Friday, March 26, 2010

How The DDO Exchange Rate Discourages Impulse Purchases

Massively has a post on playing DDO for free, which got me to take another look at the game, in particular the cash store that has helped their revenue out so much.

If there's one thing I hate as a gamer who prefers to stick to a budget, it's paying the same amount of money but ending up with less stuff because I didn't spend the money in the correct way. Unfortunately, DDO has my biggest item store pet peeve in this department.

Punitive Exchange Rate
Like many item shop games, DDO offers a better exchange rate for players who buy their currency in not-at-all micro portions. For example:
- Spending $50 gets you 5000 Turbine Points, the same exchange rate as Sony's station cash, and, incidentally, an easy to calculate cost of 100 points per dollar.
- Spending $6.50, the smallest increment Turbine will accept, gets you only 420 points, a mere 61.5 points per dollar.
In other words, the penalty for buying in the smaller increments is 1923 points (38.5%) if you spend $50 at the bad exchange rate, or a bit over $31 if you want to eventually get to get to the same 5000 Turbine points at the bad exchange rate.

Let's be clear here, they do this because they believe that making players carry a balance in their wallets helps trick players into spending faster than they intended to. The practical effect, though, is an exchange rate so punitive that it makes zero sense to pay them any money unless you're willing to pony up the full $50. Clearly, they believe this is worth it from a business perspective. But does it cost them something?

A Purchase Opportunity Lost
Let's say I wanted to jump in and try the game, but I decided that I wanted to play some exotic character like a Drow Monk. Both the race and the class are premium content that I would need to unlock to play, but I'm relatively willing to tolerate one-time fees like that if they're provided instead of an upfront fee for the game box. If I was able to get the good exchange rate, I'd be happy to sink $15-20 into the game for a starter package of sorts. Unfortunately, the way the store is set up, that would basically be wasted money if I ended up sticking with the game. So, if I do try DDO, it will probably be as a non-payer first, using a free-to-play character class/race.

Turbine can lose in several ways here.
- First, it might turn out that I would have hated the game no matter what, in which case they have basically declined to accept $20.
- Second, it might turn out that I never find a class that I like, but that I WOULD have stuck around and ultimately become a customer if only I had been able to play the class I wanted to play. (This may be less likely, but sometimes the class you play can really affect your enjoyment of the game - I've tried something like 18 of EQ2's 24 subclasses, and hated about 2/3 of them, with only one that I really love so far.)
-I might stick around but, after playing enough to decide I'm willing to invest in the game, decide that I no longer need that premium race/class. Maybe I'm happy with the character I started playing.
-Worst of all from Turbine's perspective, maybe I'm happy with the way the game treats non-paying customers and decide I don't need to spend at all.

Unfortunately, it appears that amount that Turbine and other item shop companies can extract from MAJOR impulse purchasers far exceeds what they can get from the little guy. They can even afford to blow the exchange rate through the roof for the occasional buy buy buy now now now sale (an additional 38% bonus, but only on the $50 package), because the kind of player who will jump on that deal is the kind of player who will use up the bonus cash and buy more at full price down the line. It's okay if this part of the model scares off the occasional cost-conscious consumer like myself, as long as they can make it up through the big spenders.

This, of course, is the kind of thing that has players distrusting item store games and playing it safe by sticking to the subscription.


  1. I've played DDO since September and had a lot of entertainment. I made one purchase of points for $49.99.

    It's really good value for me for two reasons. First I've used the points well, earning a lot of free points by maximising my favor across various alts. I've certainly earned more points than I've bought. Also I only spend them on stuff that is discounted. I'm not an impulse buyer.

    Next it's effectively a lifetime sub. I don't expect to ever give them money again. I have about 500 unspent points for if someone says "let's go here" and it's one of the packs I don't own. That will probably recharge at the rate I spend it.

    Also it's very nice to have the lifetime mentality rather than the sub mentality for at least one of my games. I don't need to play DDO, in fact I'm rather hooked on AoC right now but it would bother me if I were paying $15/month to not play it much.

  2. I think the future of the "free to play" system is not so much DDO's item shop as the "chapters" approach of Guild Wars.

    You pay not 1,00$ or 5,00$, you pay some 40-50 bucks for a standalone "expansion".

    This is fair, and very good for the players. But I think the reason why this model has not been copied yet is that companies believe and probably really make more money with the shop. Because 50$ are effectively are already a 3-5 months sub, depending on the game.

    There is also always the danger of greed with item shops. Allods is an example for that.

    I would like to see more macro-payments for expansion-sized content. Hopefully Guild Wars 2 will do that.

    From a customer perspective I can hardly imagine a better model.

  3. I spent $10 or so (I forget. it was on sale) to unlock the Drow and haven't felt I needed to buy anything else. Despite the poorer exchange rate I got, it's been an excellent value for me.

    Like Jaydub, I appreciate the fact that I essentially have a lifetime sub to the game. I play it when I get a wild hair (usually a few times a month), and I never have to spend any more on it if I don't want to.

  4. It's a matter of perspective, I think. Are they penalizing people who want to pay less, or are they rewarding people who want to pay more? The future value of money means there's a specific business reason for wanting people who are going to spend money to spend more up front.

    As I've said many times before, it's a question of if you believe in the game company. If you believe that Turbine is only out to screw you, then perhaps you shouldn't do business with them. It's up to you to make smart decisions and support the developers who make games you appreciate. Personally, I like the option to try out a game without making a major commitment. Then again, I'm playing LotRO, but I only got into that after my friends decided to give it a go.

  5. I agree with you. I'm a new player on DDO. I would buy a few things that are currently on sale, but I'm not prepared to spend $50 on the game right now.

    When I looked at the prices, and realized that the sale price is 25%off but the points are 35-40% more to purchase in smaller quantities, I decided to delay buying.

    That delay may mean that I don't ever spend money on the game. I may tire of the game before then, I may earn enough favor to be able to buy what I want without spending money ....

    Instead of getting the $10-$20 I'm willing to spend now, they run the risk of not getting any money from me.

    I understand rewarding those who spend more, and that's probably desireable. But for someone like me it makes more sense to reduce the difference, as rather than encouraging me to increase my purchase to $50, it caused me to change my mind and not make a purchase.

    Perhaps the best implementation of some kind of reward for spending more money would be to simply give a bonus when the account spends $50. Then when several $10-$20 purchases have been made, I would be encouraged to spend that extra $10 that gets me the bonus.

    I will probably eventually spend $50 if I continue to enjoy the game as much as I am now. But my method of spending is to spend it in smaller chunks. And I know some players who probably can't (or shouldn't) spend that much at one time.


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