Monday, October 8, 2012

Designing the Perfect Alternate Currency

In free-to-play games, and more historically arcades, alternate currencies are used to increase profits. At a fundamental necessity it allows small purchases to be batched together to reduce the credit card processing fees, but that's not what this article is about. It's also not about how to make a great game that people want to play. It's about how to maximize the profit per player within the design space of currency.

Buying the Currency
So someone wants to get their hands on some of your currency. How do you maximize the purchase. First off you need a little price discrimination. Some people have money to blow and just need a small nudge to get there. Bulk discounts and pack in bonuses of useless status items will get these guys to go for the big package. A large percentage of players won't have much money and will always go for a small purchase. The rest will be somewhere in the middle, perhaps only making one medium sized purchase. A "starter-pack"  will appeal to these players the most.

All of that is just second and third degree price discrimination: consumers self identifying. The question is how do you get closer to first degree? After the first purchase the customer can start to be categorized and targeted with offers to increase their spending. Send coupons to the small fry when they stop spending, advertise new status items to the big spenders, and use a mix of both plus periodic sales to target the middle.
Unlike the real world, the product is digital which means you've all ready paid a sunk cost creating the game. You don't have to spend any more money. Every purchase is profitable. This means if you offer a 99% off coupon that pulled a sale out of thin air then it's worth it. Just don't be too short sighted. If you upset the player base or ruin the in-game economy you'll lose out on repeat purchases.

In addition to all of this, there is another avenue: getting the player to spend more than they intended. The trick to this is the impulse buy. Just like grocery stores put candy and magazines in the checkout line, you can have a second shop screen for adding some bonus in-game items at a discounted rate. A recent trip to Dave and Buster's revealed a new variant of this trick which is unique to alternate currency. What they did is offer a boost to the purchase. An impulse buy of what they're all ready buying: currency. For a dollar or two more you can get a whole pile of deeply discounted points. The best way to pull this off is to price your purchases in nice psychologically pleasing whole dollar amounts. Good price points are the denominations of paper money: 5, 10, 20, 50, 100. Then after they psychologically committed to the purchase by clicking next you offer an impulse purchase on deeply discounted currency that they'd be a fool to refuse.

Spending the Currency
At this point, spending the currency is completely optional; you all ready made your money. However, if the player doesn't run out, there won't be a repeat purchase. This discussion is going to get a little into itemization but I'm going to leave it mostly vague.

First off, if something doesn't have value people will have no trouble parting with it. Fortunately for the seller, our minds value things relative to other things. If we can detach the value concept of the alt-currency from real world objects and re-attach it to virtual objects, people will spend more. Lets solves those two steps separately. To detach the value from a real-world anchor we have to obfuscate the relative value. In this case the only anchor we have to detach is the dollar. If you use a funky exchange rate between dollars and points most people won't be able to do the math in their heads to calculate the real cost. Total obfuscation isn't required; if the exchange rate is close to something that can be done mentally the player will use that approximation. So using that logic, if after all the tricks above your currency costs $.26 per 100 points and an item costs 400 points, the player will do the math at $.25 per 100 and price the object as $1 when in reality it cost $1.04. Not much, but still an edge.

For the second step you need a lot of way over priced objects. These objects will adjust the scale of the currency in the players mind to where those objects seem normal and everything else is a bargain. This is what you want. The reality of overpriced and way overpriced items doesn't sound as appealing. This trick is the entire reason for the existence of the Triple Whopper at Burger King. Do some people buy it? I'm sure they do, but more importantly it makes the Double Whopper seem less ridiculous and so people upgrade from the single to the double.

Secondly, you want to nickel and dime the balance away. Always have an unlimited supply of cheap stuff to spend money on. Whether it be consumable supplies that need to be repurchased or an ever widening catalog of costumes to purchase and collect. All the standard real-world sales tricks work here.

Lastly, you want to leave them with change. If somehow a player is always left with $.87 in the account and the cheapest item costs $1 the player is more likely to spend money so that the $.87 doesn't go to waste. Alternately, you can have a few useless $.87 items so that people will blow the change just for a sense of completion. Or you could do the one-two punch and offer a $.85 item and leave them with pennies prominently displayed, constantly taunting them in your UI.

If you have any questions or some tips of your own, please leave them in the comments. I'll do my best to answer them.