GoG, of ‘good old games’ fame, are very very clever, in a way it took me AGES to discover. Like many indies, I have to go through a number of different reporting sites and tot up how much money my games have made on them all now and then, primarily so I can give myself huge endorphin rushes and waves of serotonin boosts that can only ever come from pie charts.

Anyway, something that I used to regularly roll my eyes at and go ‘for fucks sake’ to, was the way GoG report sales. They report the amount of money a game has made, and ALWAYS report it as if the game was sold at full price. This is infuriating, because you think you have made more than you have. The next column is called ‘marketing deductions’, and thats where you find out how much of that was ‘given away’ in discounts.

gog

Thats fucking genius.

Because when you think about it, thats what a discount it. Its a marketing expense. You are forgoing some revenue in order to get more sales. What, in any real sense, is the difference? I guess its true to say there is ‘less risk’ to some extent, because you are not putting money up-front. You cannot come out of a sale with less money than you went in with, that is true, but psychologically it *is* a very interesting way to think about it.

Put it this way, assume a big sale on GoG or Humble, or Steam or your own site is about to start. You normally sell 100 copies a week at $20. You discount the game to $10, in the hope of selling more. That *may* work, and you may make more money overall. However, the alternative strategy is to keep the game at $20 that week, and instead of a sale, spend $1,000 on promoting the game. That $1,000 might be in online ads, it might be promoted tweets, it might be hiring someone to do some new art or add a new feature you release to the game ‘for free’ to get press…there are a lot of ways to spend $1,000. The thinking is, you sell more copies, and that compensates you for the $1,000. There really isn’t much difference.

Now the obvious flaws are firstly you need money up front this way, and secondly, you still are not able to reach customers that will only pay $10 for the game. Although the first point has clear merit, I’m not *that* sure the second one is as strong as it sounds. There are VERY few people who cannot, when they need to, find $20 for a PC game they *really want*. I’d love to know the percentage of steam gamers, for example who have *never* spent $20 or more on a single title.

Our way of capturing those sales is often to just cut our price, but the alternate strategy is to spend money to elevate your game into that niche of ‘games people *are* actually prepared to pay $20 for’.

In some ways, thats still marketing. And it makes for interesting maths. If you have sold 10,000 copies of your game at $5 which was 75% off, you just ‘spent’ $150,000 to get those sales. Imagine the PR campaign or huge free expansion you could have added to the game for that money :D

Food for thought maybe.

 

8 Responses to “Actually you do have a marketing budget. You just don’t realise it”

  1. Oli Norwell says:

    It’s an interesting way of looking at things. Especially like you say, if that quick $5 reduction which gave you ‘a nice 25% boost in sales’ could actually have been reproduced at the original price with a $100 marketing effort.

    It’s (too) easy to offer a discount, perhaps it would be far more profitable to keep the original price but invest in some quality marketing.

    I guess we’re all guilty a little of obsessing over sales numbers, when in fact, revenue is far more important. 10 sales at £24.99 is far better than 50 at £3.49, but like you say, the endorphins would fire more perhaps as those 50 came in.

  2. Jacek Weso?owski says:

    Anecdotally, when I went indie and switched to Frugal Mode (TM), I set a hard limit on a Steam price for any game at 10 EUR. It does lead to occassional suffering, although it has also fueled a change in taste (I play way more indie than AAA these days).

    I manage to get over it partly because I know pretty much every game I’d like to play is going to go on sale eventually. Also, about twice a year, I sell all those silly Steam cards I’ve collected, for some 2-3 euros of total bonus credit. I sometimes use that boost to buy something that’s slightly over 10 EUR.

    When the times are better (i.e. the business is going well or I have a job), I lift the limit, but I still wait for sales. The $60 price point for AAA games is absurdly high from my point of view, and $20 still stings a bit (the top 10% income here in Poland starts at about $16,000 per year after taxes).

  3. Sam Swain says:

    Where’s the *like* button? :]

    • mendel says:

      Consider that the extra copies sold during a sale improve word-of-mouth marketing and that sales tail following a discount phase. About half of the games I went out of “discount mode” to buy were games my friends were playing. (The other half is sequels or games that hit a core genre where I know I’m going to get the playtime back.) So disount marketing doesn’t just give you the copies that were discounted, it probably sells you more.

      The major amount of game buying I do is in “lottery mode”, where I expect a lot of duds and a few gems, so there’s a risk factor in the pricing that drives my buying price down to below what seems reasonable. (Note that I don’t spend less money than if I bought games at full price (probably more) – the money is just spread around more.) Having a huge free expansion is no help to me if I drop that game after 15 minutes anyway. It would help me more if that “marketing money” was spent on making the game more accessible, more fun to players of different skill levels and backgrounds, but then that is development and not marketing.

  4. Les says:

    Please do convince HMRC that discounts are expenses :-)

  5. Massa says:

    Cliff,

    i dont know if i agree with the article’s point. While mathematically both strategies are the same, the meaning is different. One could argue that your game is $1000 with a promotional price of mere $5 and $995 as mkt expense.

    The promotional price is indeed a mkt ACTION, but it is not a mkt expense. It will be presented in every single unit sold, no matter the amount. While the mkt expenses, like ads, are indirect costs, that have to be diluted among all sold products. The advantage of such expense is that you could eventually gain much more than it cost.

    regards,
    Bruno Massa

  6. j dair says:

    It’s one way to think about it, maybe useful as an alternative perspective, but not the main one and potentially a misleading one.

    Temporary discounts can give some visibility and also spur people into action who were waiting to buy the game. But with the effect of steam sales and similar on the market, it seems like most of a game’s sales are coming from very steep discounts 50%, 80%, or even ~95%+ in bundles, and so the nominal list price is never the real price that people pay or even imagine that the game actually costs them.
    You’d want to look at a range of stats, but I think average sale price of what people are actually paying, number of sales and total revenue, and how these track over the 12+ months after release and by store is a much better headline stat to focus on.

    Like what Massa said above, it’s not real. You may end up claiming huge ‘virtual’ revenues and ‘losing’ millions to sales when it’s really only reaching customers that wouldn’t or couldn’t buy the game otherwise.

    Think of the movie studios claiming billions lost to piracy, much of it from people wouldn’t or couldn’t buy it all at the full (or any) price anyway.

    • Cliffski says:

      A sale can definitely spur someone into action to buy a game they already had their eye on, but then again so can an advert, reminding them just at the ;right time’ when they were looking for something new.