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Cash Shop Prices and Free Market Principles

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#1 Devareaux


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Posted 03 September 2012 - 05:51 AM

Okay so I see so many F2P MMORPG companies make this mistake time and time again and to their detriment. Prices are to a company what taxes are to a country, lower is always better. High taxes put a damper on it's economy and therefor result in lower revenues, because people tend to try to avoid high taxes at all costs and therefor fewer people are there to collect these taxes from, resulting in lower revenue. The same principle applies to companies and their pricing techniques. When prices are high people tend to want to avoid it, because like high taxes, the price just doesn't correlate well with the services or goods provided. Prices and taxes should be low, because more people will participate or a better word would be , pay these prices and taxes. Lower costs bring in more revenue as opposed to higher costs where only few people can afford these costs.

Cash Shop prices are no exception to these rules. It literally costs less than pennies to provide any cash shop item, at any amount. The costs to produce these intellectual goods are almost nil, so the price should reflect it's production costs. A reduction of Cash Shop items would bring in, at my calculations, maybe well over 1000% more than what it is bringing in at their current rates. Paying 8 US Dollars for a stack of 50 wrapping paper, only to be able to sell maybe 3 one hand legendary weapons is just not worth the cost. Likewise for almost every Cash Shop item, including the cash spins. If this company were to reduce it's prices across the board for it's Cash Shop items, it would actually bring in more revenue to the company because more people would be inclined to purchase these intellectual goods.

You have to understand your consumer base in any market. The bulk of your consumers, especially in a Free to Play game, are going to be people around the ages of 13-26. These consumers are most likely to be Students and Lower income individuals. Most of these players cannot or just rather not afford something like a Cash Spin for a US Dollar a piece. High prices like these tend to make people feel as though they are being cheated out of their money. They know full well that the items they are purchasing just isn't worth what they're paying. If the prices were to come down to a more reasonable level, people would not only purchase more of said items, they would most likely spend more than they would have in the first place, because they feel they are getting a bargain.

With the prices at where they are currently at, there are very few people willing to pay what is being asked of them. This is a detriment to the company because if you charge for example 100 US Dollars for a mount, but only 2 people in the server are paying these prices you only make 200 US Dollars. Now if you were to lower the prices to say, 5 US Dollars a mount maybe 100 people would buy this mount and now that they feel they are getting a bargain, maybe they will also buy a mount for their alt characters, which is another 100-200 purchases. You have reduced your prices at a whopping 95% yet will increase your revenue at alarming rates.

High taxes will destroy a nation because people will avoid it at all costs. High prices will destroy a company because likewise the majority of the people will not want to pay these costs if it is not aligned with the goods or services they are receiving.

Take Wal-Marts advice, which is the highest grossing retail company in the world. Low prices are always better.
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#2 Chigikogou


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Posted 03 September 2012 - 11:30 AM

Has been requested on a different title.
The thing is, if they decrease the prices. It is more likely from an event.
Following your statement, they would be most likely be giving bonus mall points than reducing prices and that is a fact :(
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