Saturday, August 11, 2018

Capped Spend Reverse Discount

Just finished watching Ready Player One last night, it was a great movie and I very much enjoyed it. One of the primary premises of the story line is having to do with money; and in the virtual OASIS if you die and lose your "shit", in real life you actually can lose your "shit" and so many do.

In real life this problem already exist where the game is "free" but if you want to get very far you need to spend real money on coins and upgrades. Problem is a lot of the players already have an addictive personality and have trouble controlling their spending. That's where I started thinking about setting up a system that encourages spending still but at the same time encourages responsible spending.

Read though this whole idea first before you say to yourself or outloud how stupid it sounds.

The numbers in my examples are all arbitrary and are not based off of any real-world statistics, for this to be the most profitable the thresholds would have to be moved around. I am going to make up a fictitious game called "Mo Money" (nothing to do with Notorious B.I.G.) but you can imagine that if you wish.

Mo Money is a free download on the app store and lets you run around a city as a real estate investor and making your millions. You can also do in app purchases and get things going faster to buy coins so you can buy that virtual apartment building and start charging rent. You can play the game without spending any money but it takes a lot longer.

Now the company looks at the real-world money being spent and the average is $64 a month per player and the median is $31 a month per player. BUT there are a lot of players that spend nothing or less that a few dollars here and there. This might make up almost half the players. So how do you get those players to spend more money in Mo Money???

This is where the concept of a Capped Spend Reverse Discount (just made this up, might not be the best name) comes in.

  • A player selects a tier where they cannot spend more than a limit of money set in that tier.
  • A player can only move up tiers but not back down except once a year.
  • They must provide a form of payment that can auto-recharge like a credit card.
  • The account is fully funded up to the max at the beginning of each month.
  • There is a discount applied to each tier but the discount is greater for a lesser maximum balance.
Now this may not sound like the best way for a business model to make money. But remember you are trying to get players that don't spend money to spend some money and it all adds up really quickly.

Here are some sample tiers to give you a better idea.

Tier 1
$20 per month MAX
30% discount on all purchases

Tier 2
$40 per month MAX
20% discount on all purchases

Tier 3
$80 per month MAX
10% discount on all purchases

Tier 4
No MAX and no discounts but can purchase some items that discounted tiers cannot.

So the casual gamers are mostly going to pick the Tier 1. Then if they find that $20 a month just is not enough to satisfy their thirst for renting out scummy apartments, they can move up to Tier 2. And so on until they are so addicted they just spend spend spend with no regard for discounts or limits BWAAAHAHAHAHHAA. When moving up a tier you must read and agree to terms and every once in a while the game will remind you that you should play responsibly.

Pros to the consumer:
  • Controlled spending, if you don't spend anything then you just have the $20 sitting in your account forever and if you ever stop playing you can close your account and get a full refund.
  • Discounts for beginners, so you can get playing faster without such a commitment up front. Also an advantage to catching up to those that have been playing longer.
  • By being "locked" to a tier except to move up it encourages your to think about how much money you are spending.
Pros to the game maker:
  • More monthly revenue all around.
  • Can advertise that you care about responsible playing and want to make sure your customers don't spend themselves stupid.
  • Players that did not spend anything may spend a few dollars here and there plus you have a minimum of $20 in possibly millions of accounts just sitting there!
  • Ability to have flash sales for those that are enrolled in the tiers. Such as 50% off of any single purchase once a month or something like that. Then you make the real cool things more that $41 so Tier 1 would never be able to get those cool things even at a 50% discount. They just have to move to the next tier to get those cooler items.
A few other notes thoughts, you could even have a "roll-over" tier where $10 a month is debited every month until your account hits a max of say $100 with a discount of 15%. You cannot add more than $10 every month and if you don't use it you lose it. So after $100 you still pay $10 a month but it does not build your account balance up any more. Kinda like a subscription.

This makes a lot of sense for gaming but can be applied elsewhere in an ongoing spending/subscription model.

Hope I was able to sell you on the idea of Capped Spend Reverse Discounts, lets see if someone ever uses this model.

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