Perceived Value, Red Ocean And Pencils

Equilibrio is out for 16 weeks now and despite good reviews (from both press and users), highlights from Apple and quite high production values for an iPhone game, our title only sold only a few thousands units so far. So what's happening here? Let's try to analyze this.

Personally I find it hard to find good games in between the thousands of apps that are barely games at all on the App Store. And I find it even harder to find games targeted towards core gamers with depth and challenge. Most of the games I tried can be finished in less than 30 minutes. With Equilibrio, we tried to make it different.

From our experience a new release such as Equilibrio has to compete with thousand of games in a saturated market (older games don’t vanish of the shelves) and they poison the competition off with low priced (or free) titles of varying quality. Professionals compete directly with hobbyists in what businessman call a Red Ocean (red because of the blood spilled by the sharks bites competing on the same market).

To be honest our problem with Equilibrio is not visibility (at least when we launched) but instead how users value our product compared to others and this is something I’d like to discuss in a more general way.

We are selling Equilibrio 3.99$, the same price users pay for a few minutes song or a coffee in Starbucks. Putting this in context it is clear that the game has a pretty honest price as it provides at least 4 hours of rolling ball entertainment, several games modes, trophies and a lot of stuff most iPhone games don’t have. Unfortunately most of the comments we get from the community of players on the iPhone are: “This game should be sold 0.99$!”.

Luckily enough, we have the chance to have nearly the same game on both Wiiware and iPhone platforms and users on Wiiware are not complaining about the price and the game is doing great in terms of sales. In fact they think the game perfectly matches the price point for the content it provides (and it is sold 4.99$ so 1$ more than the iPhone version).

So why are iPhone players are asking for the 0.99$ price?

Perceived value!

A general trend exists on the App Store, I call it Hooking! The developers try to hook customers with a low price, to get noticed on that saturated market (remember red ocean). This price is often below what the game costs to the developer. For some of them it is a marketing strategy and for others it is the only way to cover some of the costs involved.

I will use the analogy of pencils. You can find very common pencils you can buy for 0.20$. They are cheap, do the job but most the time they are ugly, they leak and you cannot refill them (you have to buy a new one after 2 weeks). For this type of pencils, the manufacturers makes a 0.01$ of margin on each pencil and has a break event when selling millions of them. On the other side you have prestigious brands, with refill systems, left handed/ right handed dedicated pencils, anti-leaking systems and are often rock solid, you can keep them for 10 years.

Following the analogy, everybody on the App Store (98% of applications released each day) are like the multi-million pencils manufacturer. Unfortunately only a few break through that category and the second type of market simply doesn’t exist at the moment (and it seems it will never appear).

Not having an alternate market puts every developer in a downward spiral which will lead all games on the iPhone to be of lower quality to cover costs while consumers being very careful when buying a game without trying it first.

So there is one question to ask: how can it be changed?

Here are few hints and current discussions about ways to get out of the mass or how developers perceive how we can change the system to make it better:

From the point of view of Apple:

- More complete and strict submission process to avoid application pollution.

- Internal rankings/ratings regarding the production values of the title and appreciation from a dedicated staff in regard of the price point.

-  Support trial versions instead of Lite Edition (there is a big difference at the moment).

- Old apps get removed from the App Store following several rules.

From the point of view of developers:

- Quality labels for higher production values games in terms of quality, time and content isn’t a new idea. NGmoco:) and Steve Demeter (the creator of Trism) are currently trying to build such systems and platforms.

-  Diversify distribution channels: for example maybe some operators would be interested to bundle some of the best games in a promotional package (it is already the case with other mobile manufacturers) thus increasing the revenues generated.

-  Flooding? Some suggested flooding the App Store with cheap and low production values games to get their bigger games noticed.

-  Better trials versions? iPhone surprisingly followed the PC/Mac casual games business model. The big difference for the developer on the App Store lies in the visibility and price. In the casual market, there isn’t only one portal selling your game. This said we still have a lot to learn from the casual market and analyze what are the key elements to increase the conversion rate between lite and full editions.

- Episodic games following a 0.99$ price point tag.

It’ll be interesting to see how Apple manages the App Store in the coming months. For us a better and clearer border between quality titles and more hobbyists projects should be created to keep the platform interesting for everyone.

Getting back to Equilibrio we’ll try to stick at our current price for now, invest in partnerships and some of the elements listed above. We will see how the market evolves in the following months but don’t forget that the iPhone is still in its infancy.