What the Humble Bundle teaches businesses about pricing online products
Wednesday, June 27, 2012/
When it comes to getting consumers to pay for stuff, game developers are light-years ahead of the music, media and movie industries.
Some of the reasons for this are technical solutions not easily replicated to other types of goods. But one nifty and widely applicable pricing model caught my eye a few weeks ago.
The Humble Bundle consists of five games made by small developers, bundled together and sold for whatever customers are willing to pay over a two-week period. That’s right: a customer could choose to pay one cent if they wanted to. But most didn’t. They paid a small fortune. More on that later.
Customers didn’t just decide how much to pay, they could also decide how they wanted to split the money they did pay between the game developers, the Humble Bundle team, and one of two charities.
There have been five Humble Bundles so far, and the last one concluded three weeks ago. It bought in $US5.1 million in sales with over 600,000 bundles downloaded in the two weeks it was running.
Not bad for a couple of independent (ie. small) developers. How did they achieve this?
Of course, the Humble Bundle team had a feel-good aspect with the charity donation, but they didn’t rely on well wishers. Customers who bought the Humble Bundle got five games regardless of what they decided to pay. However, customers who beat the average price ($9 when I bought my copy) were given an extra game.
In Humble Bundle V, the extra game was Bastian, a colourful 3D platformer that came from nowhere to achieve critical success in 2011. It had name-recognition, and while most gamers were willing to take a punt on the other games (and some were very good), Bastian was the one many really wanted.
Humble Bundle V wasn’t only the most successful Humble Bundle, it was also the highest-earning pay-what-you-want sales model ever run, according to IT insiders.
The pay what you want option was almost a ruse; if you had the money in your bank account, the odds were on you paying much more. And in the end, you felt that your loyalty was rewarded with a really cool game on top of all the others.
Like all auctions, the Humble Bundle also engendered the fear that if you didn’t buy now, the average price would rise. I put it off at first, and then came back two hours later, when I realised the price was only going up.
Clever huh. The Humble Bundle shows how much innovation in pricing the internet can allow. Here’s hoping businesses keep experimenting.