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What The Games Industry Needs To Learn From Online Retail

If games are less product, more service, we need to think about monetization in a different way. Specifically, in addition to designing games to encourage in-app purchases, we need to adopt the techniques used by other online services.

Sometimes it's hard to to let go of a particular worldview. And that's certainly the case when it comes to the games industry. Over the course of many, many years we've got used to the idea that the game is a single, finished product. And as with other products, ones that are well-made, targeted and marketed succeed. Those that are not don't.

Of course that take on the industry was entirely accurate - until freemium came along. Now it only paints half the picture. The modern freemium game can be seen not as a product, but as a service - an always-changing entertainment experience with which I have an ongoing relationship (one potentially without end, but that's for another day). 

That in turn means that success is no longer solely dependent on how 'good' your game is (although that's still a necessity). Handling the service aspects of the relationship is equally important if you're looking to maximize your in-app revenues. And to do that effectively, we can learn from another industry that succeeds or fails based on the quality of that interaction: online retail.

Just as in freemium games, online retail succeeds by turning eyeballs into revenue and one-time purchases into maximum life-time value. And here's how:

Retention

If you're a first time visitor to a particular site, likely as not you'll have an experience that reflects where you came from. But beyond that element of personalization, every aspect of your first interaction with a site will have been tested to destruction to ensure the highest possible levels of discovery and lowest possible levels of frustration.

Discovery is good because making users aware of the full value of the offering encourages them to stick around. And I don't need to explain why frustration is bad. The UX and testing resources these organizations put into ensuring it doesn't happen are - from a games industry perspective - colossal.

Conversion

Put something in the shopping basket at most online retailers and then fail to follow through with a purchase. Chances are you'll receive a communication both within the site and outside it (via email) that either encourages completion or offers alteratives that you may find more interesting.

And the longer you stay on a site, and the more it knows about your behavior, the more personalized the experience will become. The idea of a 'one size fits all' experience would be laughed out of town in these organizations. The intention - always - is to continue optimizing experience until the right offer is put in front of the right person and the right time. The result is conversion.

Lifetime Value

A first purchase is just the start. Most online businesses struggle with generating repeat purchases - 'one time' customers might total 40 to 50% of all new customers. Their response is  fanatical focus on repeat business. Targeted email is just the start. Loyalty programmes offer another reason to stay. Unsolicited (targeted) free gifts can help strengthen the relationship. At each stage, you can guarantee that every action and programme has been tested and tuned until lifetime value rates - for all customer segments - are as high as possible.

And Games?

So how does the games industry compare? Firstly let's accept that the analogy isn't perfect. There's a difference between visiting a site and installing an app for one thing. But neveertheless, I think it's fair to say that almost all these techniques will eventually be applied to gaming - sooner rather than later.

There's a tendency - because of that 'DNA' we touched on earlier - to think of monetization as something we 'product' our way out of. But we need to take a few tips from online retail and use the tools available to us (testing, in-app messaging, push notification etc) to make that happen.

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