18 Approaches for Setting the Right Price For Your Game

One of the main concerns for indie game producers is how to price the game. Simplest method would be to use the ‘magical’ $19.95 price for your game, but there are more approaches available. Selecting the right price for your product is one of the key decisions in selling. Common objectives for pricing can be profit maximization, or simply – survival.

Approach #1 – Competition-based pricing
Perhaps the most widely used pricing is done according to the industry norms: shareware games are sold with a $19.95 price that, and indies simply use this as their starting point for pricing.

Approach #2 – Value-based pricing
Other bit different way to price your game is to offer the right combination of quality and good service at fair price. In this way, it’s possible to set a price based on buyers’ perceptions of value. People tend to think that a game with $29 or $39 price tag may be somehow better than a $15 or $9 priced game.

Approach #3 – One-time, monthly and yearly pricing
Typical way to purchase a game is to pay one time fee and that’s it. Other way to price the game is to offer a 3-months or 12-months license for your game. Some developers offer a $50 price tag for a ‘yearly guild membership’, which basically means the possiblity to play the game and get free updates during one year.

Approach #4 – Cost-based pricing
In this method – which I believe is not very commonly used in indie game markets – a certain markup is set. For example, if your costs for selling one copy of your game is $3 and you want to earn $10 per game, then the final price of your game would be $13.

Approach #5 – Break-even pricing or target profit pricing
You may determine a price at which it will break even. Target pricing uses the concept of a break-even chart where certain number of purchases at certain price, reach the break-even point (the point where all costs have been covered).

Approach #6 – Price skimming
This type of strategy for pricing charges more in the launch of a game, and then constantly decreases the price to achieve different segments. For example, it could use the price of $29 in the launch of a game, $25 one year after the launch, $19 two years after and $9 three years after the launch. While not so typical for indie games, this type of pricing can be used.

Approach #7 – Penetration pricing
In this type of pricing, the company sets his game price so low that they try to achieve a bigger market share. This might not be so viable for indie who is selling one game, but could be doable for a portal that offers much games with low price as they try to enter. (I personally don’t think this type of pricing is a good option, as there’s always freeware games that will be ‘priced’ lower. )

Approach #8 – Freeware pricing
In this option the company chooses to launch their game as freeware hoping it to bring other type of revenue (such as sponsors and advertisement revenue) and promote their next (commercial) game or games. The problem with freeware is the ‘free’ part of it – people who play freeware games might not be the ones you want to target, as they want to play for free. The other problem is webhosting costs (unless you get a sponsor) that might get high for very popular freeware.

Approach #9 – Expansion pack pricing (Add-on or Optional-product pricing)
Optional-product pricing takes into consideration of the expansions of the main product. For example, a game could get an add-on that would increase 100 more levels to the original game. Or a game could have an expansion pack which would bring 3 new playbale characters and 20 new weapons for the original game. Each expansion would require that the player has previously purchased the original product.

Approach #10 – Captive-product pricing
In this way of pricing a so captive price is set, but the really good stuff needs to be purchased differently. For example, one could play an online multiplayer game for free (or really low-cost) but would need to purchase additional expansions to be able to play the game efficiently. This type of pricing is bit different to previously mentioned expansion pack pricing, as it uses different price for main product.

Approach #11 – By-product pricing
In this type of pricing a very low price is set to something “trash” that is born as a by-product. A real life non-game example could be the zoo animal poo that’s sold to farmers. In games (very far fetched) this could be design notes or hints and tips that could be sold to players. (I don’t know how well that would work… but at least now you know there’s option for this kind of pricing).

Approach #12 – Product bundle pricing
Selling several games in one pack for discounted price, or selling game and expansion pack for discounted price.

Approach #13 – Discount and allowance pricing
Players get discounts for example if they purchase the product within 5 days, or if they have opted-in for a newsletter, or if they pre-order the game.

Approach #14 – Segmented pricing
Developers can also try selling the same product with different prices: for example, give different price for students or women or any other segment.

Approach #15 – Pscyhological pricing
Seller doesn’t only think about the financial but also psychological factors. High price is thought to be quality. There could be low or high-cost reference prices that can remind the seller about the quality. Marketers suggest that a game that costs $29.95 has a price of only 5 cents lower than $30 but the customer sees the game in price range of $20, not $30.

Approach #16 – Bargain pin pricing
Don’t set a low price – bargain price – for your game. Low price is not the reason why people purchase your game, it’s the quality of your offering that has the greatest impact on purchasing decicion. If they really like your game, they can purchase it at a price of $30, but if they hate your game, they won’t purchase it even if you would give it a $2.00 price tag.

Approach #17 – Price testing
Whatever price approaches you choose to use, one of the key factors is to test your pricing. You may try offering discounts for 10% of your newsletter subscribers, and normal price for 10%. According to the result (how many people purchases at discounted price versus normal price): you may give discounted or normal price for the rest of the 80% of subscribers. If you don’t have such a large newsletter database, you may simply offer the discount for one month’s period and then compare the data (downloads versus purchases in different periods of time) and tweak your pricing. Some eCommerce providers have automatical A/B split systems that let you test different pricing for your products.

Approach #18 – Customer life time pricing
Another very important factor in pricing is to calculate the life-time value of an average customer. You shouldn’t aim to get as many people to buy once, but to acquire customers that purchase several times. The cost of getting a new customer is much higher than selling to someone who has previously purchased from you. Consider what kind of offering you can give, and consider setting the price of your product and possible add-ons in a way that it will maximize the total customer revenue – don’t focus on single payment.

4 thoughts on “18 Approaches for Setting the Right Price For Your Game

  1. [...] have written a lengthy post about product pricing in the past, but today many different commercials and product prices have got me [...]

  2. Kal, I like that multi-player discount idea. Kind of like a gift subscription to a magazine.

    And Lachlan suggests testing pricing via IP address segment. Would it be just as easy to run a series of AdWords ads that offered different prices?

    Paul

  3. One little idea I had was, for multiplayer games, sell 2 or more licenses for a discount with the advertising that they give a license to their friends.
    Everyone wants to play with friends. ;)

  4. Lachlan Stuart

    You could always give a different site with a different price to every IP address you encounter and pick the ideal one for your game. e.g. everyone from 202.52.x.x sees it as a $29.95 game, everyone from 202.53.x.x sees it as a $27.95 game.
    As long as you create different products in your online payment system and pick an online payment system that doesn’t let customers browse products, you should get a pretty accurate representation of the popularity of each price after a few days/weeks…