Consumers spend money on ‘freemium’ video games
Would you enjoy playing a video game more if it was free to start playing and then you pay for the extras later? You might say ‘yes of course’, but a study by Joost Rietveld of Rotterdam School of Management, Erasmus University now shows that people are willing to spend more time and money on games they must pay for before, the start screen even comes up. Traditionally, video games were sold as hardcopy products in stores such as Toys “R”Us or GameStop. I would say, ever since the mid 2000s, the industry has transitioned into a digital product offering, where games are sold digitally via online stores such as Steam or the iOS App Store.
This transition means that video game publishers have to think carefully about the business model that they use to commercialise their video games. For example, video game publishers can choose to let consumers download and play certain content for free like in online casino sg, then entice them to pay later on, after they’ve played slots for free.
This business model is referred to as the freemium business model Video game publishers are faced with another critical choice. And that is the extent to which they want to break up their content into smaller packages, that are then paid for by consumers. But actually, we know very little about how these choices affect consumer’s decisions to spend time on video games and their willingness to pay for these video games. To find out, I designed an experiment. I took an existing game, and I presented it to half of my participants as a paid game. I presented the same game to the other half of my participants as a free game.
What I discovered was that, even though the game was the exact same for both groups of participants, participants that were presented the paid version of the video game were willing to spend more money on the game as a whole, they were willing to spend more time in the video game, and they were willing to spend more for paid extras that were offered in the video game. And I believe that there is an important psychological explanation for this effect. When consumers first pay for a product, they have made a financial investment into that product and that makes them much more willing to spend additional time and money on that particular product to get that product’s worth. I also conducted a second experiment, to find out how participants would react to the number of paid extras that would be offered in a video game. What I found was that participants who were presented with multiple options were much more likely to choose one of these options and they were also more willing to spend money on these options. I believe that there’s a simple explanation for this finding.
Consumers differ in terms of their tastes and preferences, and by giving them the option to choose from a menu of extras you allow them to choose a combination of extras that best fits their preferences So all in all, my results suggest that video game publishers that want to create the most value for themselves as well as for their players, should sell video games that are premium or paid for and offer many paid extras in those video games. I also believe that these lessons apply to other markets, such as mobile applications in the app store, or publisher selling digital newspapers.