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[Gamesbriefers] What is more important – the first purchase, or repeat business?

By on August 31, 2012
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This is the second ‘Gamesbriefers’ post, in which industry experts debate topical questions about game design, marketing and business strategy.


Question:

Following Gasketball’s well-publicised problems, Tadhg Kelly argued the developer’s difficulties stemmed from misunderstanding freemium. To Tadhg, freemium is all about “earning repeat business”. Via Twitter, Benjamin Cousins disagreed, arguing that the first purchase is the priority for a freemium business, not the repeat business. 

Clearly both are important, but if you had to prioritise with limited resources, would you focus on getting people to spend their first dollar, or on making those who have already spent to spend more?


Answers:

Ian Marsh Game developer at Nimblebit

I would definitely focus on driving first purchases to get as many people invested in your game and your brand as possible. Fine tuning to promote repeat purchases might be more lucrative in the end but if your goal is to build a game with a passionate following getting as many people invested in your game at all seems important.

The other thing to remember is that once a player dips their toes in the pool and finds it agreeable they’re much more likely to become a repeat customer. I’d much rather make the same or slightly less revenue from 100,000 players paying $1 than 1,000 paying $100.


Teut Weidemann Online Specialist at Ubisoft

Classic – working – f2p games make most revenue with multi spenders, not single buyers. If a customer only buys once your game failed to be fun to the player so that he spends even more. Payers also have longer lifetime usually and spending only once shows that your game has problems with progress, spending patterns or the items are simply too badly designed.

Freemium only works in special game types and younger audiences. Kids love fremium. Item sales work in mature markets and thats where the spendable income is highest. So if you think business then think mature f2p multi spending.

Tadhg Kelly Consultant at What Games Are

The problem with focusing on the one transaction is that it will inevitably make your game somewhat smash-and-grab by nature. So they will spend, then the value of the game will fall off pretty quickly because you have not focused on providing good long term value. You’re not so much building an audience as bilking it, and thus any hope of a relationship with the consumer, building a marketing story or expanding your brand go out the window.

Smash-and-grab is a retail dynamic based on the idea of either wowing the customer and then getting them to buy a sequel, or wowing them and running away with their money before they realise you’ve sold them a turd. Online markets are generally pretty resistant to that process though, because they are more community, social and referral focused. So instead you need to be thinking in terms of a marketing story, of momentum and of loyalty.

Short termism always leads to more short termism – and that eventually catches up with you.


Teut Weidemann Online Specialist at Ubisoft

Let me rephrase as I don’t like the question how it is being phrased:

As everyone knows an easy calculation of revenue is active users * conversion rate * ARPPU. If any one of those three factors is high you can be happy. If two are high you can buy an island near Hawaii. All three is unheard of.

So League of Legends has a huge reach with 11 million users but their conversion seems not to be high.
World of Tanks suffered from a capped ARPPU, but the rest was fine.
Desert Operationsin Germany has low users, low conversion but insanely high ARPPU.

A question which asks which ONE of TWO you would focus on on a THREE equation is not fair 🙂


Harry Holmwood Founder at Heldhand consultancy

Not an either-or in reality of course, and a broader-appeal game with a low ARPPU can be just as viable as a niche one with higher ARPPU, but from the perspective of the (Japanese) games we’re working with at the moment, the focus seems to be to prioritise retention and repeat business over getting the first dollar. In business generally it’s easier to get repeat business from an existing customer than to win a new one. The big problem at the moment is we’re not being smart enough when we acquire new users, and are still spending a lot of money to acquire the wrong ones. My hopes are that this will be one of the big improvements we see in the industry over the next year.


Patrick O’Luaniagh CEO at nDreams

Slightly straying from the topic, but there is a real danger in overreacting to some of the slightly mercenary F2P titles and making a game which offers so much free value there really isn’t much incentive to pay anything. From bitter experience, I’d strongly agree that F2P doesn’t work with a single relatively low value purchase – we created a F2P Facebook game a couple of years ago which suffered from this problem, and it really was the “worst of both worlds” – small conversion rate, small ARPPU.

So I favour repeat business over the first purchase – I’d rather create a small passionate community who keep buying things (a community that I understand) rather than have lots of gamers who pay once then go away. This is mainly due to the long term value.


Andy Payne Managing Director at Mastertronic

I would rather build a game around a community or better still build a community around a game that was loyal and committed. So for me it is about getting small pieces of money from many, many people reasonably often by delivering extra value, features and benefits which players/customers want to pay for. I want our players to give us money, not because they have to, but because they WANT to. That will keep us on top of our game and hopefully have a business with real value and  real customers which generates profits over time. So retain the customer every single time for me.


Simon Read Game developer at New Star Games

I agree with Tadhg that developers shouldn’t sit on some imaginary moral high ground proclaiming freemium to be evil, however it doesn’t mean that the old shareware model cannot work.

Clearly New Star Soccer takes that approach by requiring players to unlock the full game after a trial period. This is a risk because the game has to be good enough for people not to turn away as soon as they reach the gate, but fortunately around 39% of players do unlock the career mode in NSS. Many then go on to make further purchases (around half of the revenue comes from purchases of in-game currency) so offering the player an avenue to spend more is absolutely essential.

About Gamesbriefers

Every week, we all ask our august panel of luminaries a burning question in the world of free-to-play and paymium game design. Or we ask a broader question on the future of the industry. We’re not going to announce who is a GAMESbriefer. You’ll just have to read the posts to see who is saying what to whom. We have CEOs and consultants, men and women, Brits, Germans, Americans, indies, company people and much more besides.
  • I would totally agree with you on that, repeat purchases from a few is more important than one from many at least if your trying to build a long lasting game as those repeat customers will probably bring on more customers as they like the game.

  • Tomek Mleko

    I’d say building a game interesting enough to encourage a group of players to repetitive purchases is key. Think revenue in time…
    Focusing too much on that first purchase might be perceived as an aggressive practice which could easily backfire.
    Balance is the key, truism, I know.