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Why and How Premium Currency Subscriptions Can Boost LTV
Delving further into the premium currency subscription model, and how it can help raise LTV
February 12, 2016
8 Min Read
Conversion, Retention, and LTV
When discussing conversion and retention, there are two consistent observations generally taken as truisms in app and game monetization. Number one: good retention is the key to a healthy and increasing player LTV (lifetime value). And number two: once a customer pays, they are not only more likely to be retained but also willing to pay again. Thus the first conversion, or getting someone to make that first purchase, not only drives revenue but is critical to creating a regular paying customer.
In a recent blog post I mentioned the fairly current game Heroes Charge, and how I felt its ingenious method (the premium currency subscription) for converting a non-payer into a payer is not yet often used in mobile games and probably will be, or ought to be, soon - at least for certain types of games.
For this article I’ll delve into what they do a bit deeper to find out why this is effective for both conversion and retention, and what types of games or apps can best make use of the feature.
The Standard Convention - Tiered Buckets
Most games, for years now have offered fixed, tiered buckets of premium currency IAP with increasing value for the more expensive tiers. This makes sense and is still used today. Most of the time the premium currency is used to break the natural gating in the game, whether it’s timers, energy, or progression (in the form of gated content or useful items - permanent or consumable).
The Newer Twist
Heroes Charge (released late 2014) introduced another type of IAP to its game in tandem with the tiered buckets. I’m using this game as an example not because it’s necessarily the first game to do it, but is a very successful example and one that’s actually snagged me, too.
As of mid-2015 the game was offering a single subscription price point, and has since switched to offering several, in all likelihood because it’s proved to be very popular for them. Their subscription was set up like this. For only $2.99 you could buy daily influx of premium currency for 30 days. They also gave you a starting cache of gems (300, which helped right away) plus a bonus for being a VIP, then every day for 30 days you’d get 120 extra gems. This amounts to roughly 4000 gems in total, for $2.99. Now if you were to buy that amount of premium currency outright as just a gem pack, it would cost you about $40 for that 4000 gems. So the value is immediately apparent, because right next to it are the fixed tier buckets. At a roughly 92% discount on premium currency vs. a similar fixed tier, that’s quite the disparity. Not coincidentally at all, the bonus amount is also enough for a player to spin for one new hero immediately, and then again a new one approximately every 3 days. Further, if they save and buy 10 hero spins at once, they’re guaranteed at least one, and likely come away with several.
Why I Bought In
On a personal note, when I first started with Heroes Charge I was constantly exposed to the new and rarer - and better all around - heroes, and of course the gatcha-like spin system. Then after briefly becoming familiar with the fairly solid and responsive gameplay, and also figuring I’d probably stick around for awhile, I was actually told via word of mouth from other players that this subscription thing is the way to go - that it offers the best value and allows, at a minimum, frequent free spins, or at maximum, for you to easily save up for the 10-spin purchase. So when I perused the marketplace the value was evident, especially when seeing this option next to the fixed tiers, and I was sold. Both during the subscription and re-subscribing again it felt like an acceptable cost, even if my spins didn’t always net me a great hero.
Since That Worked So Well...
In fall of 2015 the game started offering more varieties of subscriptions, a 7 day for $0.99 (roughly 90% discount), 90 days for $8.99 (~94% discount), and a full 360 days at $29.99 (yep, ~96% discount). This is huge.
So why did they introduce the subscription in the first place? Two main reasons - conversion and retention, and it helps amazingly with both. Here’s why. For retention, as a player, knowing you are committed to coming back each day in order to make good on your purchase helps you stay active in the game, even if you only come back for the currency. And, to the extent you felt you got a decent value for your time played, you will have much less trouble buying again. Secondly and potentially no less important, coming back every day is habit-forming, and that’s never a bad thing for increasing revenue through retention.
To understand how it helps with conversion, it’s important to start with the theme and real goal of the game, at least in this instance: collection. Collect and grow a group of 5 powerful heroes from hundreds of varying rarity, and battle through the campaign as well as each other for supremacy and bragging rights. So, a collection of heroes. If the goal is to collect, one key and by far the easiest way is to use your premium currency to spin for a new hero, and the game is fairly generous with their premium currency already, since it’s offset by the chance of finding something rare and new (especially as you progress). In addition, if you opt for the bulk pack of 10 spins at a time, the 30-day subscription happens to be plenty for this, plus adds about one third more toward the next bulk purchase.
So why do people convert and buy the subscription? Two main reasons: first, the value is apparent and dramatic vs. buying static tiers or other bundles of premium currency (and both should be presented for this very reason - one as a reference anchor and the other as the value bait or proposition). Secondly, they have a reasonable understanding of why they would want to use it, a desire to use it (in that the payoff is tangible and immediate), and are able to use it or a part of it right away (if wanted). For example, with the 30-day card, Heroes Charge provides 300 bonus gems as a base, then more depending on a player’s VIP level (or essentially, their dedication to. This is enough to immediately purchase one free Hero spin. Due to the collecting aspect of the game, a lot of people actually also use this (speaking from experience and talking to other engaged guild members who’ve recommended this approach) to refill their energy in order to collect shards (which can be saved to buy or upgrade heroes. Even at the lowest tier subscription ($0.99 for 7 days @ 100 gems / day) players are still able to get daily value from the purchase.
How to Make Premium Currency Subscriptions Pay Off
The following are just a few suggestions for how to use subscription IAP effectively, though it’s certainly not exhaustive, and many creative approaches await to be found as the model evolves:
Use in games where the players are treating premium currency to purchase consumable items. For example, saving up for a spin to try and collect a rare item? Have troops you need to build to support your guild that can be sped up once per day and put to good use? Timed duration boosts you need to purchase? Energy to replenish? Important timers to speed up? Consistent donations of currency toward a common cause? Try the subscription.
Pair it with standard lower value buckets for maximum effect. The perceived value will rise and potential paying customers will be much more apt to bite. This is called reference pricing - and is something most all of us have encountered. Here’s a good description at Psychology Today. At the root of this is a cognitive bias called anchoring.
Insert it into a game with an existing social or competitive structure - that is, it pays for others to view your collection or town or characters in some way so that you can show off. This provides a lot of incentive for progression.
To summarize, a subscription model can be very effective at two things, if valued properly: first conversion, and retention - two key ways to maintain healthy long-term revenue. But it needs to be inserted into a system where players / users will understand the value and then consume what’s provided in the subscription - if this cannot be the case (whether it’s content or premium currency), then there’s no value proposition for the customer. Thus whether it’s premium currency or content, it must go hand in hand with the main goal of the majority of players or users: either to increase a collection, and/or to progress. In either case, in a F2P model there needs to be a sizable advantage to subscribe over buying static amounts, in order to incentivize and convert. Thanks for reading.
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