Do bulk discounts for virtual goods work?

A new economics study conducted by the University of Chicago indicated volume discounts usually fail to persuade mobile gamers to make purchases.


(Click image to enlarge) 
Credit: Steven Levitt and John List

The analysis of 14 million mobile gamers who played titles from King Digital Entertainment, maker of Candy Crush Saga, revealed volume discounts associated with the purchase of virtual goods often have little impact on profitability.

In addition, the study showed these discounts rarely, if ever, lead to a rise in customer purchases.

  • The availability of quantity discounts had virtually no effect on the number of gamers who made purchases. 

  • Customers who made infrequent and small purchases usually spent more when they received quantity discounts. 

  • Some consumers who made small purchases were discouraged from doing so when large quantity discounts were available. 

Clearly, discounts may represent an inferior option for mobile developers to monetize their offerings, but many viable alternatives are available. 

App-install ads, for example, may provide significant return on investment (ROI) for mobile developers. Business Insider Intelligence has estimated that 25 percent of total U.S. mobile ad revenue was generated by app-install ads in 2015, and the effectiveness of these ads may lead many developers to deploy them in the future. 

Of course, providing end users with a reliable app remains a top priority for many mobile developers as well.

A Nov. 2015 report from IBM and Forrester Consulting showed 55 percent of consumers defined a "great" app as one that does not crash, freeze or display an error.

Also, the report indicated great apps add six points to revenue across websites, app stores and other digital channels.

"In order to win, serve and retain customers with a mobile app, organizations must understand what customers expect and align their development efforts and investments to meet those expectations," IBM and Forrester Consulting wrote in the report.

For more:
- see the report

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