A number of industries change the price of their goods depending on all kinds of factors. A seat on a flight from New York to Los Angeles can shift in value by more than $100 in a single day. But one technology company is making dynamic pricing so granular that two people playing the same game could see different prices for virtual items.
Gondola, a startup specializing in dynamic pricing, recently ran a six-week test in partnership with Cut The Rope 2 developer ZeptoLab that resulted in a vast improvement in both retention and conversion of players from free players into payers for the physics-based puzzler. This is a sign that developers of free-to-play apps can use the data they’re collecting on players to better adjust their in-game economies to increase their revenues. And in a $30-billion mobile market that is continually dominated by the same three to four top-grossing games, using Gondola’s pricing (or its competitor Scientific Revenue) to squeeze the maximum lifetime value from each player is more and more important.
The two companies used an A/B method where half of all players got the same, developer-determined prices and the other half got prices set by Gondola’s algorithm. Each group had at least 2 million monthly active players. What Gondola and ZeptoLab found is that 11 percent more players spent money on the game when they saw the Gondola dynamic prices. Cut The Rope 2 also saw 9 percent better 10-day retention with Gondola’s technology.
Dynamic pricing is something that makes sense because every person has different habits and personal circumstances. Gondola is claiming is that it can understand how players will behave and spend in the future based on how they engage with the game in early days. The company sees how often people are playing, how long a typical session is, what purchasable items the player is looking at, what items they need, and many other factors to set a price. And this Cut The Rope 2 case study seems to suggest that Gondola is on to something — although it is important to note that this was not independent research.
“Because individual players value specific virtual goods differently depending on their levels of engagement and progress, Gondola distributed over 6 million unique prices to players in more than 100 countries during the six-week test,” reads the Gondola case study.
Having that many different prices isn’t simply about maximizing revenue, Gondola tries to explain. The company notes that players actually respond better to a game that seems to understand how they want to spend money.
“For the majority of players, prices are dynamically reduced based on individual user profiles,” reads the case study. “During the Cut the Rope 2 test, players in the Gondola group converted 24 percent faster than those in the Control group. Additionally, the Gondola group’s rolling retention improved by 4 percent on day one, and increased to 9 percent by day 10. This is clear evidence that Gondola’s dynamic pricing not only benefits game developers, but also helps the long-term player retention.”
Why wouldn’t players appreciate that a game’s prices are falling drastically in an effort to get them to spend money? Of course, this could also mean that Gondola can tell when certain players will pay more — maybe a lot more. So the company will have to tread carefully so it does not upset the important “whales” who often represent the vast majority of any free-to-play game’s revenues.
We’ve covered these types of dynamic pricing solutions before in a VB Insight report on “mobile marketing automation (MMA),” with Scientific Revenue being the most established dynamic pricing solution in that space. In that report, Scientific Revenue’s CEO, Bill Grosso, said “the biggest use case is ‘whale rescue.’ You’ve got someone who’s spent in the past, is about to churn out (or has been inactive for a couple of days) and you want to reach them with a targeted sale: ‘We miss you. Come back and we’ll give you X.'”
Going forward, Gondola will try to work with more developers, and it is welcoming studios to contact it on its website.