Thursday, September 29, 2011

In which I am humbled by the bundle

I have previously been very dismissive of "pay what you like" offers. My limited understanding of economic theory convinced me that there was no rational justification for customers to pay more than the bare minimum. I couldn't accept that this was a viable business model and I was sure that these offers were no more than a passing fad.

Well, maybe I was wrong. The humble indie bundles continue to thrive generating substantial revenue for indie developers and a chunk of money for worthy charities to boot. I got an opportunity to experience a bundle first hand last night when I bought the latest humble offering the Humble Frozen Synapse Bundle.

I was most impressed with how slick the process is. A single web page quickly lets you know what is on offer and lets you place an order. Choosing the price you pay is trivial and you can even choose how your money is allocated using sliders. This sounds like it could be complicated but it is absolutely not. This is the slickest easiest online checkout I have sever seen. This is a masterclass in encouraging the impulse purchase. There is even live chat support - all available from that same page.

The order delivery is equally slick. There is no logging into accounts and navigating through multiple screens to find your digital goods. Immediately after ordering you get a link to a personalised web page that has all of your games available for download. That same page even offers codes for installing your games under Steam, Impulse and several other gaming platforms.

One single web page for presales and order processing. One single page for order delivery. This is not a passing fad. This is the cutting edge of digital retailing.

I am perhaps most surprised at the price I chose to pay. I could have gotten Frozen Synapse for 1c but paying more than the current average ($4.50 or so) would get me several other games. My rational mind screamed $4.51 but in the end I paid $15. I still amn't entirely sure why. Guilt? The slickly set up order page defaulted to a  price of $25 which was I believe the original price of Frozen Synapse. Frozen Synapse is a game I have heard a lot about and I am keen to try it but I know that I probably won't play it for very long. I was never going to buy it at $25. I probably wouldn't have bought it for $15 in a Steam sale but here I was paying $15 for it in a bundle with a bunch of other games that I have never heard of. The donation to charity aspect is nice but I can't say that influenced my decision. Some strange combination of rationality (I'm not paying $25) and irrationality (I'm not going to be a meanie and pay $5) combined for me to settle on a price of $15.

I still don't understand how all this works but I have to accept that it does. Is this a new business model that overturns the naive assumption of my undergraduate economics textbooks or is this just a natural outcome of traditional economic theory in a business where manufacture and distribution cost have become almost zero? I don't know.



Tesh said...

It's a good way to capture a variety of points on the demand curve if nothing else. It's also a reminder of the psychological trick of letting the consumer "win" by setting their own price. Some will be selfish jerks, totally, but others aren't wastes of human potential. Making the customer feel important by letting them choose can be a powerful tool.

mbp said...

@Tesh I am still struggling to understand this business model but your point about capturing points on the demand curve makes sense. If you think about it in that light then even the person who pays $0.01c need not feel guilty if they genuinely wouldn't have bought the game for more.

Tesh said...

Exactly. It's also probably worth noting that this sort of thing isn't usually the *only* business model. These Humble Bundles have so far taken games that sold for a while at a fixed price point. I'm not convinced that you could start with a "pick your price" model and be profitable.