Premium Currency vs Real Money Purchase

I’ve just written a reasonably long post on a LinkedIn group that I now realise only has 36 members. Since I think my Words and Opinions are Important, I wanted to share it to a slightly wider audience.

The question was on the use of virtual currencies vs real money in-app spending…

[Has] anyone run into any good public domain discussion of the tradeoffs involved in one approach rather than other, and how best to combine them?

I don’t think I’ve ever seen a proper discussion around when to use hard currency and when to real money purchase (RMP).

I’ve read a few behavioural economics books that suggest that people feel the “sting” of a purchase less the further you can abstract it away from cash (why buying an expensive thing on card is less painful than counting out dozens of ¬£20 notes). I think Predictably Irrational might be one of them, the other is Happy Money.

Another benefit of virtual currencies is the trick of selling currency in different denominations to the amount it’s used (for example selling a 1,000 Gold bundle, when the most expensive thing the player can buy is 900 Gold), leaving them with unused currency they feel they should use. Personally I think this is quite a dirty trick and I know certain audiences are very wise to it and turned off by it, but again I’ve never seen any research to suggest how negative a reaction this would get.

Yet another benefit would be that a currency transaction can complete without friction as long as the player has enough currency. Whereas a RMP will almost always go through some kind of “are you sure?” / password flow that would introduce friction (and depending on where the purchase is happening in your game could cause problems – for example in the middle of a multiplayer firefight you wouldn’t want to be asking for passwords).

Benefits of RMP would be that you’re guaranteeing a conversion (rather than players using stored up currency). This is the thinking behind “coin doubler” style purchases – they make sense as an investment for a grinding player who otherwise would’t spend.

Using RMP for bundles of in-game items, or “early bird” bundle sales also makes sense in terms of trying to encourage that important early conversion to switch the player’s self image over to “I’m the type of person who spends in this game”.

Another downside of RMP on a lot of devices you’re limited as to what values you can choose too – for example on iOS the cheapest an item could be is $0.99 – which could make them very bad value. I think this is why you rarely see RMP used for consumable items, whereas it’s used more for durables – the value proposition. Also running discounts on RMP is slightly more trouble, as you have to create two identical items with different costs and point players to the correct one, rather than just removing a different amount of currency.

Would love to hear there peoples’ thoughts on this stuff.