Red Rants: A Round of Capitalist Applause for Valve

Marketing Magic

In which Red takes his hat off to Valve’s marketing team.

A friend of mine, who came to PC gaming late, hit me up on steam today about a game deal he’d spotted in the sale. He’s a very conservative gamer- he’ll only buy games months after release when they hit the cheaper sales, and he’s happy to be well behind the curve. He’s already spent more than what would otherwise be 3 months of his gaming budget in three days. His exact quote?

“This is my first steam sale, it is….. cruel…”

Like all gamers, I eagerly await the Steam sale. Since I had a laptop capable of running Steam and the will to play games on it, I’ve spent a fair deal of dosh (according to the steam calculator, $1464.89, though that doesn’t include sales, bundles or gifts) on PC games, a large amount of which I’ve never played and some of which I never will. I have enough games here to last years, yet why do I keep buying them? Why do we get so excited about the Steam sale, but never about the Gog.com or Amazon sale?

I reckon it’s because the way Valve conducts its business is one of the most brilliantly constructed pieces of marketing I’ve ever seen. They’ve taken what is, let’s face it, a luxury good in effectively infinite supply (a digital copy of a game) and made it sell like the world was ending and that buying it now is essential. And there’s several marketing techniques I’d point to that enables them to do this.

A quick note before I start: I’m highlighting these, I’m not passing judgement. Whatever you think of online games retailing, the whole Steam infrastructure, your views on its DRM or the effect Valve and its sales have on the PC landscape, you can’t deny this is bloody clever.

1. It feels special

As well as the actual sale, Valve has run bits and pieces surrounding their sales that create a feeling of specialness. They ran the Steam Summer Camp, where you could earn digital camp badges, and the Christmas sale from a few years ago where you could earn “coal,” vouchers and even free games. This makes you feel like the game is indeed an event, and you can get drawn into the other parts of it very easily- I and many others bought cheap games on the off chance I’d win a free copy of something along with it. Even their minor sales have included community vote deals, where even people who aren’t making a purchase at the time are suddenly thinking about their next purchase- If this game is cheap I would buy this because I chose the deal.

2. It’s in your face, but not annoyingly so

Most people don’t go to the shops every day, and most people don’t go to shopping websites on a daily basis. What the Steam sale does is put a store (where AN EVENT IS HAPPENING) no more than 2 clicks away for anyone who is going to play a normal game or do anything else on their computer, and puts up discreet ads when you log in to steam that the sale is ongoing.

Most marketers would KILL to get an ad in front of you on a regular basis, especially when the see ad -> purchase item loop is so short. Even if you close them immediately, it’s a targeted ad right in front of you, usually when you’re relaxed and comfortable ready for gaming, so your guard’s down.

3. It’s a perfect example of price skimming and the elasticity of demand

WARNING: ECONOMICS

Economists talk about a concept called Price Skimming, where a product is sold initially at one price to grab a certain part of the market, then dropped in price to grab another segment, then droped again and so forth. This is why all the games you see at the crazy sub $5 prices are older ones- they’ve made all the sales they’re ever going to at $50. The rate at which this occurs is also covered by the Price Elasticity of Demand- basically, how receptive is a market to changing the prices of a product? The slope of the demand curve governs how much you need to change the price of a good- if it’s very steep, you only need to change the proce by a little bit to get a large change, though it’s worth pointing out that some products actually sell less by being cheap- if rolexes became cheap and lost their prestige status, they’d sell less. In the case of games, the demand curves are sensitive- everyone’s out for a bargain, and even 10% drops can increase the sales of a game on Steam.

What Valve has proven is that dropping the price of a game or DLC even a little causes sales to increase by a large amount- even 10% or so drops cause huge jumps in player numbers for a game (without hard sales figures it’s hard to pin this exactly to sales). The publishers have already skimmed the top price levels, so now it’s all gravy. What they have done is created a way to shift- in volume- an evergreen good using only a little push in prices- they’ve steepened the demand curve like a pro.

Hell- this is a graph from Fez creator Phil Fish:

And that’s dropping a game from $10 to $5. Indeed, Bananers.

4. It shows you big discounts…

It’s a common piece of marketing knowledge that if a consumer can see that they’re getting a saving, they’ll more likely buy something. If, to pick an example at random, the Witcher showed as $2.49 without any other accompanying fanfare, it’d probably go relatively unnoticed. When it shows as “75% OFF! $9.99 $2.49,” it pushes the parts of the brain that go “OOH BARGAIN” like the x button in a QTE.

5. …and limits their duration

Another really clever thing that Valve do is limiting the time of the discounts, both daily deals and the 8- hour flash sales. This introduces an artificial pressure onto the deals- if you DO NOT ACT NOW YOU’LL MISS OUT. Think about this for a second: unlike when you buy, for example, Pizza Shapes at Woolies that are on special, there is no possible way for Valve to run out of stock- you’re only buying that game at that price because if you don’t it’ll go back up in price, even though the nature of the good is unchanged.

This artificial scarcity does two things- it forces you to make a decision under pressure (I’d better grab this before it goes!) and encourages you to check back on the Store regularly to see what the next deal is.

6. And now it has a whole metagame

This sale is the first under Steam’s new trading card scheme, and they’ve tied the trading cards directly to the sale. Now, in addition to all of the above, it is directly rewarding you (and giving your brain’s pleasure centres a tickle) for interacting with the sale itself (Benanen’s discussion of the market here talks about this gamification in greater detail). It’s the same way a poker machine gives you a small win to keep playing, and it’s quite potent, especially because you can gain sale trading cards just for voting in the community deal.

All this taken together is a marketer’s ideal scenario. A relaxed captive audience whom you know are interested in PC gaming, who are interacting regularly and directly with the means by which you sell them the goods, who are checking the prices often and are being rewarded for interacting without even buying anything. A market where people are receptive to price drops, and then having those drops flashed right in front of your face, and now one with a whole other game built around the very act of buying and interacting with the storefront.

They’ve taken what could be a standard sale, and turned it into an event that people anticipate for months and discuss online for days.

It’s brilliant, and I take my hat off to them.

2 comments

  1. This guy has made some of these points and adds another couple of good ones : http://www.psychologyofgames.com/2013/07/the-psychology-behind-steams-summer-sale/

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