When VCRs first hit the consumer market (about 1980) a pre-recorded video tape ran $60-$80. Considering the time period, that was a great deal of money for a 2-hour film. (There was also a thriving pirate tape market, but the quality of the pirate tapes was awful.)
Then Paramount Studies made a bold move: They released Star Trek: The Wrath of Khan for $20. It sold like crazy, and that one market test was so successful it changed an entire industry. By lowering the price, the tapes were accessible to so many more purchasers. (And it also cut the heart out of the pirate tape market.)
Thinking back on that example, it makes sense to me that lowering the price of donuts (or the number of donuts needed for any given purchase) would increase the volume of donut sales and ultimately make EA more money.
Yes, why wouldn't the market for in-app game purchases respond exactly the same as a thirty year old cherry-picked model that just happens to fit how you would like to see the pricing deployed?
Based on many other business models, for one. Also the fact that these types of threads are a bi-weekly thing. It shows that there are a lot of people who would be willing to pay if the prices could be justified by more people. This isn't a new concept.
I made a few points that more or less answer your question. You have to get people in the door before you can sell them something. At the current prices, not many people are willing to step foot in. I mean, you can't even buy a single premium character or building with some of their smaller donut packages. What can you even buy with a box of donuts? You'd barely make off with a plant. Most casual gamers see that as discouraging and are less willing to even put a small amount of money into the game much less get hooked and start buying more and more.
There is no doubt that lowering prices does attract more purchasers. Completely true but I'll point out why you cannot simply assert that EA should lowering pricing.
And just because a few vocal people on these boards want it doesn't help EA decide either. You and I have zero idea how many people play the game and even less of an idea what ratio of players is represented by this vocal minority.
This is why it doesn't matter: If you lowered prices by 25% to simply break even and maintain current profit you would need to sell 25% more units. A business is entitled to make a profit and they are well within their rights to try and make the most money off the time invested by their project teams.
The bottom line: while your reasoning is correct in a vacuum, you have absolutely no way of knowing if dropping pricing by a specified percentage will increase sales by the same percentage OR MORE which is the key. Absolutely no way of knowing at all. If you worked for EA then you wouldn't be on here talking about it with us rubes! So I agree with you, sales will increase. Where we disagree is by how much those sales would increase. I say we cannot know which is, well, indisputable.
That doesn't even begin to factor in the sliding pricing scale for donuts. EA makes more money if smaller package purchases make up a greater portion of overall "donut" sales. If you lower pricing people would buy with less frequency because whatever package of donuts they buy will stretch further.
I completely get that some of this game's consumers are frustrated with what they perceive as overpricing. That's great. They are 100% entitled to their opinions and to express them. What they are not entitled to is their own facts or **** projections based on pure conjecture. Economic projections and decisions they claim will boost EA's profits but just so happen to match their individual purchasing limits. What a remarkable coincidence!
It's not about my personal spending limits. I didn't suggest a price. It's about using a reasonable pricing scale for what you are selling.
This site doesn't represent the entire audience of the game but it serves as an example that one could base a market projection on. That is what EA bases their decisions on - example tests.
Also, what he was getting at wasn't exactly a cherry-picked instance. It's common practice in business. You find an ideal price point that will make the market thrive, or you produce a better product for what you are charging.
Will people pay these prices? Sure. Some people will also pay $700 or more for Louboutin shoes. The difference is one caters specifically to a wealthy share of the market whereas the other is aiming for the casual consumer. Not too many people here feel the prices are justified, even the ones who do pay for it because the want it and get enjoyment from the game. I'm going off of the general consensus of the majority, not my own opinion which happens to align.
My point is that you have to lower by some amount and regain by the same ratio otherwise it isn't worth doing from a profit standpoint. You do agree to this simple premise, yes?
And yes, it's totally cherry picked. (I already agree with finding the price point that will make the most money.) VHS movie sales from thirty years ago? A time when those tapes were marketed to and purchased by corner mom and pop video stores who rented them? Are you serious? THAT'S the go-to marketing example we're going to roll with as a case representative enough to change strategy and alter pricing? LOL.
Bring that into a marketing meeting for increasing software sales in 2013 and you'd be lucky if were only laughed out of the board room.
"I'm going off of the general consensus of the majority..."
The majority always wants prices lowered just like businesses always want to charge as much as they can get away with. This is nothing new. Why is this business supposed to implement what is being asked for if it would result in a loss of profit? Let's not forget: If the majority was truly unsatisfied this game would have altered it's pricing approach by now (and still have legions of cheap people who want something for nothing STILL calling for price reduction) or died a miserable death.
I get into these discussions because no member of the self-identified: "EA is ripping everyone off and should lower prices" club is ever able to demonstrate why they are right and EA is so far off the mark.
I'll ask directly: Why exactly is your pricing projection based off incomplete and imperfect information supposed to be better than the projections based off EA's pricing that is determined by staff who's day to day livelihood is this work and is influenced by far better information (they have all the figures) than you've got?
For all we know EA might be pricing as low as they can be once they considered licensing fees and a profit small enough to make it slightly worthwhile. (If that was true, I am sure plenty of parasites will still demand EA take a loss and lower prices anyway!)
Pricing digital content has always been problematic. In traditional economics, the minimum price for an item is its "marginal cost," what it costs to produce one unit for sale plus some portion of R&D/fixed costs that you're trying to recoup. You then add more for your profit (less when sales are poor and more when sales a good). But for digital content, the marginal cost is $0! So, once you've figured in a portion of your R&D/fixed costs, what should you charge?
In theory, to spur sales you should add only a tiny amount for profit. However, digital content is often priced on the perceived "value" of the product to the customer. It costs no more to produce a unit of Adobe CS 6 than it does a PC video game. However, a complete set of CS 6 lists for about $1500 and the game for $40.
As I see it, a company like EA has to gauge what they believe to be the value of the digital content and price it accordingly. What we seem to disagree on is exactly what that value should be.
Its is just as enjoyable for free play (more so as I often think people have more money than sense), I just get 1 scratch card each week. Have huge farm 100 pink houses and 100 white houses. So I level up 2 or 3 times a week which provides a few more dough nuts. It soon accumulates, maybe its what goals you set. That and not speeding taxes up by accident has helped.
Used to be get all the characters, now it is get all the land. The latter is achievable if not on decent income, the former will just make you go nuts. Since the yard sale started I have accumulated 222 (which i got finks dog and 2 duff bus things.)donuts but I have been really lucky with scratch cards.
Pricing digital content has always been problematic. In traditional economics, the minimum price for an item is its "marginal cost," what it costs to produce one unit for sale plus some portion of R&D/fixed costs that you're trying to recoup. You then add more for your profit (less when sales are poor and more when sales a good). But for digital content, the marginal cost is $0! So, once you've figured in a portion of your R&D/fixed costs, what should you charge?
In theory, to spur sales you should add only a tiny amount for profit. However, digital content is often priced on the perceived "value" of the product to the customer. It costs no more to produce a unit of Adobe CS 6 than it does a PC video game. However, a complete set of CS 6 lists for about $1500 and the game for $40.
As I see it, a company like EA has to gauge what they believe to be the value of the digital content and price it accordingly. What we seem to disagree on is exactly what that value should be.
This is the whole point. It's all development and licensing costs, there is no loss if someone doesn't buy something. Even at that rate, the development that goes into $15 worth of graphic items in this game doesn't even come close to the development and support that goes into, say, a $15 map pack on Battlefield. For what you get in other games in digital content for the price, the graphics on this game are laughable at $8 or more per item.
I'm torn about which side of the fence I sit on with this topic.
This game is exceptionally playable, without having to spend any money at all on premium content. So i can understand the price point for premium content, because it's paying for the licensing that covers all of the casual players who are more than happy to keep playing it as a free game without spending anything on it.
Do I think that premium content could be priced lower? Absolutely. I definitely agree that if donuts were half the price, more people would buy them.
The real question in terms of profitability for EA is "if the premium content was half of the price it is now, would TWICE as many people buy it...?" and the answer to that, is probably not.
The real question in terms of profitability for EA is "if the premium content was half of the price it is now, would TWICE as many people buy it...?" and the answer to that, is probably not.
Actually it would have to be more than twice as many... EA wouldn't lower the prices unless they would make a profit of it. Otherwise there wouldn't be a point to lower the prices, atleast on their part...
I have to say I stand with Excruciator69, as he explains basic microeconomics... All points he makes are valid.
That is not to say that I myself would of course want lower prices too, as all consumers/customers always wants. But as Excruciator69 points out, this has to be weighed against the fact that all producers want to price their products for as much as possible. EA have most probably found a good enough price for the product they are making, atleast to make them content. If someone wants to suggest to EA that they should change their prices, that person better have very solid arguments, and you need to sit on the figures to be able to suggest an alternative that might be sound.
To finish this, as Excruciator69 sums it up, if EA had missed horribly with their prices, they would have been adjusted long ago. As that is not the case, you can assume that the pricing isn't too far off as it is now...
The cost seems to matter most to completists since every level comes with a few more items to spend donuts on.
Personally, I like that they seem to layer the content at different donut costs. So you can get premium content based on how much you are willing to spend.
Replies
Yes, why wouldn't the market for in-app game purchases respond exactly the same as a thirty year old cherry-picked model that just happens to fit how you would like to see the pricing deployed?
There is no doubt that lowering prices does attract more purchasers. Completely true but I'll point out why you cannot simply assert that EA should lowering pricing.
And just because a few vocal people on these boards want it doesn't help EA decide either. You and I have zero idea how many people play the game and even less of an idea what ratio of players is represented by this vocal minority.
This is why it doesn't matter: If you lowered prices by 25% to simply break even and maintain current profit you would need to sell 25% more units. A business is entitled to make a profit and they are well within their rights to try and make the most money off the time invested by their project teams.
The bottom line: while your reasoning is correct in a vacuum, you have absolutely no way of knowing if dropping pricing by a specified percentage will increase sales by the same percentage OR MORE which is the key. Absolutely no way of knowing at all. If you worked for EA then you wouldn't be on here talking about it with us rubes! So I agree with you, sales will increase. Where we disagree is by how much those sales would increase. I say we cannot know which is, well, indisputable.
That doesn't even begin to factor in the sliding pricing scale for donuts. EA makes more money if smaller package purchases make up a greater portion of overall "donut" sales. If you lower pricing people would buy with less frequency because whatever package of donuts they buy will stretch further.
I completely get that some of this game's consumers are frustrated with what they perceive as overpricing. That's great. They are 100% entitled to their opinions and to express them. What they are not entitled to is their own facts or **** projections based on pure conjecture. Economic projections and decisions they claim will boost EA's profits but just so happen to match their individual purchasing limits. What a remarkable coincidence!
This site doesn't represent the entire audience of the game but it serves as an example that one could base a market projection on. That is what EA bases their decisions on - example tests.
Also, what he was getting at wasn't exactly a cherry-picked instance. It's common practice in business. You find an ideal price point that will make the market thrive, or you produce a better product for what you are charging.
Will people pay these prices? Sure. Some people will also pay $700 or more for Louboutin shoes. The difference is one caters specifically to a wealthy share of the market whereas the other is aiming for the casual consumer. Not too many people here feel the prices are justified, even the ones who do pay for it because the want it and get enjoyment from the game. I'm going off of the general consensus of the majority, not my own opinion which happens to align.
And yes, it's totally cherry picked. (I already agree with finding the price point that will make the most money.) VHS movie sales from thirty years ago? A time when those tapes were marketed to and purchased by corner mom and pop video stores who rented them? Are you serious? THAT'S the go-to marketing example we're going to roll with as a case representative enough to change strategy and alter pricing? LOL.
Bring that into a marketing meeting for increasing software sales in 2013 and you'd be lucky if were only laughed out of the board room.
"I'm going off of the general consensus of the majority..."
The majority always wants prices lowered just like businesses always want to charge as much as they can get away with. This is nothing new. Why is this business supposed to implement what is being asked for if it would result in a loss of profit? Let's not forget: If the majority was truly unsatisfied this game would have altered it's pricing approach by now (and still have legions of cheap people who want something for nothing STILL calling for price reduction) or died a miserable death.
I get into these discussions because no member of the self-identified: "EA is ripping everyone off and should lower prices" club is ever able to demonstrate why they are right and EA is so far off the mark.
I'll ask directly: Why exactly is your pricing projection based off incomplete and imperfect information supposed to be better than the projections based off EA's pricing that is determined by staff who's day to day livelihood is this work and is influenced by far better information (they have all the figures) than you've got?
For all we know EA might be pricing as low as they can be once they considered licensing fees and a profit small enough to make it slightly worthwhile. (If that was true, I am sure plenty of parasites will still demand EA take a loss and lower prices anyway!)
In theory, to spur sales you should add only a tiny amount for profit. However, digital content is often priced on the perceived "value" of the product to the customer. It costs no more to produce a unit of Adobe CS 6 than it does a PC video game. However, a complete set of CS 6 lists for about $1500 and the game for $40.
As I see it, a company like EA has to gauge what they believe to be the value of the digital content and price it accordingly. What we seem to disagree on is exactly what that value should be.
Used to be get all the characters, now it is get all the land. The latter is achievable if not on decent income, the former will just make you go nuts. Since the yard sale started I have accumulated 222 (which i got finks dog and 2 duff bus things.)donuts but I have been really lucky with scratch cards.
This is the whole point. It's all development and licensing costs, there is no loss if someone doesn't buy something. Even at that rate, the development that goes into $15 worth of graphic items in this game doesn't even come close to the development and support that goes into, say, a $15 map pack on Battlefield. For what you get in other games in digital content for the price, the graphics on this game are laughable at $8 or more per item.
This game is exceptionally playable, without having to spend any money at all on premium content. So i can understand the price point for premium content, because it's paying for the licensing that covers all of the casual players who are more than happy to keep playing it as a free game without spending anything on it.
Do I think that premium content could be priced lower? Absolutely. I definitely agree that if donuts were half the price, more people would buy them.
The real question in terms of profitability for EA is "if the premium content was half of the price it is now, would TWICE as many people buy it...?" and the answer to that, is probably not.
Actually it would have to be more than twice as many... EA wouldn't lower the prices unless they would make a profit of it. Otherwise there wouldn't be a point to lower the prices, atleast on their part...
I have to say I stand with Excruciator69, as he explains basic microeconomics... All points he makes are valid.
That is not to say that I myself would of course want lower prices too, as all consumers/customers always wants. But as Excruciator69 points out, this has to be weighed against the fact that all producers want to price their products for as much as possible. EA have most probably found a good enough price for the product they are making, atleast to make them content. If someone wants to suggest to EA that they should change their prices, that person better have very solid arguments, and you need to sit on the figures to be able to suggest an alternative that might be sound.
To finish this, as Excruciator69 sums it up, if EA had missed horribly with their prices, they would have been adjusted long ago. As that is not the case, you can assume that the pricing isn't too far off as it is now...
Personally, I like that they seem to layer the content at different donut costs. So you can get premium content based on how much you are willing to spend.