Price Skimming

Pricing strategy to maximize sales revenue and minimize consumer surplus.

A lot of developers seem afraid to engage in revenue maximization strategies because they don’t want to be greedy. However, there is a big difference between using psychological tricks to boost sales through extorting your customer base, and just being smart about how you price your game. Price skimming is the latter: You should absolutely use this strategy. The goal of price skimming is to maximize revenue by minimizing consumer surplus. Price skimming uses time to differentiate between more price sensitive segments of the market.

First you set a fair list price for your game. After release, keep this list price. One major mistake devs make is by putting their title on sale too early. This not only can hurt your total revenue, but it also breeds feelings of unfairness (equity theory) among gamers who paid full price. Don’t by seduced by a small spike in sales if you reduce your price. Your goal is to maximize revenue over the life cycle of your game. Typically, your first week will be the highest for sales. After, your sales will probably level out for a bit. After a couple of months (typically) you will start to see daily average sales drop off again. This is when you should do your first sale or price drop. Keep the drop around 20% to 30%. Repeat this strategy again in another few months if you see another drop is volume.

Have you ever paid attention to the pricing of popular AAA titles like Grand Theft Auto 5? That game stayed at full list price for a long time before finally going on sale. This is because the publisher was using a price skimming strategy.

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