Pricing iPhone Games

Author: Tommy Leung | 03.14.2010 | Category: Business, Marketing, Video Games

The average price of an iPhone game is less than $1.50. That buys very few things these days. You can’t get a cup of Starbucks coffee for $1.50. The iTunes Store culture is one of low prices. This precedent was set by Apple’s own pricing of music at $.99 a song. This is the price most App Store customers are accustomed to.

This might make sense for music where a CD traditionally cost $15 – $20 so the average price per song is about $.99. Take away the cost of producing CD’s, cases, and the label’s cut and the artist is probably better off. Games have traditionally had double digit prices depending on it’s platform and scale. PopCap sells Plants vs Zombies as a PC downloadable for $19.95. The same game on the App Store is $2.99.

When Super Monkey Ball was released on the iPhone, it came with a $9.99 price tag. It is now $3.99 and the price range for high quality premium games have settled to around $6.

While the low expected price of games on the App Store is a problem for game developers, there is little good in complaining about it. The initial rush to iPhone game development was spearheaded by hobbyists and small game companies that had low costs and seemingly infinite upside. Almost any game could have succeeded by just being available on the App Store. Times have changed and the pricing strategies have to change with it.

The $.99 price point is not going to work for 99% of game developers. The quality bar has been raised so high that it is impossible to break even at $.99. Losing money on every game you make is the fastest way to no longer be in the business of making games. The App Store is not exempt from traditional pricing strategies.

Virtually every pricing strategy that has ever been developed in marketing apply to the App Store as they do to the sale of all products and services.

Competitive Pricing

The simplest and most logical pricing strategy is competitive pricing. This means you are going to set a price similar to or exactly the same as competitors in the market. This has been the predominant strategy applied across the board in the App Store.

Smart marketers who use this strategy don’t apply it across the industry. You will notice that not every beer is priced the same or every shampoo, detergent, orange juice, deodorant, etc. This is because each product is not the same. There are some products that are virtually identical and in those cases, you either need to differentiate or you match prices. Generally speaking, when a customer has to choose from two identical products, price is going to be the determining factor.

Cost/Economy Pricing

Cost pricing is coming up with a price based on your cost to produce plus a suitable mark up. This is a strategy that generally ignores the prices set by competitors in the market and is derived solely based on the company’s cost structure and goals. If each product costs $5 to make and you want a $2 profit on each sale, you would set a price of $7.

Loss Leader

A loss leader is a product that sells at a loss to spur customers to buy other higher priced items. This is usually done to bring customers to a store hoping they will also buy other things. Big chain stores do this often in their circulars and usually only have a limited amount of the advertised product.

Penetration Pricing

Penetration pricing is usually used to break into a new market or gain market share. Prices are set lower to attract customers and then raised later once significant market share has been gained. This happens a lot in cable TV where companies offer a low price for 6 months and then changes to the regular price thereafter.

Premium Pricing

This is the general pricing strategy for high end luxury items. This is also the most desirable pricing strategy as it has the highest profit potential. It is also the hardest to achieve because the product needs to be seen as highly unique in the eyes of the consumers. This also happens to be the traditional pricing strategy for Apple. Their products are built with a unique design and experience that can command generally higher prices.

Price Skimming

Price skimming is the act of releasing a product at a relatively high price where only a small percent of the market is willing to afford it. This is usually because it is the only product of its kind at the time and competitors have not yet entered the market. Once more competitors offer the same or similar product, prices start to come down. This is the general pricing strategy in technology and electronic products like flat screen televisions.

Determining Price

There are literally tons of other pricing strategies and hybrids of each other. These are the basics for a general understanding of pricing. The best pricing strategy for the App Store is going to depend on the company and the products. EA’s pricing strategy is not going to be the same as a five man game company.

It would be safe to say that you do not want to price at $.99 as there is no where left to go after that and as more premium titles are released, $.99 is going to come to mean low quality. When you don’t know much about two similar products, the higher priced one is assumed to be the better one.

A pricing strategy should fit within an overall marketing strategy. It is impossible to come up with a good pricing strategy without knowing what the marketing goals are. Prices that are too high or too low can derail an entire marketing plan from achieving business objectives. Poor pricing can also make or break a business.

Luckily, in the App Store, prices can be easily and quickly changed. A poor price may not be terminal but, there are still lost profits at stake.

Know your product, marketing objectives, and then determine a price.

Branding a Game Company

Author: Tommy Leung | 01.06.2010 | Category: Business, Marketing

You can’t be everything to everyone. We are all uniquely different. Think of a close friend. What feelings come to mind? What words describe that friend? Now, think of another friend. What feelings come to mind? I bet you had distinctive feelings for both friends. That’s their brand.

Brands are like people. They take on personality traits and we like those traits or we don’t.

This means you are a brand. You evoke certain feelings when people think of you. The entirety of who you are, is your brand. Your beliefs, likes, dislikes, attitude, personality, style, etc. are all things that create you. These same things make up a company brand.

We all have distinct feelings about each of the top ten brands in 2009. Some brands you know better than others; some brands you like better than others. It’s no different than friends compared to acquaintances. Being everyone’s best friend is being no one’s best friend.

Building a brand for a game company is the same as for a car company, beverage company, restaurant, or any business. The major game companies don’t need a lesson in the importance of branding–they already spend millions a year doing it. That’s why their games sell so well. Consumers know their product. We know what to expect from a game with the EA logo on it.

When your target audience sees your game with your logo, do they know what to expect? They should. A company name should sell itself. That’s the power of a brand.

Your company needs to have a brand as much as you need to have a personality. It doesn’t matter how big or small: a one man show or a thousand man spectacle. You need a brand.

Your customers will develop feelings about your company based on points of contact. These experiences can be influenced or the chips can fall where they may. There are brands that people want to evangelize and tell their friends about. That brand makes a top ten list. That’s a brand you want. That brand didn’t happen by accident.

A strong brand allows for competition on more than price. Competing on price is the weakest competitive advantage. Anyone can lower prices until they go out of business. That’s not smart business. Smart businesses create their own market with few competitors. You can’t achieve this without a brand.

thatgamecompany, the makers of the popular flOw, has a distinct brand. Their games are truly unlike any others in the industry. Their games won’t be a fit for everyone and that’s okay. They call their games “core games”. They are in their own market with few competitors.

So how do you build a brand and benefit from it? First, your company needs to know Who am I?

You have an identity. The people who make up your company have an identity. What are they? What makes you tick? What makes your employees tick? Why are you in business? What do you do? Why do you wake up every day? What is your passion? What do you offer your customers?

Don’t try to hide your identity. It is a fools errand to pretend being someone else. Take the example of Superman and Clark Kent in their quest for Lois Lane’s affection.

Clark Kent hides his identity. He pretends to be someone else. He is not a run-of-the-mill small town boy looking to make it in the big city. Clark fails miserably to court Lois. On the other hand, Superman knows who he is. He doesn’t hide his otherworldly origin or his super powers. He saves people from danger because he believes he should. It’s not an act, it’s who he is. Superman wins.

Clark Kent and Superman are exactly the same person. One is true to himself and the other is not. A brand that attracts people is like Superman.

A small game company with a few employees should not be ashamed of being small. That is who you are. Don’t pretend to be bigger. You cannot build a brand on a foundation of lies.

A large game company shouldn’t pretend to be an indie shop. It isn’t you. People will see right through it. No one likes a liar. No one wants to do business with a liar.

The goal of a brand is not to be a fit to everyone. Not a single successful brand does that. Successful brands are like successful people. They know who they are and believe in their work. People are attracted to them because they are real. Not everyone will like them but, those who do will make a real connection. That’s a fan for life. Lifetime profitability is the lifeblood of long term success.

Every point of contact with customers need to be congruent with your brand. The only way to do that is to be able to communicate who you are to your employees. Your brand starts with your employees. You can’t communicate that you are a friendly, loving, smile-flashing company and have employees who are rude to customers.

The people responsible for direct interaction with customers should exemplify your brand. If your brand is fun, social, helpful, and out-going then you need people who have those qualities. Best Buy’s Geek Squad needs technology and gadget lovers working for them or there will be a brand disconnect.

The quickest way to communicate your brand to employees and customers is with a tagline.

A good tagline is essential. Potential customers should know what you do and who you are in a blink of an eye. Your tagline needs to tell them everything they need to know in a few words. A tagline is like a signature, it should be distinctive. Once you come up with a good tagline, use it on everything. There is no point in having a tagline if you aren’t going to use it.

Take the time and effort to come up with a great tagline. It may seem useless to put so much effort on a few words but, you need those magical words that eloquently consolidates everything you are. It’ll help keep everyone in the company focused and on the same page. That is priceless.

Everything about your company needs to be congruent with your brand: company logo, mission, employee attitudes, website, advertising, story, etc. All of it. Every inch of your company needs to reflect your brand.

Building a brand takes time and effort. Two people can’t become great friends in one sitting. It takes a series of meetings, activities, conversations, cups of coffee, pints of beer, etc. Every contact builds the relationship. Every contact provides more information about each other. Showing up as a different person at each contact will never create a strong relationship. Building a brand is like building a friendship.

Brands are like people.

Avoiding iPhone Game Obscurity

Author: Tommy Leung | 12.29.2009 | Category: Business, Internet, Marketing, Video Games

There is no shortage of iPhone developers. There is no shortage of iPhone applications. With over 100,000 apps, there is no shortage of extra features. It makes me wonder how I ever lived without my iPhone. I use Google Maps to get around. I share picture perfect moments using the Facebook App. I use the Subway Map app to get around NYC. I use Shazam’s tiny elfin librarians to tell me the name of songs. I use the Chase Mobile App to check account balances.

You name it, there’s an app for that. A year from now, you name it, and there will be apps for that and the ten other things you didn’t think of.

These are all conveniences iPhones owners have enjoyed. I have taken these services for granted. I don’t worry about where anything is anymore, I can find it on Google Maps. All of this convenience is fantastic for the consumer, while those trying to sell apps on the iPhone are finding it harder to stand out.

The most competitive category is Games. There are few categories as popular as the Games section of the App Store. There are more Games than any other category. At over 20,000 strong, avoiding obscurity will be a challenge.

But not only that, you need to have a lasting impression. You may have created the hottest iPhone game to date but, what is going to stop someone from releasing a $.99 clone? How do you ensure a cheaper clone isn’t going to eat away at your sales and market share?

Take the once popular iShoot. It made $800,000 in five months and prompted its creator, Ethan Nicholas, to leave his job at Sun Microsystems. iShoot has since been buried by competitors and copycats. Nicholas says it’s “terrifying” and that iShoot’s success was “pure luck”.

Pure luck is not going to work for a business selling games on the App Store. Relying on luck to run a business is the surest way to the land of businesses-that-were. And I’m not sure all businesses go to heaven.

Luckily, the solution is as old as time: marketing. Why do you buy Tide instead of Acme Brand? They may have exactly the same quality and stain fighting power but, Acme Brand isn’t going to hold a candle to the power of Tide.

There was a time when only a handful of games were on the App Store. The best games sold well in those prehistoric times. Those days are long gone. You can release a game on the App Store tomorrow and it’ll be in the company of a hundred other games. Only a small fraction of all iPhone users are going to know your game came out. People can’t buy what they don’t know about!

This is logical reasoning but, not everyone is on board. In an interview with Wired, Austin Sarner, CEO of Design by a Knife, said this:

“Basically everybody’s on the same level once they submit an iPhone app. Unlike traditional marketing, there’s no ad campaign: A user just sees what he sees in the iPhone store, and the applications kind of have to sell themselves to some extent.”

Sarner’s philosophy is that great content drives App Store success and not “marketing”. Sarner is a developer by profession so this an understandable point of view. Sarner confuses advertising with marketing and doesn’t realize that developing a great product is a fundamental function of marketing.

It is inaccurate that there is no advertising behind iPhone games. EA didn’t come to the party without their advertising muscle. And with hundreds of games being added to the App Store every week, the clutter alone will make you invisible no matter how good your game is.

It is suicide to release an app and hope it will be magically discovered. Only 7% of iPhone users download through iTunes, 62% knew what they wanted, 60% browsed the top lists, and 46% were from word of mouth according to AdMob. The 62% who knew what they wanted heard it somewhere first. It didn’t come to them in a dream.

If you are convinced that making the greatest iPhone game in the world, releasing it to the App Store, and then praying it will sell is a viable strategy, I have two words for you: good luck. You are going to need it.

However, if you want a viable business, there is a better way.

Game developers worldwide will disagree and hate this but, marketing has to be part of the development process from day one. You can’t create a game and then sprinkle some marketing pixie dust as an after thought. That’s the equivalent of wearing a blindfold, spinning around a few times, and then trying to hit a pinata. You have no idea where the target is. You are going to miss.

The development process starts with an audience. You need to target someone. You don’t need to go after the same audience as everyone else, but you need an audience. Who is going to buy your game? You need to make a game for them. You can make a game for yourself, but that’s not a business–it’s a hobby. Doing things in that fashion means it’ll always be a hobby.

Your game needs to be characteristic of your company brand–your company does have a brand right? There is a reason EA has multiple brands. Each brand has its own image and their games reflect that. EA Games caters to a more traditional audience, EA Sports develops games for the sports audience, and EA Play is solely focused on the casual market.

Engage with the community. If your audience is there, you need to be there engaging them: blogs, forums, YouTube videos, LinkedIn groups, Facebook groups, etc. If your audience is there, you need to be there. Being engaged does not mean spamming. Join the conversations and use your company as the name of contact or end each comment noting your company. Don’t be obnoxious. Be informative, helpful, and provide useful discourse.

Marketing your game is a full-time job. People who solely work on the development side find this difficult to swallow. In their world, they are doing the hard work. Their point of view isn’t without merit. Without them, there would be no product at all.

To make things worse, it is difficult to accurately measure the impact marketing has on your business. You may never know how or if someone who interacts with your marketing ends up buying your product. In fact, they might not buy your product at all. They might talk to ten other people about their experience with your company and then one or more within those ten may end up buying. We cannot accurately measure this.

For people who are used to concrete and visible patterns, marketing may as well be voodoo. However, this doesn’t make marketing less important. It does mean marketing requires a different mindset than that of development.

Social medias has allowed us to monitor our audience’s thoughts, concerns, and feelings in real time. This lets us adjust our marketing efforts on the fly if it isn’t working or is having a negative effect. You need to be constantly monitoring your audience. It isn’t just a matter of marketing during a release–you will end up like iShoot. Cultivate your audience and develop a community.

Infinity Ward, the makers of Call of Duty, understands the importance of a strong community. They have a community manager, Robert Bowling, whose sole job is to monitor the Call of Duty audience. Without him, Modern Warfare 2 may not have become the highest grossing entertainment release of all time. The game would have done well no matter what. Call of Duty has a history, the first Modern Warfare was excellent, the hype surrounding Modern Warfare 2 was spectacular, it was a high quality product, and Call of Duty is a known entity–a brand. But, would it have done as well without marketing? Of course, we can never actually measure it but, I’m willing to bet marketing made the difference between one of the highest grossing and the highest grossing.

Do the Opposite

Author: Tommy Leung | 12.26.2009 | Category: Business, Life, Marketing

It’s that time of year again! Time for our personal Year in Reviews. We usually end up making New Year’s Resolutions that we keep until February and then it’s back to business as usual. It is not our fault, we are creatures of habit–good or bad.

2010 is going to be different. For starters, we can’t call it “oh-ten”. That doesn’t make sense. Are we going to call it “ten”? Maybe we’ll need to actually say the entire thing: “twenty-ten”. No matter what becomes the accepted way to say the year, it is a change from the last nine years.

And change is something we are all dying for. We thought we were getting change in 2008 but, 2009 has shown us that it was just wishful thinking. No change to be found! So that begs the question, are we looking in the right places for change? Maybe we shouldn’t be looking to others. Afterall, the late King of Pop told us to look at the Man in the Mirror.

And we all know a mirror shows us everything in the opposite. Maybe 2010 is the year to take a look at ourselves and see if our lagging endeavors need to be evaluated in a completely different light. Perhaps, we need to do the opposite.

The economy is suffering the effects of being stabbed a thousand times by a toothpick. You wonder if now is a good time to make radical changes. To that I ask, would it be a good time if we went back five years? We all know it’s not about the times–there is never a good time. There is only now.

Now is as good a time as any! And if not now, when? If there is never a good time, perhaps that’s the first thing we need to apply the opposite to: it’s always a good time.

Besides, the economy can use some opposite thinking right now. The old ways of thinking have sunk the Titanic. And as everyone carries on thinking the same way and doing the same things, the water keeps climbing!

We think what we know is safe. It could be killing us, but it’s familiar so we stick with it. Well, it’s time to do the opposite. Take the plunge. Take the leap. Just do it. Whatever jingle you like.

It could be the best of times or it could be the worst of times. It’s impossible to know. But, we do know what doing the same will result in: the same results we’ve always gotten.

Some of us will choose to do the opposite. Things are going to change. Some of those changes will be so dramatic that we will all feel it. We’ve already seen it in the past decade. Ask someone about Twitter or Facebook in 2000 and you’ll get a blank, puzzled stare. Social networks have become a part of everyday life and used in everyday language. And it took less than a decade.

We know one giant is opting to do the opposite in 2010. Pepsi is foregoing advertising during the Super Bowl to focus on social media. This could go terribly wrong or it could be a banner year for Pepsi.

Take Pepsi’s lead and do the opposite. At least you don’t have $20 million on the line.

omfg!marketing

Author: Tommy Leung | 03.24.2009 | Category: Marketing

I started a marketing blog a while ago but, I didn’t bother announcing it here. I did put a link to it in the menu under “Marketing”. I’ve been pretty busy with work and sometimes just plain lazy! However, I do find the time to debate people about politics and economics on Facebook.

So my marketing blog is called omfg!marketing. This is where I talk about social media, online, interactive, word of mouth, new marketing. I am a believer in this “new” era of marketing where it isn’t about shouting at your consumers but, conversing with them.

So check it out! I only have a few posts as I try to not reiterate the news–there are plenty of other outlets for that. Trying to actually provide useful and possibly unique things! I’m on Twitter a lot these days–can’t imagine living without it now! A little scary.

Social Media Guru?

Author: Tommy Leung | 02.26.2009 | Category: Internet, Marketing

This blog post came from someone I follow on Twitter. It talks about all the people who have started calling themselves “social media gurus” on social networks like Twitter, LinkedIn, and Facebook. Are they really “gurus”. What makes them a guru?

“Yes, social media is huge when it comes to marketing on the internet but not all so called social media gurus know what they are doing.”

That is probably the truth of the matter too when it comes to social media. The field itself is so new and bleeding edge, what defines your guru status? I thought it was a good read–I did a retweet. Particularly loved this part at the end:

“Marketing in the social web or utilizing social media for marketing purpose is built on one premise which coincides with the age old form of marketing : word of mouth. That is exactly what social media marketing is. Word of mouth marketing but on the web. You do things that makes others talk about you. Whether through meaningful relationship on a one on one basis with your fans or followers or by doing things that gives value to the people on the other end.”

I’m reading Word of Mouth Marketing by Andy Sernovitz right now so that resonates. I also believe it.

90/10 Twitter Rule

Author: Tommy Leung | 02.23.2009 | Category: Internet, Marketing

The Pareto Principle (80/20) is pretty valid for almost everything in the universe and a adaptation of that rule is 90/10 or even 110/5 is just as valid in some cases. The idea being that 80% of all effects come from 20% of the causes.

I find it easier to look at it in business terms: 80% of profits come from 20% of customers. I follow Nabbit on Twitter and Nabbit had a tweet about the 90/10 rule of Twitter. I actually think it applies to a lot of social media, interactive, and word of mouth marketing.

This new age of interactive marketing requires that we give and give a lot. What we receive will be directly porportional to what we give. Those just trying to push things down our throats are not going to get much from us. Web 2.0 brought about online communities and information sharing.

I believe the way to successful interactive marketing is by giving away as much useful information as possible. To be helpful and kind and caring. The greedy evildoers are going to be caught redhanded and their faces plastered all over Google. This is an age where you can’t get away with poor customer service and bad products.

Instead of give me, give me, give me. It’s give, give, give.