E19: Why Doesn't Apple or Steam Use Regional Pricing? (w/Bill Grosso)
Nov 26, 2023
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Bill Grosso, CEO of Game Data Pros, talks about price personalization at scale, community pushback, pricing power of brands, and the best things about game economists. They discuss challenges of regional and dynamic pricing in the gaming industry, optimizing game ecosystem, churn models, personalized treatments, and building a community of game data professionals.
Price discrimination can have welfare-enhancing effects by offering lower prices to customers with lower willingness to pay.
Implementing dynamic pricing in the gaming industry is complex due to challenges of customer perception, long-term evaluation, and altering established infrastructure.
Economists bring valuable skills to game analytics teams, enabling critical analysis of data, driving successful experimentation, and understanding game behaviors.
Deep dives
Transition from Two Fish to Scientific Revenue
The podcast episode discusses the transition from the payments processor, Two Fish, to the development of Scientific Revenue. Two Fish aimed to provide local currency payment solutions for desktop games. However, with the emergence of restrictions from tech giants like Google and Apple, the company had to rethink its direction. This led to the realization that game companies needed assistance in figuring out effective pricing strategies. Scientific Revenue was founded to address this gap by developing a dynamic pricing engine based on big data. It aimed to help gaming companies optimize prices and improve revenue by analyzing customer behavior and making data-driven pricing decisions.
Understanding the Difference Between Price Discrimination and Dynamic Pricing
The episode explores the concept of price discrimination and its relation to dynamic pricing. While the two overlap to a large extent, there are differences in their applications. Price discrimination involves setting different prices for different customer segments, aiming to optimize revenue and provide tailored pricing based on customers' willingness to pay. On the other hand, dynamic pricing focuses on the ability to adjust prices over time, considering factors like market conditions, demand, and personalization. The episode emphasizes that price discrimination, often misunderstood and seen negatively, can actually have welfare-enhancing effects by offering lower prices to customers with lower willingness to pay.
Challenges and Considerations in Dynamic Pricing for Games
The episode delves into the challenges and considerations of implementing dynamic pricing in the gaming industry. It highlights the complexity of game systems, where a one-size-fits-all approach does not work. Each game has unique characteristics and player behaviors that influence pricing decisions. Additionally, the episode explores the need for experimentation to optimize pricing strategies effectively. It emphasizes the importance of metrics beyond short-term revenue, such as retention and repeat purchase rates, to ensure that pricing changes do not negatively impact the long-term health of the game and player engagement. Game Data Pros aims to provide tools and consulting services to help game companies navigate these challenges and make informed pricing decisions.
Challenges and Limitations of Dynamic Pricing in Gaming
One of the main ideas explored in this podcast is the challenges and limitations of implementing dynamic pricing in the gaming industry. The speaker discusses how game companies, unlike airlines or e-commerce platforms, heavily rely on the goodwill of their customers, making it difficult to implement pricing strategies that may be perceived as unfair or exploitative. Additionally, the long-term nature of the gaming industry poses challenges in evaluating the success of dynamic pricing interventions. The speaker highlights the complexity of implementing dynamic pricing in gaming, including the difficulty of altering established infrastructure and processes within large gaming companies. The speaker concludes that while dynamic pricing in gaming holds potential, it is a complex sales process and may not be suitable as a startup idea.
The Value of Economics in Game Data Analysis
Another key point discussed in the podcast is the value of economics in game data analysis. The speaker emphasizes that individuals with an economics background bring valuable skills to game analytics teams. They have the ability to critically analyze data and ask important causal inference questions, rather than simply being cheerleaders for models. The speaker suggests that economists are valuable in their understanding of why particular game behaviors generalize or transfer to different contexts. They highlight the importance of economic skills in developing personalized gaming experiences and driving successful experimentation in game design and player retention. The conversation also touches on the concept of personalization in gaming and the potential for leveraging detailed telemetry logs and simulated player behavior in level design.
Price discrimination is the economist "duh," yet few firms engage in the *welfare* enhancing practice. What's with that? Dr. Bill Grosso, CEO of Game Data Pros, joins the crew to tell us that sometimes it's just about more columns in the database... We cover his efforts to build price personalization at scale, community pushback, the pricing power of brands, and the best things about game economists.
