specifically specifically the rewards that players get for an in-app purchase and all the virtual goods and free to play games and get so that would be the intro so as far as dynamic pricing goes there's a couple different ways and we're going to going to talk about both methods of dynamic pricing there's a few different ways that we're looking at it there's a school thought that it's right pricing where the goal is to get charging the correct amount for each item or transaction to maximize player retention and balance again the other the other method is to provide different players different pricing to engage them get them back into the game retain them or somehow incent them in more detail so what we're going to start with right pricing about how you can write use use dynamic pricing the right price your item and it's nichols can go through the process so how that would happen yeah so generally the idea is that game

developers regardless of what they platform there on regardless of what genre the game is in do a whole lot to customize the experience for you know different kinds of players segmenting comes to mind and they also do a whole lot throughout the life cycle of a game in order to the game and you know like constantly iterate you know based on the data that they are receiving a first player behavior goes what we have our ever observed in the past couple of years and I should mention here that my co-founder and I have an indie game development background ourselves so we know all of these things firsthand he's got the scars on the back of anyone wants to see yeah I can to show that around later and no but my co-founder and I have very much experience this ourselves and and and and the challenge is that pricing for a game and that certainly includes you know all the virtual goods that you're offering the game as well as most

of the time the in-app purchases that's done sometimes you know and like alpha or something you know like a game designer and and the producers sit down and essentially populate an excel sheet and then that is never being touched again and so there's two problems with that first of all they are not iterating this according to you how the playerbase really behaves and how it also changes over time and then secondly the idea of the one price fits all you know like all different kinds of players if you have a million ma you you obviously have a whole bunch of players that are not even going to last 15 seconds in your game and then you have you know a couple of players that will play your game for years and assuming that you know the pricing that you can provide or like a one price that you know suits both of those it's quite obviously not going to work so well I guess we went into the segmented pricing where should the right price range that is sure which is tends to be a little bit more contentious and just be candid one of the things that we see one of one of my concerns is when I

hear this was talked about dynamic pricing how pissed off is my user base really going to get and that that's that's a big concern that every time I look at the dimeric were pricing I have people talk to me about dynamic pricing I'm always like how do you keep people from being pissed if this guy's paying a nickel i just paid a dollar and i'm going to find out so then you tell me what the results are when you do I mean obviously you've done this multiple times first of all how often is that an issue truth be told never never yes never been it has never been an issue that I know that sounds you know hard to believe but it really has never been an issue but I will probably let me just address why I think your concerns come from a lot of developers out there have you know experimented around with promotions a lot and they think I hey we were running this promotion recently or like we're running an a/b test and we were you know trying to find out if if for our you

know 5,000 jump package we can charge 999 or 1999 so we just ran a random a/b tests across our entire user base you know divided it up and and you know in order to figure out what was the better price point and and then all of a sudden you know they're they're getting you know like backlash from the user base and you know like they get these screenshots on facebook and say hey I'm seeing this price my friend of seeing this price this is totally screwed up so you know I don't like to say anymore and this is then what oftentimes happens as far as the assumption goes what we you know do as far as dynamic pricing goes and that that's all also happen there's two crucial differences in what we do to what I just described number one we don't randomly apply priceless we cluster the user base according to player behavior and group users that are alike together and the prices are applied to the different user clusters so what happens is that if you and I play the same game right and we are at you know similar levels of progress and we sit next to each other the chances

that we are going to be in the exact same pricing cluster is probably north of ninety-nine percent right so if we would play we would never see different prices that's very different then okay so one of the one of the methods that people can use is to make sure they're careful with clustering it just makes sure to move alike players together you know that's one thing then the other thing is I just describes you know the 5,000 gen package you know I are going to charge 999 or 1999 that's kind of a double half pricing approach dynamic pricing is nothing that you know works with extreme price changes the ninety percent of the price changes that we apply our anywhere between plus five percent and minus ten percent a lot of the time we actually drop prices so it's something that works at scale with a you know a big user base multivariate testing machine learning all these things come to mind and and then you know small increments at a larger scale really make a significant difference in

this room who in here is publishing a game or developing a game right now with the percentage of people have any of you guys tried on formalize dynamic pricing anyone in here else in the back how to work out it's really hard what makes it so hard okay yes we must be peeing all over the work module that allows you to sign up alter the platform okay just so you know he doesn't work you don't work for these guys to know I think that's one of the biggest things where I'm starting to see these these guys get implemented in a couple of other dynamic pricing groups I know in which I've been seeing list of anywhere from three percent about nineteen

percent of the maximum what is what is a list that you guys have seen at the top we've seen north of thirty percent of the required extreme I've never but we are constantly in a matter of three months anywhere between say seven and 15 and that's the list in our coup right and then what I also want to want want to just say here so often times you know the question comes up well how do you really measure these results right if you do it before and after so just because my game was making a million dollars in October and then you guys came in and now we're making you know million one in November how do I know that you know that due to you that could be due to like 50 other things and that's that's kinda true so the solution is that we always run our dynamic pricing engine as a big ad test in the game so the game developer can always see how the game is you know I'm the same day in the same billing cycle performing without dynamic pricing and that's how we you know give game developers a lot of confidence you know

moving forward and then you know they can start with a small subsection of their player base and as they see it's working you know they keep on adding more and more how does how does this work with addressing game it actually works very well okay so one of the things that we have added over the last year meaning 2016 is rewarded video ads I mean it's not a new thing anymore but I think like as of 2014 and later has really revolutionized you know add monetization and games and this is what everybody's doing right now but once again game developers go ahead and you know provide a rewarded video ad that you know in order for like or in return for watching you know 30-second ads you get like you know 50 goals or something okay so what happens is that that's an interesting reward for an early flight in the game you know where the next weapon upgrade you know costs 100 goals 150 but as you progress through the game you know 50 goals not worth a lot to you anymore and all of a sudden you know you have a highly engaged player that really likes actually engaging with video ads but it's just not worth it for him anymore because you have to watch like

40 ads in order to get one thing out of it so what you do is you dynamically provides the reward or actually dynamically change the reward you know that the player gets according to the player behavior and and then that works really really well with that and now to the retention go on yes go on okay on a promise we'd like questions for the last five minutes we're coming onto the last five minutes already does anybody have questions here all right making coffee how do you manage very good can everyone hear that or should I repeat your question maybe we just read okay he wants to know if you put somebody in one cluster your magic you make a change in one cluster and they're all playing together what happens if that person moves to another cluster good question happens all the time no no it happens all the time right and that that's also something that you know I think differentiates clustering from segmenting usually game developers to segmenting you know somebody goes into a segment and they stay in that

segment and half that label from that segment so the way we do that is that every single player gets a unique on the lady so we can track them like with a number and as they progress through the game and by the way you know as far as metrics go you know progress is one of the most important metrics to consider when it comes to pricing we are following this player and he moves from cluster to cluster and then you know the might go into a different pricing group which obviously happens much more quickly in the beginning of the game you know there's already a difference between somebody that played in a one minute and ten minutes but you know later on in the game you know they change clusters much more slowly but that's how we manage it we provide unique user IDs for every player we see nope yes we ever get negative feed if there's any negative feedback for different person the concern comes up a lot I will absolutely admit that and I also absolutely understand where it is

coming from in the end of the day you know that there is there's always the belief that game developers have that you know we can show up you know with case studies and then we can you know drawl the analogies from the airline industry from from amazon rental cars hotels where we all constantly do this and everybody has gotten used to it but in the end game developers constantly believe that I've heard this thing so often where they do show up and say by the way can I can I tell you secrets like I'm making ninety percent of my revenue with one point five percent of my player base right which obviously applies to you know pretty much every single free to play a game out there but no we have never had negative feedback that the reason is that the situation you know that I described before the Jeff and I play the same game right very very similar a point in the game you know and are competing with one another and we'll see different prices is just not going to occur the different situation where just started playing the game today and I've been playing for a year right we're not going to compare

each other right he is still throwing sticks and stones while well I have a laser cannon so I couldn't really care less you know like certain prices for like the early player in the early player arsenal are any different I event I i know i have vastly different disposable income in my household between the 11 year old boy the 13 year old boy the 18 year old boy and me and I distance been going on for years because we'll all be sitting there and my youngest son who has no disposable income will be like yeah dad stayed off the classic line for a week here's my bonuses coming week and he'll catch up because they have time I have money so the only way I can compete with them as I can and why I just don't tell me don't tell my kids but yeah it's bet it's actually been going on for years I'm sorry you have a question is there a microphone yeah integrate integrate the dynamic

pricing to your game in practice so the question was how often do we change the prices and how can you implement it in practice question number one they are being recalculated on a daily basis that doesn't mean that they change on a daily basis right the pricing engine runs through that cycle every day but once again the price changes are you lived fairly minimal it's much more about target pricing and really think about it as a way of customizing the user experience because that's really what it comes down to right as far as the implementation goes two years ago we used to do at decays that they've gone out of fashion so it's it's API way it works is all we need from the game developer is essentially a list of everything that you're selling in the game you know you can feed that VXL into our dashboard all the in-app purchases and then if you have a regular

promotional schedule you can provide that then you get an API which is obviously a very lightweight can be implemented cross-platform and it's individualized to your game to the extent that doesn't have a lot of functions that are irrelevant to the genre that you're in and then what we do when we get started is we devise a player group you know into two groups and then we don't manipulate anything in the beginning and just see that they are performing equally as they show it right at large numbers and once that has been established that they are two between the two groups the same then we actually start dynamic pricing and that's an out go on we have two more minutes any more questions okay hurry forgot be connected yeah but one repeatable how do you handle offline experience to use need to be connected to the Internet took on a dynamic

pricing to work good question most games that we work with you know our is it get up set up in a way that you have to be connected in order to play that's how I have another requirement for us so the pricing the individual pricing for the player gets stored locally on the device in adjacent files that then you know gets overwritten every time it gets updated and that process usually happens on the splash screen so if the game loads you know then we just push this over it takes like a fraction of a second and that is also the protective layer should anything ever happen you know God forbid on our server where all the calculations happen in the world the heavy lifting is done it would never be a game like we're you know as far as like prices go you see all the Earth's the default bank is always says the most recent pricing file that has been stored on the device any more questions I have a question it's good i just heard you say awesome they issue have gone to all ID so how do you protect their data yeah

does someone have to give all the data to you know we are recording specifically the data that is relevant to us meaning you know the api enables us to you know tracks or metrics that are relevant in the game and if anybody doesn't want to be our customer anymore obviously there are provisions that all that will get erased but the gone leidy is something that is specific to us and that we obviously gives the developer access to so they can you know see everything that we are recording but the data is protected well you're not getting any user data specific you mean as far as like gender and religion and all that no no no that would be illegal okay our times up okay all right hey guys thank you guys [Music] you