Reason Why Lowering the Price is a Poor Strategy

Lowering the price of your product can prove successful in situations where the price is simply way too expensive compared to the value offered. A $50 shareware game simply might be too expensive when the industry average is $20 – and because others are selling their game with that price tag. Notice: might be too expensive.

Developers at Mistaril managed to sell their ShortHike space simulation game with a price of $50 per year. They called it ‘Guild membership’. You could purchase the game for $20, but if you wanted updates you would need to purchase the premium price. Tribal Trouble managed to make $60,000 income in about a year using the $30 price tag.

Anyway, developers such as Retro64 and Reflexive have made price tests and they have quite extensive amount of data. Their results indicated: $20 seems to be ‘the’ right price. I still recommend testing different prices for games, but the $20 industry standard seems to have quite a strong position.

If you lower your game price to $10 then your game quality looks worse compared to $20 games. It’s same as with mobile phones or computers, which one is better $50 or $100 cell phone? $1000 or $2000 computer? I might be exaggerating a bit, but basically some people will simply ignore downloading $10 games for the sake of price alone. The other problem with $10 price is that you need two times more customers than with a $20 price tag.

People won’t buy your game because of a low price.

That’s the main reason why lowering the price might be a wrong move and that’s why I always think that offering a quality product with a quality price works. The other reason why it works is that many people concentrate on lowering the price, when they should be concentrating on providing better quality: if you fell into that crowd you’ll end up having a lot of competition. On the other hand: if you decide that your game will have the $20 or even $30 price tag, and concentrate on making the quality reach that level – you’ll be competing in a different crowd.

People might say that the price is too high for them to buy, but doesn’t that go pretty much with anything one might but? I know I said to myself that I’d buy a simple cell phone with nothing fancy features and decided that it could cost maximum of $50 – simply because I don’t use phone that much. I ended up buying a $70 phone. What happened to my ‘strict max $50 price’ thinking? It vanished the realized there was no $50 phone in the store. Prices started from $60, and the phone with a color screen was ‘only’ $10 more expensive than the cheapest one so I ended up buying the more expensive. I don’t even need colors in my cell phone! For some strange reason I ended up buying $20 more expensive phone than I initially planned. Certainly if one goes to store and can easily spend ten or twenty or hundred bucks more than he initially though, then certainly your game doesn’t have to cost $10. Price it $20 or more and make the offer so that people simply cannot resist: make them want the product so much that the price comes irrelevant.

If somebody really wants to purchase your game, he doesn’t care if it costs $10, $20 or $30. No matter what the industry standard is.

When I launched Insiders I put a $50 price tag. Some people thought that the price was way too expensive and that nobody would join the Insiders with that price. Some people recommended dropping the price and charge $15-$30 yearly fee. Some of the comments were filled with advice and I read all of them – both the negative and the supporting – and realized I would need to increase the quality, rather than lower the price. I didn’t want to drop the price because I thought that people who would sign up would only need 2-3 sold units to get their money back.

As I said, I decided I would increase the quality. I decided that I would need to finish the Insider Sales Guide that’s filled with tips, hints, ideas, strategies, promotion methods and resources to get traffic and sales. Even though the manual is not finished, it’ll contain list of sites where developers can send news and announcements for free to get traffic. I’m also going to give members the possibility to send news to GameProducer.net – which over 11,000 unique visitors will see monthly – and the number is increasing all the time. Besides this I’m listing the members in the site (you can see all of them in the left menu) and I’m considering some sort of banner advertisement for members. I haven’t decided the details for banner ads, but I’m working on it. On top of all of this: I’m making sure that each member gets mentioned in the blog post, so that each of the members gets traffic also that way.

One central point of being Insider member is to have intelligent discussion at the forums without the noise. It made me really glad when Mr. Phil mentioned about his career plans, and I recommended him to use the major change in his life to promote his game business. He said “I didn’t even thought about that” – this made me feel good. I’m glad that I could help him some way and I’m sure that that single piece of advice along can give him great publicity – hopefully worth way over the membership fee. That’s one important point of the service: to help others. I’m not sure but after the last weekend – when I finished this article – I felt good about my decision, and after that there’s 3 new paid members who have joined the Insiders.

I really want you to the ponder and ask yourself the following question: “How can you increase the quality of service or product you are offering so that it proves to be worth much more than the price tag?” Can you help your company to give value of 100 or 1000 times the price you ask? If you can find a way and prove yourself worthy of more than you are asking, then you are sure to get what you want.

Dropping the price shouldn’t be the first strategy when you lack sales. Focus on improving your offering.

8 thoughts on “Reason Why Lowering the Price is a Poor Strategy

  1. [...] Many developers think that reducing the game price will increase the sales. While this might be true sometimes, I generally believe that people won’t buy your game because it’s cheap – they are looking for fun, and when looking for something fun price is only one element. If people say that your product price is too high, do this. [...]

  2. “Yes… or perhaps skin the game, change the graphics totally and stick $29 price tag ;)”

    well they were made in an older language so even with new graphics the overal polish would not be enough/possible. Also I’m not sure I like the idea of looking back, as I ought to be moving on an improving. Perhaps I should even forget selling them myself at a lower price at all…?

  3. Great post Dan. Now… are you ready to share some numbers with us? Shall we make a sales stats post? :)

  4. I did reply to this with regards to Gibbage’s pricing, but it was waaaaaaay too long, so I turned it into a blog post.

    http://www.gibbage.co.uk

  5. I’d be interested to know what the Author of Gibbage thinks of this strategy, since he appears to have done well selling at the $10 mark?

    I don’t have any sales stats or idea how much he is selling, so it would be hard to know. Maybe he would be willing to share…? As I said, it can be successful sometimes, but I’d rather test what works best rather than listening to what others (like me ;) tell. Industry average for shareware games is $20, so I’d stick with that. Maybe give discounts for kids or something… but still I’d concentrate on getting the quality to meet (and go above) $20 price tag rather than keeping the $10 price. The cell phone example is to point out that price is not ALL that matters… I’m quite sure that you all can find similar experiences from your lives: situations where you bought something unnecessary whether you needed it or not.

    I find myself to be too obsessed with new projects to add more value to older ones that might make them worth the $20 i charge. – I know this is a fault of mine though ;)

    Perhaps you could make an add-on for some existing… and charge additional $20 for the add-on/sequel?

    Im actually trying a slightly different strategy with my current project (its a music based game) where we plan to give the core program away for free and sell expansion packs – however i have no idea how much to sell these for!

    That sounds bit like ‘episodic content’. I’m not sure… but Half-life 2 episodes were sold somewhere around $20-30, and they were named as ‘episodes’.

    Yeah also Titan Attacks of course was half price. There could be a new market for $10 non-portal games which are sorta throw away action games or some such thing?

    Well… maybe – but you have to sell 2 times more of those to get the money.

    My current game should contain enough value/bling to be worth $20, and whereas I totally agree with the post (in business generally your absolute last resort should be to drop your price) I was considering selling my old Xmas and Easter Bonus games myself this Xmas/Easter for $9.99 (maybe via download.com and similar places) and seeing if that generated any interest … basically treating them as good, but throwaway match-3 games.

    Yes… or perhaps skin the game, change the graphics totally and stick $29 price tag ;)

  6. Yeah also Titan Attacks of course was half price. There could be a new market for $10 non-portal games which are sorta throw away action games or some such thing?

    My current game should contain enough value/bling to be worth $20, and whereas I totally agree with the post (in business generally your absolute last resort should be to drop your price) I was considering selling my old Xmas and Easter Bonus games myself this Xmas/Easter for $9.99 (maybe via download.com and similar places) and seeing if that generated any interest … basically treating them as good, but throwaway match-3 games.

  7. I’d be interested to know what the Author of Gibbage thinks of this strategy, since he appears to have done well selling at the $10 mark?

    Pricing something is always something that worries me. I find myself to be too obsessed with new projects to add more value to older ones that might make them worth the $20 i charge. – I know this is a fault of mine though ;)

    Im actually trying a slightly different strategy with my current project (its a music based game) where we plan to give the core program away for free and sell expansion packs – however i have no idea how much to sell these for!

    Anyway, enough hi-jacking, good stuff there Juuso ;)