Gamers Experiment with Pay Whatever Model
BY Josh Spiro
By letting people set their price, two video game designers sold over 50,000 copies of their game World of Goo in just one week.
World of Goo was not new. It had been available in stores and online for one year. So how did the two independent designers of the game sell 50,000 copies in just one week, when any successful indie gamer would be happy to sell that amount in six months? They offered users the chance to pay whatever they wanted.
Ron Carmel and Kyle Gabler, two video game designers that use a multitude of cafes in the San Francisco area as their offices, were looking for a way to promote the one year anniversary of World of Goo, the critically acclaimed game they released in 2008 under their studio 2D Boy. Carmel had the idea, based on Radiohead's experiment with their 2007 album In Rainbows, to allow fans one week to download the game online for whatever payment they thought appropriate.
At first Gabler was dubious of the plan's success. World of Goo, which he describes as a puzzle game that allows gamers to build structures such as bridges or even people with talking balls of goo, retailed for $20 in the first year after it was released.
At the start of the experiment "we got a ton of one cent payments and it was really discouraging watching them roll in, but then [some] people actually paid more and it really made up for the people who got the game for free," Gabler says.
In the first week, the pair made $100,000 with roughly 50,000 purchases, at an average payment of about $2 per purchase. The strategy was such a success, the duo decided to extend the sale a second week, during which they reached 83,250 copies sold.
According to Brett Walton, the CEO of VGChartz, a website that provides video game news, reviews and sales information, an independent game that moved 100,000 units in a year, or roughly 1,900 units per week, would be considered a definite success. By comparison, Gabler and Carmel had about 2000 percent the sales volume a successful indie game would have in an average week.
Yet, Gabler and Carmel doubt that the model is sustainable. "Neither of us really think that this is something you can do over and over again. The reason it was successful was because of the novelty of the pricing model," which attracted a lot of publicity, Gabler says.
Users actually suggested tweaks that would make the model more effective, such as displaying a rolling average. The theory is that people would want to pay slightly higher than the average, so the average would steadily increase.
Allowing customers to pick their own price isn't a new tactic. Other entrepreneurs have also found success by letting customers pick their price. Eric Hagen works full-time for the Red Cross, but to supplement his income, he runs Recession Ride Taxi, an Essex, Vermont-based enterprise that does away with the meter and lets its customers set the fare.
Despite the service's name, Hagen lets riders choose the price even when there's no downturn. "I don't think it matters whether there's a recession or not," he says, "I'm trying to accommodate all economic levels during hard times or good times."
Hagen says many low-income individuals might pay about half as much as a ride is worth but the tourists and college students he drives around the nearby city of Burlington balance it out. "It's almost like what somebody can't do, somebody else will make up for," he says, financially "I'm probably on equal footing to a standard taxi."
So what motivates people to pay even when they don't have to? According to Daniel Benjamin, an economics professor at Cornell University, it's pure old-fashioned guilt. Most people are motivated "by a sense of responsibility or morality to behave in a way that is fair," he says.
He compares the pay what you want model to the idea of efficiency wages in labor economics. Basically, if an employer pays more than the market level, he or she creates a sense of obligation that motivates their employees to work harder. Studies have also found that employees work harder when left unattended than when micromanaged. "That's consistent with the view that this kind of marketing method could be successful," Benjamin says, "and also that the same sort of motivation might have broadly important implications for the way the economy is structured."