[UPDATE: Alex Dale, the CMO of King.com, has graciously taken his time to clarify a few points related to CCS, and I have edited this paper in a few places using italics to show the updates]
A coercive monetization model depends on the ability to “trick” a person into making a purchase with incomplete information, or by hiding that information such that while it is technically available, the brain of the consumer does not access that information. Hiding a purchase can be as simple as disguising the relationship between the action and the cost as I describe in my Systems of Control in F2P paper.
Research has shown that putting even one intermediate currency between the consumer and real money, such as a “game gem” (premium currency), makes the consumer much less adept at assessing the value of the transaction. Additional intermediary objects, what I call “layering”, makes it even harder for the brain to accurately assess the situation, especially if there is some additional stress applied.
This additional stress is often in the form of what Roger Dickey from Zynga calls “fun pain”. I describe this in my Two Contrasting Views of Monetization paper from 2011. This involves putting the consumer in a very uncomfortable or undesirable position in the game and then offering to remove this “pain” in return for spending money. This money is always layered in coercive monetization models, because if confronted with a “real” purchase the consumer would be less likely to fall for the trick.
As discussed in my Monetizing Children paper, the ability to weigh this short term “pain relief” vs. the long term opportunity costs of spending money is a brain activity shown by research to be handled in the pre-frontal cortex. This area of the brain typically completes its development at the age of 25. Thus consumers under the age of 25 will have increased vulnerability to fun pain and layering effects, with younger consumers increasingly vulnerable. While those older than 25 can fall for very well constructed coercive monetization models, especially if they are unfamiliar with them (first generation Facebook gamers), the target audience for these products is those under the age of 25. For this reason these products are almost always presented with cartoonish graphics and child-like characters.
Note that while monetizing those under 18 runs the risk of charge backs, those between the age of 18 and 25 are still in the process of brain development and are considered legal adults. It seems unlikely that anyone in this age range, having been anointed with adulthood, is going to appeal to a credit card company for relief by saying they are still developmentally immature. Thus this group is a vulnerable population with no legal protection, making them the ideal target audience for these methods. Not coincidentally, this age range of consumer is also highly desired by credit card companies.
The exception to the above child targeting would be products making heavy use of Supremacy Goods, which I will discuss near the end of this paper. These products target a wider age range of users that are vulnerable to such appeals.
King.com was generous enough to point out that their target demographic for CCS is middle aged women. 80% of their players are women, only 34% of their players are under the age of 30, and only 9% are under the age of 21.
To maximize the efficacy of a coercive monetization model, you must use a premium currency, ideally with the ability to purchase said currency in-app. Making the consumer exit the game to make a purchase gives the target's brain more time to figure out what you are up to, lowering your chances of a sale. If you can set up your game to allow “one button conversion”, such as in many iOS games, then obviously this is ideal. The same effect is seen in real world retail stores where people buying goods with cash tend to spend less than those buying with credit cards, due to the layering effect.
Purchasing in-app premium currency also allows the use of discounting, such that premium currency can be sold for less per unit if it is purchased in bulk. Thus a user that is capable of doing basic math (handled in a different part of the brain that develops earlier) can feel the urge to “save money” by buying more. The younger the consumer, the more effective this technique is, assuming they are able to do the math. Thus you want to make the numbers on the purchase options very simple, and you can also put banners on bigger purchases telling the user how much more they will “save” on big purchases to assist very young or otherwise math-impaired customers.
Having the user see their amount of premium currency in the interface is also much less anxiety generating, compared to seeing a real money balance. If real money was used (no successful game developer does this) then the consumer would see their money going down as they play and become apprehensive. This gives the consumer more opportunities to think and will reduce revenues.
Skill Games vs. Money Games
A game of skill is one where your ability to make sound decisions primarily determines your success. A money game is one where your ability to spend money is the primary determinant of your success. Consumers far prefer skill games to money games, for obvious reasons. A key skill in deploying a coercive monetization model is to disguise your money game as a skill game.
King.com's Candy Crush Saga is designed masterfully in this regard. Early game play maps can be completed by almost anyone without spending money, and they slowly increase in difficulty. This presents a challenge to the skills of the player, making them feel good when they advance due to their abilities. Once the consumer has been marked as a spender (more on this later) the game difficulty ramps up massively, shifting the game from a skill game to a money game as progression becomes more dependent on the use of premium boosts than on player skills.
Note that the difficulty ramps up automatically for all players in CCS when they pass the gates I discuss later in this paper, the game is not designed to dynamically adjust to payers.
If the shift from skill game to money game is done in a subtle enough manner, the brain of the consumer has a hard time realizing that the rules of the game have changed. If done artfully, the consumer will increasingly spend under the assumption that they are still playing a skill game and “just need a bit of help”. This ends up also being a form of discriminatory pricing as the costs just keep going up until the consumer realizes they are playing a money game.
This is my favorite coercive monetization technique, because it is just so powerful. The technique involves giving the player some really huge reward, that makes them really happy, and then threatening to take it away if they do not spend. Research has shown that humans like getting rewards, but they hate losing what they already have much more than they value the same item as a reward. To be effective with this technique, you have to tell the player they have earned something, and then later tell them that they did not. The longer you allow the player to have the reward before you take it away, the more powerful is the effect.
This technique is used masterfully in Puzzle and Dragons. In that game the play primarily centers around completing “dungeons”. To the consumer, a dungeon appears to be a skill challenge, and initially it is. Of course once the customer has had enough time to get comfortable with the idea that this is a skill game the difficulty goes way up and it becomes a money game. What is particularly effective here is that the player has to go through several waves of battles in a dungeon, with rewards given after each wave. The last wave is a “boss battle” where the difficulty becomes massive and if the player is in the recommended dungeon for them then they typically fail here. They are then told that all of the rewards from the previous waves are going to be lost, in addition to the stamina used to enter the dungeon (this can be 4 or more real hours of time worth of stamina).
At this point the user must choose to either spend about $1 or lose their rewards, lose their stamina (which they could get back for another $1), and lose their progress. To the brain this is not just a loss of time. If I spend an hour writing a paper and then something happens and my writing gets erased, this is much more painful to me than the loss of an hour. The same type of achievement loss is in effect here. Note that in this model the player could be defeated multiple times in the boss battle and in getting to the boss battle, thus spending several dollars per dungeon.
This technique alone is effective enough to make consumers of any developmental level spend. Just to be safe, PaD uses the same technique at the end of each dungeon again in the form of an inventory cap. The player is given a number of “eggs” as rewards, the contents of which have to be held in inventory. If your small inventory space is exceeded, again those eggs are taken from you unless you spend to increase your inventory space. Brilliant!
Progress gates can be used to tell a consumer that they will need to spend some amount of money if they want to go further in the game. If done transparently, this is not coercive. For the purposes of this paper, the focus will just be on how this can be layered to trick the consumer into spending on something they may not have if they had been provided with complete information.
Now let's break progress gates into “hard” and “soft” types. A hard gate is one where you cannot advance if you do not pay up. The central buildings in Zynga builder type games are a good example. All other buildings in a town/city/base are capped by the level of the central building, forcing a hard progress gate. What makes this coercive is that the player is not told that if they pay through that gate they will just be presented with another hard gate soon that will cost even more money. Thus the consumer may assume they are getting more pain relief for their money than they are.
A soft gate is one where the player can get past the gate, eventually. Clash of Clans uses this type in making building times ever longer and allowing the user to spend to complete them. This is a method presumably borrowed from games made by Zynga, Kabam, Kixeye, and others since it is a common Facebook game convention. In order to improve the efficacy of the soft gate, these games also make it so that resource generation in-game increases faster than the player's ability to spend these resources (because building/spending takes so long). Thus these “earned” resources are lost (taken away) if real money is not spent. This is a method of combining reward removal with a soft gate to increase the pain level while at the same time layering, as the consumer may be gullible enough to assume these effects are coincidental or due to some strategic misstep they took earlier.
Another novel way to use a progress gate is to make it look transparent, but to use it as the partition between the skill game and the money game. Candy Crush Saga employs this technique artfully. In that game there is a “river” that costs a very small amount of money to cross. The skill game comes before the river. A player may spend to cross the river, believing that the previous skill game was enjoyable (it was for me) and looking to pay to extend the skill game. No such guarantee is given of course, King just presents a river and does not tell you what is on the other side. The money game is on the other side, and as the first payment is always the hardest, those that cross the river are already prequalified as spenders. Thus the difficulty ramps up to punishing levels on the far side of the river, necessitating boosts for all but the most pain tolerant players.
In the mobile version of CCS (which I did not test) a player does not need to spend money or "social currency" (friend invites) to progress past the gates. There is a "quest" option which acts as a soft pay gate. According to King.com, 70% of all players who have completed the game have never made a currency payment.
Soft and Hard Boosts
The purpose of a money game is to promote Boost sales. Boosts that have an instant one-time effect are “soft” Boosts. Those that stick around either forever or until they are converted to something else are “hard” Boosts. The $1 “un-defeat” button in PaD is a soft Boost, as are all of the power-ups sold in Candy Crush Saga. The obvious advantage of soft boosts is that you can keep selling them as long as the player stays in the money game.
“Hard” Boosts include things like the random rare creatures that are sold in PaD for $5 each. Having these in your stable effectively lowers the difficulty of the game enough to allow you to get a little bit further with each purchase. A technique that is very popular in Asian games with hard Boosts (PaD included) is to allow hard Boosts to be “merged” to allow for even bigger hard Boosts. This makes the math involved in figuring out exactly how expensive a very high quality hard Boost will be, daunting. It may even be completely invisible to the consumer due to the various drop %s being hidden. Thus the best hard Boosts in these games typically cost thousands of dollars, a fact that is hidden to the user until they are already invested for at least a few hundred dollars. This puts the consumer in the difficult position of giving up and losing the equity already purchased, or going “all the way” and spending some unknown large amount to get the top Boost. Some of these techniques, sometimes called “kompu gacha”, are already facing regulation in Asia due to their excessive layering and lack of transparency.
In money games that contain a social layer, this social layer is used as an added incentive to show off your “skills” to other players that may still not realize they are in a money game. This is the purpose of the mini-leaderboards in Candy Crush Saga, to make it look like you need to try harder to beat your more “skillful” friends. Even the “word-o-meter” in Words with Friends can be considered a soft Boost in a money game disguised as a skill game. This would, of course, depend on if you considered it to give an advantage. If it didn't then why are people buying it?
As described in detail in my How “Pay to Win” Works paper, the key to these games is to start off with the appearance of a skill game and then shift to a multiplayer money game that I call an “Ante” game. The game could proceed as a skill game but never does since once one player spends enough money it becomes a money game. At some point players keep raising their antes, hoping that the other players will fold. The “winner” (and loser) is the player that puts in the largest ante. It is not unusual for winning antes to be over $5000, and some Asian game developers that make only ante games like IGG have “VIP” member sections that you have to spend $3000+ per year for the top level of membership.
The target audience here tends to be non-hardcore competitive gamers who need the self esteem boost that comes with winning a skill game, and who for whatever reason never recognize the game as a money game. Some of my peers in the Asian gaming industry suggest that there this is merely a form of conspicuous consumption. I would love to see some age demographics for these “whales”.
The above mechanics are not meant to be exhaustive, but give a basic overview of key techniques used in coercive monetization model based games to defeat a customer's ability to make informed choices about the costs and values in these products. The more subtle the hand, and the more you can make your game appear to be skill based the more effective these products will monetize. Currently I would consider Puzzle and Dragons to be the state of the art. While it's gameplay mechanisms are simplistic, the depth of its reward mechanisms and its adherence to most of the best practices listed in my Supremacy Goods microeconomic model make it quite elegant. Its fantastic use of reward removal in particular is quite impressive.
While it is possible to make commercially competitive games without using coercive methods, this is a lot more work. In the current market, especially with most adults and children not familiar with the nature of these products, the environment is still ripe for fast profits, and likely will continue to be so for a few more years. Note that while these methods can be very successful with young and inexperienced gamers, they find less success with older and more experienced gamers, and this population represents a group with potentially very large gaming budgets.
Finally, I would like to relay that King.com feels that their use of data in their game is for the purpose of "optimizing fun", not profits...