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Virilneus’ GS4 Idea Book » 2008 » August

Virilneus’ GS4 Idea Book

August 7, 2008

An Open Letter to Simutronics

Filed under: Uncategorized — Virilneus @ 6:18 pm

One doesn’t have to look far to see far more successful games out there, I am surprised you’re not doing more to emulate them, your business model stinks.

The hard costs of running an IT business have dropped by ridiculous amounts since GS3 launched, but prices have been steadily rising since the move to the web. Bandwidth is cheaper now, hardware is cheaper, and skilled employees are cheaper. There is no longer a shortage of IT workers.

You, as a company, need to hire more people with business degrees. Does anyone with an MBA work for Simutronics? I would be very surprised if they did, you seem to hire programmers or fans and eventually through seniority they end up in a position like project manager with what experience exactly? What training? (no offense to any former or existing PMs, but lets be honest here).

If you did have such people working for you, I think they would tell you what I am telling you now.

You need to sit down and figure out what your fixed costs are, and what your variable costs are. Your fixed costs are the costs it takes you to run your business regardless of the number of customers you have. Your variable costs are what it costs you to serve your customers. Your fixed costs do not go up when you add more customers, your variable costs do. So what you need to do is figure out the incremental variable cost for each new customer, what does it cost you to serve one additional customer.

Then that has to be the point at which you work on pricing.

Your pricing model stinks. The ideal business situation is where you charge everyone exactly what they’re willing to pay, optimum pricing. A common example is that if you’re selling hotdogs on the street and someone is starving and has $10 in their pocket, they may be willing to spend $10 on one hotdog, someone else may merely be looking for a snack and not think it is worth it to spend more than $2 for something on your cart. If you can charge the first guy $10 and the second guy $2 you’ve hit optimum pricing. You lose no revenue by under pricing, and lose customers by over pricing.

You guys do fine with the $10 people, but you do crap with the $2 people. Your game is just too expensive for some people, I’m not one of them, I go to every pay event and have multiple premium accounts, but some people can’t afford it. This is where knowing your incremental variable costs comes into play. If you can service a new account for $1, why not only charge $5? Better to get $5 for a customer than $0 because they don’t play.

Many, many, many, many, many games, software providers, and other online services make money with a free basic level of service and then charging for upsells. You get someone using your service and you nail them on the upsells. Get them addicted, them charge them for more features. That is a business model.

You could, indeed, have a free level of service subsidized by incentivized affiliate programs. Allow people to play for free if they complete enough affiliate offers through an incentivized affiliate network. In your affiliate links you pass a unique identifier for the customer account, in the reports that is passed back to you. The software portion of tracking such things is as such very very simple. There are free websites out there that make seven figures monthly off of things like this. It isn’t small potatoes.

For free or cheaper ($5) levels of play I would recommend limiting to 1 character per account, and forcing them to stay in a player start city. No traveling. To travel, they have to buy the upsell. Also, no type ahead lines, a weaker assist queue, etc. Maybe even a lower character item limit to encourage those who would merely use them as lockers to buy the upsell.

You also need a realistic referral program. Your best method for gaining new customers is referrals from existing customers. Do you even still have that ridiculous referral program? Everyone who refers someone in a month gets their name entered into a hat for a free alteration? Ohhh… a chance at a free alteration, that’ll get me to push this game on my friends.

It costs you nothing (nearly so) to give away free premium points for referrals, not just to “the lucky winner” of the monthly raffle, but to everyone who refers a paying customer to you.

Give everyone who refers a friend 100 (or more) PPs if the friend continues playing after their trial. Give them 10 pps per month for every month their friend remains a paying customer. How hard is that? Now only do you then encourage people to refer their friends, but you encourage them to make sure their friends stay active, they give service beyond the sale. Maybe 100 pps for a referral, 100 more when they end their free trial, 100 more at 6 months. Then 10 a month after that.

Finally, your free trial needs to be longer, 90 days. You should know your own game and you should know that the single cause for people continuing to play is attachment to the character they create. You can build 3x more attachment in 90 days than you can in 30. For necessary reasons do not allow transfers of characters off of free trial accounts, or accounts less than say 6 months old, unless it is a premium account.

Understand this, your eggs are gradually going into fewer baskets, and that is not desirable, you want a large customer base, broad bases are stable. Understand that interaction and communication are one of the main draws of this game, and having more players increases opportunities for those things, for everyone. Understand that many areas of the game seem like ghost towns because of the low population, and that such things encourage other people to quit, which results in a spiraling problem that has gotten out of control.

Gemstone does not have to die, you’ve survived passed the dawn of graphical competition and are still here, but you need to make changes.

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