TECHNOLOGY

3 Things Every Business Can Learn from Gamers

They drove mobile, they drove freemium, and now they are proving that everything is better by the byte.
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In today's autocatalytic, technology-driven world, where every change accelerates the speed and frequency of the changes to follow, gamers are the virtual canaries in the coalmine. The disruptive innovations and the market transformations that gamers' behaviors consistently predict ripple across virtually every industry sector. In other words, as gamers go so goes the rest of the world.

It was the gamers’ rapid abandonment of expensive, bulky and static gaming consoles (Playstation and Xbox) in favor of light, portable, and mobile devices that not only built companies like Zynga into almost overnight market leaders, but, much more significantly, presaged the world’s online migration from the desktop to the mobile world. Mobile today is everything and everywhere, and our smartphones are the direct descendants of yesterday's handheld gaming devices.  

The actions and choices being made by gamers (of all ages) will continue to change the ways that businesses price their products and services--and the manner in which they interact with prospects and customers. We're looking at the end of fixed pricing for anything and entering a permanent a la carte world. Bulk packaging, bundled products, and even bargain pricing are all breaking down in favor of a single consumer demand driven by a desire for choice and flexibility:  They want "everything by the byte" whenever and wherever they want it. And it's gamers who have shown us exactly how these demands are impacting every business.  

To understand this phenomenon it's helpful to look at which approaches didn't work in the gaming space, and why.

First and foremost, subscriptions and long-term commitments haven't achieved anywhere near the scale or penetration that was anticipated. The fundamental reasons are fairly clear--commitments of any kind and continuing obligations are out. Any online game company will tell you that the most active participants won't commit to spend a dollar in advance, but will spend ten dollars, a dime at a time, all day long.

Second, fixed pricing, downloadable paid games and pay-per-play models have also failed. The only companies making real money today (more than a million dollars a day in virtual sales) are the companies deploying freemium games, where players are charged for upgrades, increased weaponry, powers/skills, or other virtual goods.

What are the lessons for the rest of us? Three basic propositions underlie the gamers' decision-making process, and these ideas are already on their way to your market and your products and services--if they're not already there.

1. Investment

The best and smartest games let the users set the effective price of each session or game each time they play. Some days it's a little bit and some days it's a bundle. The point is that the customer is in control. Your pricing strategy needs to incorporate and demonstrate the same kind of flexibility.

2. Commitment

The best and smartest games let the users decide how much or little they want to spend each time they play. Some days it's a lot of time or money (each being a material kind of a commitment) and some days it's just a quick bit of time-killing. If you do things right, you can be all things to all people all of the time. But your products and services need to be accessible across a broad spectrum of pricing and consumer choices, not a simple set of fixed offerings.

3. Valuation

The best and smartest games let the users decide on exactly how much the experience is worth to them each time they choose to play or continue to play. All the market research and pricing guidance in the world doesn't compare to letting the customer determine the value of the experience. If your products or services provide real benefit and value, you will discover over time (and over the lifetime of a continued customer relationship) that your best customers will actually pay up for the right experiences rather than try to be bargain-basement buyers.

Focusing on the value of the experience is doubly significant because today no one under the age of 30 really cares about possession or, frankly, about owning anything. Everything is about utility and experience, social and sharing. Ownership (buying "stuff") is a burden today, not simply because so much of the readily disposable technology we see and use every day is outmoded and obsolete in roughly the time it takes us to master it, but also because we would just as soon not assume the obligations and the commitments that come as part of the package.

I know that "one size, one model, one strategy" will never work for everyone, but one thing is true beyond question: Your best buyers will tell you that everything is better by the byte. 

Last updated: Apr 8, 2014

HOWARD TULLMAN | Columnist

Howard Tullman is the CEO of 1871 in Chicago where, at the moment, 260 digital startups are building their businesses every day. He is also the general managing partner of G2T3V, LLC and Chicago High Tech Investors – both early-stage venture funds; a member of Mayor Emanuel’s ChicagoNEXT Innovation Council; and Governor Quinn’s Illinois Innovation Council. He is an adviser to many technology businesses and an adjunct professor at the Kellogg Graduate School of Management. @tullman

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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