User acquisition expenses and production costs have risen sharply for free-to-play (F2P) games, causing their success to be more and more dependent on the longevity of their players. Therefore, increasing the lifetime value (LTV) of players has only grown in importance.
The task for product managers is clear: engage your players and retain them as long as possible to maximize LTV. To accomplish this task, product managers can’t afford to solely rely on selling standardized hard currency packs priced between $0.99 and $99.99. Special offers for new players, non-spending players, advanced players, expert players, specific offers for in-game goal achievements are crucial to extending LTV.
Additionally, live ops are needed to keep things fresh for aging players, prolong the life of existing content, and give players ways to engage with the game between major content updates and feature additions. Common ways to keep players interested are events, tournaments, challenges, changing rewards, etc. These tactics are usually accompanied by offers allowing the player to purchase additional in-game currency and items to prepare for a tournament, or replenish currency spent during a tournament.
Typically, games provide only a single offer per offer category (conversion, expert, event, tournament, holiday) to the entire player base. There is however an opportunity for product managers to target different player cohorts with bespoke offers. Below are 4 reasons why this is so valuable.
1. Impact on Offer Conversion
Willingness to pay (WTP) is the maximum amount an individual is willing to sacrifice to procure a good. In the context of F2P gaming, indicators for a player’s WTP include in-game progress, earning and spending behavior, platform, device, user acquisition channel, and many more. 1-2 of these parameters alone create player ‘thumbprints’ that can be assigned to different spending profiles. These profiles can help product managers determine which offers to present to which players. It all comes down to who-sees-what -- think of targeted advertising and maintaining ad-relevancy for different segments.
For example, Conversion offers (aka starter packs) are a popular way to get players to spend their first dollar. A typical starter pack in a mobile game costs $7.99 and includes hard currency, soft currency, and a valuable item. Such offers usually get triggered very early in the game, for instance when a player finishes the tutorial, solves the first quest, or wins the first match. If the player doesn’t convert on the first go, the offer is triggered again later. Here is the problem though: a price of $6.99 is only suitable for a subsection of players. Many players will be priced out at $6.99, while other players would happily buy a bulk package with a higher price tag but greater value. However, if the game had a “Beginner Offer” for $2.99, the previously described “Starter Pack” for $6.99, and an “Intro Special” for $12.99 a much broader range of player WTP and value perception would be covered. This method will lead to increased conversion since each player will be presented with their optimal offer.
2. Impact on LTV
A player’s LTV is highly dependent on the first purchases they make. For any given player, the specific items they purchase, the price point of those items, and the time between purchases establish a spending behavior and trajectory for their LTV. But, if you begin the first session with a $9.99 starter pack many players will be priced out, and their sense of the game will be that it is too expensive. Clearly, this is detrimental to LTV. However, if the game leads with a $1.99 starter pack, the game publisher is most likely pursuing an unsustainable LTV. It would be better to have a variety of options targeted at different player personas. For example, establishing a repeat purchase price of $10 vs. $5 early on in a player’s lifetime helps to manage the expectations of that player towards higher spending. Additionally, targeted offers don’t only help convert a higher number of players, but additionally lead to higher LTVs, thereby multiplying the conversion boost with the LTV boost.
3. Taking Advantage of Different User Acquisition Channels
When it comes to player profiling, all parameters that can be attached to a player’s persona before he/she even starts playing a game are particularly valuable since they can inform optimization decisions that impact a player’s game experience from the very first moment he/she enters a game. Often, too much emphasis is put on determining location (country). Location, however, is a very weak optimization indicator because both non-affluent (likely non-spenders) and very affluent (potential whales) players share the same location. Optimization by location is therefore not recommended because pooling all players from Russia, for example, and treating them differently than all players from the US based on the assumption that the average Russian player is less affluent (GDP suggests that) will not work. Eager spenders in Russia will be met with a very counterproductive experience. A player’s platform (iOS vs. Android, Playstation vs. Xbox) is also immediately available information. There are benefits in using platform as a determining factor because, as a whole, certain things hold true, such as the average iOS player generally spends more than the average Android player.
The user acquisition (UA) channel is much more interesting. Generally, there are 4 categories:
- Organic traffic -- the player finds the game on the app store
- Cross-promotion -- the player finds the game through a cross-promotion ad in another game by the same publisher
- Low-value ad networks -- the player is acquired through a relatively cheap network with limited targeting capabilities
- High-value ad networks -- the player is acquired through an expensive network with advanced targeting capabilities
Players that are sourced through different UA channels should have their own gaming experiences with bespoke offers so that the publisher takes advantage of both the high-quality (expensive) UA traffic and simultaneously ensures that the less promising players are still properly served. Ideally, players that come through different UA channels all have their own 'promotional journey' with a succession of offers that are suited to their player profile. This method allows the PM to a) take full advantage of better UA traffic and b) channel more money back to the performance marketing team, allowing them to buy more of that great traffic.
4. Broadly Applicable
Offer targeting is not only applicable to starter offers. PMs can substantially improve the performance of all types of in-game offers with targeting. 'Second offers,' meaning the special offers presented to players after their initial purchase, really benefit from targeting. A lot of information is gathered after a first purchase (the price point the player spent the first time, how long since the first purchase, how much in-game progress he/she has made in between) and each data point represents an opportunity for targeting.
Other examples are expert or VIP offers that are given to advanced and/or high-spending players. These can be special-event or holiday offers that are highly seasonal and only available for limited amounts of time. Other targeted offers can accompany tournaments and challenges, or be presented to lapsed or returning players to reengage formerly active players/spenders.
As a final thought, in many ways a F2P game is 10000 x 10000 Excel sheet with an almost infinite number of optimization problems. The vast majority of these problems possess so many different dimensions that they likely can’t be solved economically. However, offer targeting is solvable with machine learning and multi-armed bandit testing and can increase the value of the game for both the player and the developer.