Best practices to expand your payer base in India and Southeast Asia
Discover tips to help you find effective approaches to sub-dollar and localized pricing
Authored by Ashnil Dixit, Business Development Manager, Google Play Apps and Games; Guy Charusadhirakul, Head of Games Business Development for Southeast Asia, India, and Australia, Google; and Ad Timmering, Head of Growth Insights, Google.
A growing opportunity in India and Southeast Asia
Mobile games revenue flowing through app stores in India and Southeast Asia is on track to top $10B by 2023 (Newzoo Global Mobile Market Report 2019). This presents an opportunity for developers to expand in these markets, especially as Google Play will account for the majority of this revenue.
This revenue growth is driven by the rapidly expanding number of mobile gamers in India and Southeast Asia, as well as several other factors:
- Growing smartphone penetration as phones are becoming more affordable
- Better and cheaper data connectivity
- More options for app-purchases using locally relevant forms of payment
- New genres & new approaches to monetization
In this post we focus on monetization strategies and aim to provide a guide to expanding your payer base in India and Southeast Asia, with insights from 6 developers who shared their valuable experiences with us.
Growing revenue and expanding buyer base
To address this growing opportunity, many developers are exploring strategies to grow their business and revenue in the region. Some of the most successful developers look beyond increasing revenue from existing buyers and have thought strategically about the importance of expanding their buyer base beyond traditional high-value users.
For example, GARENA INTERNATIONAL comments that “at this point, our direction is to ensure many more players can afford to buy and enjoy Free Fire’s content, rather than boosting price and ARPPU.” While at miHoYo Limited they “would prefer to have a higher buyer rate because this means a bigger pay user base. Maybe they can’t pay as much as US users now but they will catch up, and it also can share the risk if revenue doesn’t rely only on big whales.”
While a key reason for looking to expand the payer base is revenue, developers are also finding that a larger payer base drives better retention rates and lower spend volatility.
At Moonton they “have learnt that the buyer rate is very important for MOBA games, especially for the SEA market. Higher buyer rate is not only beneficial for revenue, but also for higher retention rate. That is our surprise.” While for SIAMGAME, they “would prefer a higher buyer rate. For the games with lower buyer rate, the negative effect of losing big whales in the game would be too significant.
Pricing to maximize revenue
Before we look at how you might differentiate your pricing to attract more payers in India and Southeast Asia, we want to briefly discuss why.
It is all about the theory of “price elasticity of demand”. Let’s imagine a retail store where you are selling items at 1 price point, say $70. With only one price offering, you are only able to capture the demand from people that are attracted to that value at that price point. You are not capturing:
- people that aren’t able to afford $70 or think the item is not worth $70
- the potential demand from those who would be willing to spend more.
Therefore, you would normally look to maximize your revenue by introducing offers at different price points.
By adding offers, you’re able to capture a larger portion of the area under the demand curve. In this example, by introducing lower price points revenue grows from $105K to over $360K.
Now, there are various ways to capture demand at the right price: in economics these ways are referred to as the “three-degrees of price discrimination.”
Price discrimination to drive payer growth
Price discrimination can be:
- First-degree: personalizing prices based on an individual’s willingness-to-pay. A typical example of this is an auction, or price negotiation at a car dealership.
- Second-degree: offering bundles and versions so consumers self-select based on their willingness to pay. Starbucks coffee options are a good example of this.
- Third-degree: varying prices based on customer segments. Examples of this include the onboarding pricing used by utilities and telecoms operators.
Applying price discrimination to mobile gaming
Let’s get a bit more practical and look at how price discrimination applies to mobile games:
First-degree: this approach isn’t prevalent in mobile games, as it’s very difficult to implement 1:1 pricing.
Second-degree: is used by almost every game.
Third-degree: is also common and where pricing tactics become interesting, for example with prices based on:
- tenure in the game, eg. starter packs for new players users
- payment history, eg. VIP programs or non-buyer promos
- activity level, eg. offers for highly engaged, low engagement, likely to churn, or reactivated players
- location, eg. regional or localized pricing.
Perhaps, unsurprisingly, when it comes to strategies for increasing payers in particular markets it’s that last approach to third-degree price discrimination, that of location-based pricing, that often has the most impact.
Effective location-based pricing strategies
Two price discrimination strategies are emerging as the most effective for expanding your payer base in India and Southeast Asia:
- Sub-dollar pricing: offering in-game items below the equivalent of US $1
- Localized pricing: offering in-game items at different prices in India and Southeast Asia compared to elsewhere in the world.
Localized and sub-dollar pricing are very common tactics outside of mobile gaming. For example, Spotify and McDonalds offer their products at discounts of between 40% and 80% in Southeast Asia compared to US prices.
However, games developers have resisted these strategies because of concerns with:
- Fairness: players, particularly those in developed countries — where prices might be higher — could be upset that others are getting the same items for less.
- Game balance: players able to buy in-game items at lower prices could have an advantage in the game.
- Cannibalization: players with the potential to be high value will exploit the arbitrage and therefore cannibalize revenue.
The good news is that there are many strategies that can be used to avoid these issues, including:
- Separating players in “low price” and “high price” markets using:
- separate servers by market or region
- different APKs for markets or regions
- locking players based on the IP of their first login.
2. Keeping price ambiguous to make it hard to compare by:
- pricing some items higher, others lower
- varying quantities and items in bundles
- making offers, promotions, or bundles for country or region specific events.
3. Focusing price discrimination efforts on cosmetic items, particularly, as it’s more complicated to price discriminate for functional items.
4. Differentiate experience for VIPs: price discrimination will be appreciated by new payers, but VIPs are still critical to the financial success of any game. Show your appreciation with special offers such as esports event invites and subscription benefits.
So, let’s take a more practical look at how you can implement sub-dollar pricing in your game.
Sub-dollar pricing
When introducing sub-dollar the challenge is to offer items that are perceived to have value, even though they are inexpensive, and don’t reduce the value of higher priced items.
To illustrate this challenge let’s look at a hypothetical example. Let’s suppose you sell players:
- 100 gems for $1
- 1,100 gems for $10, offering a 10% bundle “bonus”
- 2,280 gems for $20, offering a 14% bundle “bonus”
Now, let’s consider some options for introducing sub-dollar pricing and their implications:
These simple options are unlikely to have much impact, so we need to get a bit more creative.
Option 4: chance based-item
Here you don’t change the unit price for gems for most purchases but entice buyers with the possibility of a significant benefit. For example, offer a gem chest for $0.50 with most people getting 50 gems but 10% of buyers getting 500 gems.
This approach offers similar economies to option 3 but is likely to be much more attractive to players and drive up buyers, revenue, and sentiment.
Many developers use gacha to sell Indian Rupee 10 (US0.15) packages. Most users get something of similar value, but a small percentage get items of greater value.
Option 5: behavior-based offers
Here you base the offer on how a player interacts with your game. A common approach is to offer players a significant discount as part of their first purchase. For example, you might offer 80 gems for $0.50.
This approach offers similar economies to option 1 but provides buyers with higher value without the risk of cannibalization or imbalancing the game economy.
Mobile Legends: Bang Bang rewards people making their first purchase by giving them popular heroes. They do the same within each season, rewarding players for making their first purchase within each season with a rare skin. These rewards are also available to players making purchases outside the sub-dollar range.
Option 6: time-limited sale
Provide significant discounts for one or more purchases for a short time. Often these can work best when linked to local or regional holidays or celebrations. For example, you might offer players the opportunity to make one purchase of 80 gems during Holi, the popular Hindu festival celebrated during March mainly in India but also other areas of Asia.
This approach offers similar benefits to option 5, providing buyers with higher value without the risk of cannibalization or imbalancing the game economy.
Lords Mobile: Kingdom Wars often creates Indonesian Rupiah 3,000 (US$0.20) bundles that offer 2 to 3 times the normal value but for a limited period. This enables IGG.COM to expand their payer base without cannibalizing spend from regular purchasers.
Option 7: repeat purchase bonuses
This approach is to offer players a bonus item if they make a number of purchases within a specified period. For example, offer 50 gems for $0.50 but reward players that make 7 purchases in 7 days with a bonus item.
This tactic offers similar economies to option 1 but gives players an inexpensive introduction to how purchasing can change their experience in the game and also may reduce inhibition about future purchases.
In Mobile Legends: Bang Bang, 7 purchases get a popular skin. The minimum qualifying purchase can be as low as US$0.10.
To avoid impacting more expensive SKUs and encourage regular purchasing, some developers cap sub-dollar SKUs, for example, to one purchase per day or week, or per player.
In practice, developers have found that using options 4 through 7 they have been able to consistently drive up buyer numbers, revenue, and player sentiment.
Localized pricing
Let’s turn our attention to localized pricing, again taking the scenario of gem sales. In this case for players in India we might consider these options:
Again, let’s get creative and look at some better options.
Option 3: lower prices for some items, higher for others
For example, you might consider reduce cost of gems by 20% but increasing the cost of chests by 5%
This approach has the benefit of limiting the likelihood of negative feedback from players outside India, as making a price comparison is harder. You can also adjust the price deltas based on demand, for example, increase the price of in-game cash in countries where players prefer to buy cash.
Some developers vary item pricing by market. For example, country X has cheaper cash but more expensive chips. This approach can also be used to price based on demand, for example in country X users love to buy cash.
This approach deters price comparison.
Country X
Country Y
Option 4: event-based discounts
This is another time-limited sale approach, similar to the one we discussed for sub-dollar pricing. For example, reduce the cost of gems by 20% during a holiday period such as Diwali. Another option is to introduce limited time currencies — for example, Christmas Bucks — that are similarly discounted and expire after the holiday.
Players often respond well to promotions based around local events, and the ability to offer deeper discounts should help unlock payer expansion. This can expand the payer base within a particular market without impacting the overall game economy.
Mobile Legends: Bang Bang offers limited time bundles during seasonal events (they do not discount gems, but will discount bundles in terms of gem price). This can expand the payer base within a market without impacting the overall game economy.
Option 5: purchase events with lower thresholds or higher value payouts
When you run purchase promotions consider offering lower thresholds or higher value payouts. For example, if globally you give players a reward when they spend $10, give players in India a reward when they spend the equivalent of $5. Alternatively retain the same spending level but give Indian players a higher number of gems as the purchase benefit.
This approach means no difference in pricing is shown in store, which helps hide localized pricing.
For the same event, SIAMGAME offers players of BLEACH Mobile 3D in Southeast Asia greater rewards for completing each spend level than elsewhere in the world.
SEA Version
Global Version
All of these localized pricing options should boost buyer numbers, revenue, and player sentiment. However, where you want to guard against players in other markets perceiving localized pricing as unfair, using options 3, 4, and 5 can help obscure localized pricing and reduce the likelihood of negative perception.
Implementing your new pricing strategy
When you are ready to implement third-degree price discrimination in your game, these are the steps you should take:
- Choose your strategies: do you want to explore sub-dollar or localized pricing or a mix of both? Do you want different strategies by market?
- Create a test plan: which ideas do you want to prioritize for testing? How will you evaluate success? Make sure you test across different segments of users.
- Test and learn: what worked and what didn’t? What did you learn?
- Iterate: don’t expect to hit the jackpot on your first attempt. How will you adapt for the next round? Also, remember to retest periodically to understand changes in the demand curve.
Final thoughts
In this post we’ve looked at techniques for price discrimination and focused on why localized pricing is an effective approach to expanding your payer based in India and Southeast Asia. However, we have also examined why simple approaches to sub-dollar and localized pricing may not be effective and suggested a number of potentially more effective approaches.
By implementing strategies to adjust your in-game pricing for India and Southeast Asia you can capture more of a consumer’s willingness to pay. However, making the right pricing decisions requires an understanding of user demand and the ability to test and learn. Remember, untested attempts at price discrimination could lead to less revenue.
Useful resources
If you want to learn more why not check out the Games Business Fundamentals courses on the Academy for App Success, in particular the Price discrimination and merchandising in mobile games lesson.
