Wednesday, December 22, 2010

Bringing Up the Average, Pt 2

Had a good talk with Jansen. I thought it might be interesting, it contains some further ideas to further refine the pay-what-you-want pricing model.

It's a chat log, so pardon the format. I have edited it somewhat, to reduce clutter and skip over stuff that doesn't matter. I've added some [editorial notes] as well.

[Stuff skipped]
me: The point isn't to keep people from being asses, or to put them in a bad spot. It's to make sure that people realize the value that they're actually getting.

Jansen: however, i think they're going about raising the avg the wrong way
the way they have it, they've set a bar for amt to get extra stuff
everyone's just going to pay $7.40, which will do almost nothing to raise the avg. prolly should have been $10. b/c, with that bar in place, fewer ppl will pay between avg and $10

me: You have to pay more than whatever the average currently is, as I understand it. That's an excellent way to bring up the average.

Jansen: Help us bring up the average! Everyone who pays more than $7.38 gets the first Humble Bundle as well!

me: Refresh in ten minutes. It'll be a different number. The "bar" is moving, and is based on the average.

Jansen: which is the problem. it limits the $8 to $10 range donors, they will prolly do $7.40 instead

me: I agree that the idea needs polish.

Jansen: okay

me: However, the fundamental idea is brilliant. "Bring up the average, get more stuff". Most people are strongly influenced by the average price. It's a big win!

me: Hopefully keeps the downward spiral these things tend to suffer from from happening.

Jansen: i haven't really noticed a downward spiral. the avg's increased since i bought mine. i'm not saying it doesn't exist though, it's just not happened in the past week or so

me: At some point, it settles into a saddle point. Something with as high a buy rate as the HIB2 settles very quickly.

Jansen: but, if everyone has the incentive to go above avg, then the avg will be higher

me: Exactly! [The saddle will be at a higher price.]

Jansen: however, the avg can easily go above ppl's price range

me: That's fine, it's pay what you want.

Jansen: it's penalizing ppl who are less wealthy, rather than less generous. there's little difference between $5 and $10 (unless you're lacking in any income at all). but if the avg were, say, $40 (just spouting a figure)

me: It's true that that might theoretically be able to happen, but the chances seem extremely remote. It's far easier to bring the price down than bring it up.
Plus, if you can only afford $5-10, it's still pay-what-you-want, so you can still afford it.

me: Although you'll feel like a dick. And you won't get the extra.

Jansen: this is true. so, the answer is this: the extra needs to be less than the main bundle. bundle of five games, one or two games for above avg payees

me: Well, I think that's probably true, but it hasn't been tested. It may be that there's actually a sweet spot where the bonus is better than the default. Then you essentially have a "climbing bid" situation.

[Technically, the extra could be anything at all, including things like swag or even just a web-comic-like "voting incentive" image. Having a bonus worth more than the baseline would probably be bad, but it hasn't been tried, as far as I know.]

me: That WOULD penalize the poor. [To have a better bonus than baseline.]

Jansen: it's truly a penalty for ppl who cannot pay above avg in good conscience to their finances

me: Yes, I agree. However, I'm not sure, from a business standpoint, which is better. Poor people can't buy some things, and that's just the way it is.

Jansen: i assume the HIB ppl don't directly want to screw with poor ppl lol

me: It may be ten or twenty times more profitable to accept that.

Jansen: that's true

me: If you're getting along on a shoestring budget yourself, you might need that extra cash to keep making games. Or music.

Jansen: yar

me: Also, there's the HIB option more directly: The awesome bonus this time is the standard next time. So if you don't buy it now, you can pay what you want in a few months. [This better-bonus stuff has screwed up the language a bit, but the basic idea is sound.]

Jansen: interesting


me: Here's another interesting thing you may not have noticed, just so it's in the chat log: Did you look at the highest payments? The top ten list?

Jansen: they're by ppl who think along your same lines about the avg (most notably Notch of Minecraft) and are deliberately trying to raise it

me: No...

Jansen: i noticed that when i saw Notch up there. no?

me: Look again... They're mostly ads. That's an... interesting kind of ad space... So that's just one more way to bring up the average, if you implement it.

Jansen: it is. one of the ads is by a company that's involved in the bundle

Jansen: however...
Jansen: ppl paying more than avg to get kool stuff and increase the avg == good
Jansen: ppl noticing the avg is low and deliberately trying to raise it == good
Jansen: companies artificially increasing the avg to buy available ad space == BAD
Jansen: it only happened thrice this time, so that's fine

me: I'm sure it happened lots, and they just fell off the bottom.

Jansen: but, if you're suggesting utilizing that on a larger scale.... i'd not think that was a good idea

me: Why is it worse than normal advertising?

Jansen: b/c it directly costs the user money, kinda

me: It raises the average at least a little, which in turn probably causes the buyers to spend a little more. But let's reframe it just a bit.

me: Have you ever seen a pay-what-you-want that seemed too high? Ever?

Jansen: that's true. so, assuming the avg is too low, it's alright

me: With the understanding that it's not quite as pure-summer-breeze as giving out extra stuff for raising the average, it seems a valuable tool.

Jansen: assuming it's implemented in a way that causes the avg to skyrocket, it's bad. it all depends on implementation

me: Hah! Wait, let's think about that. If the advertisers actually cause the product's average to skyrocket out of control, then they are your primary target audience.

me: Once you've reaped your money from them, give the product away for cheap later.

Jansen: which defeats the purpose of a "humble indie bundle"

me: Yes, it certainly wouldn't fit for them. [And it seems unlikely to ever happen, a note that was removed when clipping the chat.]

Jansen: [first-day sales pitch is] "top ten commercial contributors get the ad spot!" so, it's a competition. it raises the avg to, say, $50 (given the commercial contributors and other buyers eager to get in on it)

me: Well, if you really want to get a bidding war for ad space going, then you allow them to add to their payment later. Classically, this kind of bidding technique can get people to pay $4+ for a $1 bill.

Jansen: yes, that' fine. but commercial bids end first day of sale

me: Hm. Why?

Jansen: so the avg steadily decreases after first day of sale. you get the commercial revenue, and then the price tapers down with time

me: I'm not sure I follow your no-commercial-bidding-after-day-one argument, but I do like the idea overall.

[Clipped tangent about wagering on price decreases]

Jansen: that way, the price will eventually get to a lower level

me: I think that will always happen, though.

Jansen: and so ppl who can't pay more are just losing time.

me: The wait-and-pay-less idea is valuable, but mostly if either the wait is longer than a month or if the thing you're buying is extremely time sensitive.

me: Anything sold today will be free tomorrow in this kind of world, so I'm not sure it makes sense to overcomplicate the sales.


Jansen: ^.^


Keto said...

The problem with Jansen's logic is that it assumes social pressures from the average price create a strong when high rather than a weak one.

People naturally would look for their best excuse to go lower. Either the average price is low, or their personal sensibilities would indicate a lower price.

Naturally, because it is rare for people to give a larger amount than a smaller, the 'pressure towards minimum' that people feel would constantly drop over time.

That said, I really like this pricing model. Personally I would feel it ideal if you got the first bundle for double the current average payment. It makes sense for double content, and will goal-seek the fastest if people value both bundles equally.

Craig Perko said...

I basically agree, although I'm not sure about the "double" part. I think it makes sense to set the premium as a specific value above average, where the amount is chosen to try and get the average you're aiming for.

IE, if you want your product to have an average of $20, you'll want a premium of maybe "$10 above average". But if you want your average to be $10, you might prefer a premium of only "$2 above average".

There are probably also a lot of other factors, such as the quality of the bonus and the social reasons to purchase. But at the moment, I prefer to set a hard "$X above average" rather than a multiple of the average.

Ensis Draconis said...

This is my first blog comment of any kind ever, so I'm sorry if I screwed up the formatting somehow. This is Jansen, the other side of the above chat log.

"People naturally would look for their best excuse to go lower." is, in fact, a variable that I failed to account for being as strong as it is. That would make the commercial contribution impact less relevant than I'd previously thought.

Really, you can have as complicated a premium equation as you want, as long as the current premium is highly visible. If the premium's CURRENT_PRICE * SCALE_FACTOR + OFFSET, all you need to do is say "Pay this much to get the first HIB too!" So, in essence, the best premium price is probably a combination of the two as I above described (or an even more complex equation with damping and other bells and whistles).

Craig Perko said...

Locked comments. For some reason, this post is a spam magnet.