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What we can learn about customers from the bizarre economics of Pokemon Go

The price of Pokecoins is abnormal. What could it mean?

Pokecoins are the in-game currency in Pokemon Go, used to buy gameplay and aesthetic items. Pokecoins can be earned in-game or bought for real-world money. Below is a screenshot of the Pokemon Go Shop. Which of the six options do you think is the most economical?

Which option is the best value?

Instinct says it’s the one on the bottom right: it’s the most expensive, and gets you the most coins. That’s how buying in bulk works in the real world. So, instinctively, that’s the one I’d go for if I wanted the best deal.

But if you look more closely you’ll see that my instinct is wrong.

Hmmm…

The most economical option is to spend the smallest amount: less than a dollar.

Rather than writing a post about why this is wrong, let’s assume the creators of Pokemon Go are geniuses. Let’s instead consider why they are right and what we can learn from it.

[Note that the pricing above is Australian. I assume the pattern is the same in other currencies.]


Why the price is right

  1. Low barrier to purchase
  2. Habit-forming behaviour
  3. No drawbacks for the company

1 . Ninety-nine cents is a pretty low barrier for most Pokemon Go players, 78% of whom are aged 18+, and whose average annual income was $90k shortly after launch. For those players, spending “less than a dollar” on the game is unlikely to raise any emotional warnings or guilt. After all, it’s less than the cost of one coffee, and represents two days’ worth of coins (players can ‘earn’ a maximum of 50 coins per day). Compare that with the second option: nearly $8. That’s lunch. That’s real money. I don’t know if I want it that bad.

If the goal is to make it easy to click the “buy” button (which I assume it is because otherwise the Pokemon people don’t get any money) then $0.99 is a good price point.

“A couple of weeks after Pokémon GO’s initial launch on July 6, the game’s average player demographic was characterized by a 25-year-old white woman with a college degree making about $90,000 per year.” — SurveyMonkey
Data: SurveyMonkey Intelligence. Graphic: Nick DeSantis/Forbes. Taken from this SurveyMonkey article.

2 . Creating habit-forming behaviour is the second reason it’s important to make it easy to click “buy”. The basis of creating habits is trigger + action + reward.

Trigger = I need more coins to buy this Pokemon thing.

Action = Buy 99 cents of coins.

Reward = The buzz of buying the desired thing.

Source: Nir Eyal, Hooks: An Intro on How to Manufacture Desire

Making it easy to buy 100 coins means a player is more likely to do it. Once they do it once, it’s more likely they’ll do it again next time they get that trigger of not quite having enough coins. Trigger, Action, Reward. Pretty soon it’s a habit, and one that comes with minimal guilt or regret or financial impact.

3 . The third reason this price point is correct is that there are no drawbacks to the Pokemon people if players make a different choice. It’s low risk. If players spend 99 cents, which represents the best value for the player, that’s great for the company because they just got revenue. If players choose a different price point (e.g. because instinctively they assume it’s better value), that represents both more revenue (raw $) for the company and better value for the company ($ per coin). From the company’s point of view, it’s win-win.

Oh yeah, and it’s working

Of course, there is also the evidence that Pokemon Go’s pricing strategy seems to be working quite nicely for them.

Daily Active Users — 20+ million
Percentage of iOS users that do in-app purchases — 80%

http://www.businessofapps.com/data/pokemon-go-statistics/

Pokémon Go has now earned a total of $1.2 billion in revenues and 752 million downloads, according to Apptopia, an app intelligence startup based in Boston. — VentureBeat
“Meanwhile, the Pokémon GO’s revenue per daily active user rate of $0.21 is above the average ARPDAU rate of all but two mobile game genres (strategy and role-playing).” SurveyMonkey Intelligence

What we can learn from the Pokemon Go pricing strategy

I don’t make mobile games or apps, but I do work in customer experience. So what generalised lessons can I take from this?

  1. Consider the behaviours you want from your customers, and make sure your triggers and rewards reinforce them.
  2. Remove guilt and regret from the customer’s experience

1 . Reward the behaviour you want to continue.

For example, if your company takes 5 days to respond to a customer email, but can resolve an issue straight away on the phone, you’re teaching your customers to call instead of emailing. That might be great if you provide value-adding services on the phone, but might be terrible if your infrastructure is set up to prefer online support. How could you make sure your customers get a reward (as close as possible to the time of the action) for sending an email?

Pokemon Go encourages lots of small purchases, which is fine for an online store with no physical inventory, but if you have a physical store you might prefer to get people to spend more per visit rather than visit more often. So maybe your strategy could be to offer a discount or gift for larger purchases; e.g. spend $200 and get 10% off or this lovely mystery prize. If you want to encourage more frequent visits, then maybe it’s a mystery prize if they shop again in the next month. Or maybe just a great experience when they arrive in the shop: when I walk into X store, I’m greeted with a glass of cold water / hot green tea. Action = I got to the store; Reward = I feel pampered.

What triggers can you implement or control to encourage customers to engage in an action? Perhaps it’s an email from you, or a light that comes on when your product is 20% from needing a refill or service, or — like Kit Kat’s marketing strategy teaches them — it’s when they “have a break” and make a coffee.

2 . Remove guilt and regret from the customer experience

The cheapest option is not only so cheap that it barely registers in the customer’s mind, it also represents the best value for the customer. There is no need for them to “save up” to buy in bulk because doing so will delay their gratification and represent worse value-per-dollar. The customer has no guilt about buying now, and no regrets about not waiting or taking the more expensive option. They can act now with no negative impact.

Maybe you don’t want to customers to always choose the cheapest option; maybe it suits your cost structure to sell more of the premium version of a product. So instead consider how you can remove risk and guilt from the purchasing decision. Perhaps a “change-your-mind” policy would help — if they don’t think the top-of-the-line version was worth the extra cost, they can bring it back within 30 days and swap for the basic version (with a refund of the difference). Remove their pre-purchase guilt about spending extra money on features that might not be worth it and make it easier for them to say yes.

Research has shown that people are happier with their choice after they have already made it (see choice-supportive bias) so there’s a good chance they won’t change their mind, anyway. Low risk for you.

That’s my quick take it. What are your insights from the price of coins in Pokemon Go?


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