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Are we predictably irrational about the word free? Or is it the concept?

By on November 20, 2014
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Apple has just started an experiment that should be fascinating  for behavioural psychologist Dan Ariely.

Ariely is the man behind the popular psychology title, Predictably Irrational. In Chapter 3, he explains at length the powerful drive that FREE! has on our purchasing behaviours. Here is my description of Ariely’s experiment, taken from my book, The Curve.

Psychologist Dan Ariely demonstrated this irrational behaviour that relates to free products in a famous experiment using Hershey’s kisses. Ariely set up a table at a large public building. He offered two kinds of chocolates: high quality Lindt truffles and ordinary Hershey’s Kisses. A large sign above the table read, “One chocolate per customer”. Customers could only see the chocolates and their prices once they stepped close to the table.

Lindt chocolates are high-quality Swiss chocolates that Ariely describes as “particularly prized, exquisitely creamy and just about irresistible.” They cost Ariel about 30 cents each when he bought them in bulk. Hershey’s Kisses are less special: the company makes 80 million of them every single day. Ariely started the experiment by setting the price of Lindt chocolates at 15 cents and Hershey’s Kisses at one cent. “We were not surprised to find that our customers acted with a great deal of rationality: they compared the price and quality of the Kiss with the price and quality of the Lindt truffle, and then they made their choice. About 73 per cent of them chose the truffle and 27 per cent chose a Kiss.”

The purpose of the experiment was to see what impact free had on people’s rationality, so Ariely then lowered the price of both chocolates by one cent. The Lindt was priced at 14 cents while the Kiss was now free. “What a big difference FREE! Made. The humble Hershey’s Kiss became a big favourite. Some sixty nine per cent of our customers (up from 27 per cent before) chose the FREE! Kiss, giving up the opportunity to get the Lindt truffle for a very good price. Meanwhile, the Lindt truffle took a tumble; customers choosing it decreased from 73 to 31 per cent.”

Ariely repeated the experiment in different circumstances and with different conditions. His conclusion is that free is a very powerful motivational price. It gives us an emotional charge that increases the perceived value of what we are getting. More than that, we will often take the free option because it is perceived as being lower risk, as eliminating the possibility of loss. We often ignore the externalities (such as the time taken to download an app, or the limited amount of storage space we have on our iOS devices) because the lure of free is so powerful. Most importantly, Ariely shows that the difference between an app that is free and an app costs $0.99 is much bigger than the difference between $0.99 and $1.99. Even though a dollar is a tiny amount to pay for a game, an amount that most of us wouldn’t flinch from spending on a cup of coffee with barely a thought, it is vastly, unimaginably, infinitely more expensive than free.

Apple has just changed the word FREE in the AppStore. In its place, it uses the confusing phrase GET. It seems likely that this change is to comply with European regulation that are heading towards an interpretation that says that if something is labelled “free”, it can’t have upsell opportunities within the app.

 IMG_0299[1]

So now we get to see if FREE is the powerful, emotive word that Ariely describes or if the more important element is the concept of free. Will we see downloads of free-to-play games falling because they no longer have the magic word “free”, or is the key value of the free-to-play business model the frictionless install and the easy experimentation that a zero price point enables.

In other words, this experiment will help to answer the question of whether free-to-play games are successful because they trick users into believing the game is totally and bait-and-switch them later (as detractors believe) or because they offer low-risk, low barrier installs that draw users in and then earn the right to users money through offering them entertainment value (as I believe).

My take: this change will have a negligible impact on the free-to-play business model, but it will remove a big stick that detractors have used to beat the industry with. I look forward to the results.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
  • Sir GrooveFlyer, Esq

    No it’s not my “assumption”.
    Sure, I was being a little over the top, but I’m referring to the class of F2P that is most definitely designed to tweak peoples addictive impulses in pursuit of profit.

    Of course they are not all “gambling addicts” in the pure sense of the phrase but psychologically speaking they are being played like a fiddle, some more so than others.
    It doesn’t matter that the % is a subset of all internet users, what matters is the % of player base that sustains such a mechanic. Look for yourself at the %’s for problem gambling behaviour http://en.wikipedia.org/wiki/Problem_gambling among the global population, on a cultural basis as well.

    Of course it’s a continuum and not black and white, but you can’t deny a large segment of the F2P model is based around exploiting this addictive psychology model.

    In that sense, despite being dressed up as a “game”, it’s no different from pachinko, slots, horse betting, or whatever people do to “keep pulling the handle”

  • Here, for example, is a full length interview with me when I discuss these issues at length.
    http://www.pocketgamer.biz/interview/55188/nicholas-lovell-free-to-play-gamers-are-tired-of-skinner-boxes-and-thats-a-good-thing/

  • Not at all. I freely admit there are issues of ethics in F2P games, as there are in any form of marketing (and games and marketing are now intertwined, which upsets some people). But your comments are black and white: all payers are gambling addicts, only gambling addicts pay. That is what I disagree with.

  • The stats bear out that it is only a few people who pay (out of a much larger audience than has ever played video games before. At its height, 20% of all people connected to the Internet played Candy Crush Saga every month). It is your assumption that these people only choose to spend to spend money because they are gambling addicts. The stats say nothing about why people choose to spend.

  • Sir GrooveFlyer, Esq

    Because the mechanics are designed to operate that way, in a large number – but not all – cases.

    South Park does a wonderful summary of the issues with it:
    http://southpark.cc.com/full-episodes/s18e06-freemium-isnt-free

    Your problem is you can’t admit there ARE issues with it.

  • Sir GrooveFlyer, Esq

    I don’t dispute free is not going to go away. I just dispute the cynical manipulation of it at scale via skinner box designs.

  • Sir GrooveFlyer, Esq

    NO, only the people that pay are gambling addicts.
    Disagree all you like, the stats bear it out.

    Skinner box mechanics, gatcha, whatever you want to call it..it’s not the game design that comes first it’s the monetization mechanic.

  • I’m not querying your stats. I’m querying a) why you believe these stats show the business to be unsustainable and b) why you think the only people who pay are gambling addicts.

  • I also disagree with your analysis. It reflects your prejudice that the only people who can enjoy free-to-play games are “gambling addicts”.

  • It wasn’t free-to-play that lowered user price expectations: it was the iron laws of technology and economics that say that once the marginal cost of a product falls to zero, so does the price (unless, of course, a cartel prevents that from happening.

    The F2P model is sustainable, including for indies. More importantly, anyone who makes anything that can be distributed digitally needs to figure out how to compete with free, because free is not going away.

  • Sir GrooveFlyer, Esq

    Wed 09 Apr 2014 3:17pm GMT / 11:17am EDT /
    8:17am PDT

    Free-to-Play

    Swrve research finds 46% of all revenue comes from
    .22% of player base, two-thirds of people stop playing after one day

    Retention and
    monetization are two of the biggest challenges for any free-to-play game
    developer. But as reported by Re/code,
    a new report from app testing firm Swrve suggests they may be even more
    challenging than previously believed.

    Swrve tracked the
    habits of 10 million new players on 30 games in its network over the course of
    90 days, finding that only 2.2 percent of those players ever spent money. The
    spending of monetized players wasn’t spread evenly, as Swrve found 46 percent of
    revenue came from just 10 percent of that group, or .22 percent of the total
    player base.

    Beyond the
    monetization concerns, the report also speaks to how difficult it is to retain
    players. Two-thirds of the tracked users quit playing their games within a day
    of downloading them. Further pushing the idea that early monetization is key,
    53 percent of user spending happened within the first seven days after
    downloading a game.

    Speaking with
    Re/code, Swrve CEO Hugh Reynolds said the report was a “word of caution
    around user acquisition,” stressing that developers who focus their
    resources on goosing the total number of downloads need to worry more about
    keeping users engaged after the app has been downloaded.

  • Sir GrooveFlyer, Esq

    Eg: From this site in April

    Only 2.2% of free-to-play users ever pay – Report
    http://www.gamesindustry.biz/articles/2014-04-09-only-2-2-percent-of-free-to-play-users-ever-pay-report?utm_source=newsletter&utm_medium=email&utm_campaign=european-daily

    plus plenty of other reports of similar levels from other analytics companies

  • Sir GrooveFlyer, Esq

    “In other words, this experiment will help to answer the question of whether free-to-play games are successful because they trick users into believing the game is totally and bait-and-switch them later (as detractors believe) or because they offer low-risk, low barrier installs that draw users in and then earn the right to users money through offering them entertainment value (as I believe).”

    It doesn’t matter. The stats already show it’s the small % of high value gambling addicts that sustain the so called Free to play (sic) model.

    The bigger question is now that Free 2 play (sic again) has lowered user price expectations to the lowest level how do we transition back to other more sustainable business models for the industry at larger, including indies.