In a previous post we covered A Deep Dive into Starter Sale Packages. In this post we want to focus specifically on the amount of a discount that is offered. Specifically we want to cover why it can be dangerous to offer too much of a discount.
Long Term Conversion Goal
From the previous post we already know why we offer the starter sale package. In a nutshell, it is to convert more free users to paying users. It can also be said that if these users don't stay as paying users, then the conversion was not successful. In other words, the starter sale package is get the user familiar with the benefits of purchasing in app -- so that they can become a long term spender.
When you run your starter sale package experiments it is easy to look at initial money brought in and call the sale a success. Keep track of these users over the long run and analyze how many of them purchase a second time. You may even want to track the number of days between the first purchase and the second.
Dangers of a Steep Discount
The danger of offering too steep of a discount on your starter sale package is that you will set an expectation level with your users. You may see good initial conversion simply because the value was good -- but you will see horrible long term retention of those payers because they never see the value again.
You want to offer your users a discount on normal purchases to sweeten the deal, but you also want to avoid offering them such a large discount that it is painful to make a regular purchase.
There is no straight rule here for what to offer. It really depends on each game's unique economy. Results from one game will not transfer directly to another. Therefore it is recommended to experiment within your game on different starter sale packages.
Experiment Design
Before going further it should be noted that running experiments around virtual currencies and premium items is something that has received a lot of criticism and conflict in the industry. We provide the example below purely for educational purposes only. App owners should make judgement calls on any experiments to run in their app.
In this case our experiment will be targeting long term conversion. Therefore we are not interested in which of 5 different starter sale packages sells the most. In this experiment, we will take the same offering of x amount of premium currency and offer it at a couple different price points, let's say $3, $5 and $7. Let's assume further that the content being offered normally costs $9.
During this experiment, we can analyze which package resulted in more people purchasing it. This will give us good insight into what value players put on the premium items and currency we are offering. Generally speaking you will see higher counts at lower price points. The key is to look for differences in the deltas between levels. In this case at the $7 package, users purchased it because they got a discount, but only a $2 discount on a $9 package (approx 22% off). By contrast, the $5 package saw a much greater sale volume because it was closer to 50% off. Now in the case of the $3 package, it still saw more sales because it was a steeper discount, but it didn't see as big of a jump when compared to the $5 package. In other words, more players were converted when offering close to a 50% discount. We didn't gain that many more conversions when we offered greater discounts.
The second part of this experiment is to analyze over time, which price point produces more repeat spenders. Let's expand our graph further.
In this graph we add in the number of users that made a second purchase, grouped by which starter sale package they were in. Here we can see that our $7 sale package had a much greater number of users that went on to be long term payers and contribute in our app. These players only got an initial 20% discount, so seeing a slight increase in price was not hard to overcome. For our $3 starter sale package users, a great number of them had a hard time continuing to pay because to them, then went from a 66% discount rate to normal pricing - in essence a 3x increase in price.
What is the value of premium items?
In the example above it can easily be argued that the optimal discount spot is the $5 starter sale package or just under a 50% discount. If you find that you only see success in a starter package when offering crazy high discounts in the 60% ranges or higher, then your app might have a different problem with true value. Your users may not understand the value of the premium currency and will have no interest in purchasing it unless you are essentially giving it away.
In this scenario, you may want to invest effort in communications and user flows that help to convey the value of the premium currency and items offered. Alternatively you may even want to consider the real money pricing structures of your premium currency. Maybe your communication is great, users just disagree with the exchange rate that is being presented between real money and premium currency items.
Conclusion
Remember that the data presented here is hypothetical. This data varies greatly between games and cannot apply globally. The lesson however is that you don't want to offer too steep of a discount on your initial payment conversion sales. With a steep sale, you may see great first time conversion, but you are more likely to see steep drop off on the 2nd purchase. It is more valuable to your game to convert longer lasting users who are willing to pay. Therefore - offer a sale to make the purchase enticing - but don't offer so big of a sale that it is hard to purchase again. This may require testing and adjustments to find the range that makes the most sense for your app.
