Dynamic Pricing: Revenue or Engagement?

More and more game developers are exploring dynamic pricing models to both drive revenue and engagement in their games. For example, reducing the price of in-app purchases for users in developing countries like India or offering widespread discounts during the holidays. However, your dynamic pricing strategy will differ based on which of the which of these goals, revenue or engagement, you are looking to accomplish.

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There are two ways to adjust the pricing of in-app purchases:

1. Adjusting the pricing of the currency sold in-app. 
For example, lowering the price from $1 for 25 virtual coins to $0.50 for 25 virtual coins.

2. Adjusting the price of what the users are purchasing with the virtual currency.
For example, adjusting the cost of an extra life from 15 virtual coins to 10 virtual coins.

The difference?

Adjusting the price of the virtual currency can help boost revenue from in-app purchases. It makes your currency more affordable to more people and in turn, more people are likely to make the purchase. Take the original example, discounting rates for users in developing nations, by lowering the price of virtual currency in India the price becomes something that the average Indian gamer is more likely to be able to afford and boosting in-app purchases and revenue from that region. More money, just in smaller increments.

Adjusting the price for the items purchased with the virtual currency will boost engagement. There is a lot of content in games that users don’t notice or even ignore when they start to grow bored with a game. Discount items in the virtual store can encourage users to re-engage or highlight an aspect of the game that they maybe haven’t noticed before.

What do we suggest? Focus on engagement.

Discount prices for items in-app drive engagement and indirectly build revenue. The longer a user spends in gameplay, the more likely they are to notice the in-game economy and the more likely they are to make in-app purchases. Also, the more time spent in-app, the more they can be exposed to advertising that also boosts revenue.

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