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Analysis: Zombies, Barbarians And Loss Aversion
Analysis: Zombies, Barbarians And Loss Aversion Exclusive
January 26, 2010 | By Jamie Madigan

January 26, 2010 | By Jamie Madigan
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More: Console/PC, Exclusive



[Psychologist and gamer Jamie Madigan writes for Gamasutra on the subtleties of "loss aversion" -- and why the way a message is framed can lead to big changes in what gamers are willing to pay for.]

How can publishers get more people to buy an Xbox Live Arcade or Playstation Network game after trying the trial version? And how can MMOs get wayward customers to resubscribe? Let me glue on my goatee and practice my maniacal laugh a few times, and then Iíll tell you my ideas.

Zombie Outbreaks and Loss Aversion

First, let me ask you a couple of hypothetical questions made famous in certain circles by two guys named Amos Tversky and Daniel Kahneman:

"Imagine that the U.S. is preparing for a zombie outbreak, which is expected to kill 600 people. Two alternative programs to combat the outbreak have been proposed. Assume that the exact scientific estimate of the consequences of the programs are as follows:

If Program A is adopted, 200 people will be saved.

If Program B is adopted, there is 1/3 probability that 600 people will be saved, and 2/3 probability that no people will be saved.

Which of the two programs would you favor?"


Okay, so Tversky and Kahneman actually phrased the question in terms of an Asian flu and not a zombie outbreak, but I figure we would stick to territory more familiar to gamers. That said, which of the two programs would you pick: Program A or Program B? The researchers found that most people they asked chose Program A: 72% versus the 28% who chose B.

So then the researchers presented the same hypothetical situation but with the following options:

"If Program C is adopted 400 people will die.

If Program D is adopted there is 1/3 probability that nobody will die, and 2/3 probability that 600 people will die.

Which of the two programs would you favor?"


Which of these new options would you pick? This time most of the experimental subjects picked Program D by a wide margin ó 78% versus the 22% for Program C.

The thing is, both sets of choices are identical. Look closely. Programs A and C both result in 400 of the 600 people dying and 200 living. Programs B and D both have a 1/3 chance of saving everyone and a 2/3 chance of killing everyone.

The only difference is that Programs A and B are phrased in terms of lives saved and Programs C and D are described in terms of lives lost. People were made much more willing to gamble with the lives of 600 people simply by having the dilemma framed in terms of losses. Why?

Tversky and Kahnaman said this points to "loss aversion," which is one my favorite kinks in the human brain. In short, loss aversion is our willingness to go to great lengths to avoid losses Ėmuch farther than weíll go to get an equivalent gain. In other words, losing $10 is more painful than gaining $10 is pleasurable, or "losses loom larger than gains."

Simple Changes to Framing Mean Big Changes in Attitudes

Consider another quick question and suppose that a company were offering two subscription plans for an online MMORPG.

- Option A gives you a $5 credit
- Option B lets you avoid a $5 monthly surcharge

Assuming both options were otherwise identical, which do you think would be more popular? In all likelihood it would be Option B, since people prefer not losing $5 to gaining a $5 discount. This despite the fact that the monthly costs would be identical. This is also one of the reasons youíll more often see "$10 late registration fee" advertised instead of "$10 discount for early registrations" for events where the organizers want you to register early.

Here, Take This. Now Pay for it or Lose It

So what does this have to do with getting people to buy a Xbox Live Arcade or Playstation Network game after they play the trial version? Right now, itís not uncommon for such trials to pop up a message saying something to the effect of "You would have just gotten an achievement/trophy just now! Buy the full game to get it!"

And thatís pretty good. Pretty sneaky. Pretty psychological. Because we obviously like getting things we value, and a lot of us value achievements and trophies. But the phenomenon of loss aversion suggests a way to be better, more sneaky, more psychological.

Instead of saying that you will get the achievement or trophy if you buy the game, actually give it to them and then say youíre going to take it away if they DONíT buy the game. And I mean really give it to them Ė have it show up in their gamer score and on their achievement/trophy list. Just take it away if they exit the trial version of the game without buying the full thing, and make sure they know it.

I guarantee that your conversion rate would go up if you tried something like this. because while people like the promise of getting something, they hate the promise of losing it way more. Hey, I know that there's logistical issues and maybe Microsoft or Sony place restrictions on how these things are handled. But I'm the idea man here; I'm sure some of you guys can figure out how to put in place.

But just in case you were wondering, there are other ways to make use of loss aversion, as Funcom and everyone's favorite barbarian recently showed us.

Conan the Loss Averse Barbarian

Many players who had unsubscribed from the Age of Conan massively multiplayer online game recently got an e-mail from the publisher stating, in part:

"Dear customer,

Thank you for playing Age of Conan.

As part of our maintenance your account is now flagged to have your characters below level 20 deleted as part of maintenance. Please re-activate your account now to ensure that your characters progress and names stay intact."


In other words, "come back or your low level alt (not to mention your bank and your mule characters) gets taken out back and shot."

I'd be fascinated to see what this did to Age of Conan's resubscription rate. If I were in charge of these things at Funcom, I would have randomly separated that mailing list into two groups and sent the above e-mail to the first half. The second half would have gotten something along the lines of:

"Dear customer,

Thank you for playing Age of Conan.

As part of our maintenance your account is now flagged to have your characters below level 20 saved as part of maintenance if you resubscribe. Please re-activate your account now to ensure that your characters progress and names stay intact."


And then I would have looked at the differences in resubscription rates between those whose message was phrased in terms of losing their character and those whose message talked about saving it. Which of those two messages would you, as a MMO player, respond to more strongly? My guess would be the former, especially if you weren't the handsome and well educated person you are on account of reading about loss aversion here.

[Jamie Madigan, Ph.D. is a psychologist and gamer who explores why players and developers do what they do by studying the overlap between psychology and video games at The Psychology Of Games website. He can be reached at jamie@psychologyofgames.com.]


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Comments


Brandon Kidwell
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Excellent thought here.

[User Banned]
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This user violated Gamasutraís Comment Guidelines and has been banned.

Blake Schreurs
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I think you're completely right about motivating people to take the action you'd like.



That said, I think extreme care and caution should be exercised when taking things away from players. When a company, any company, talks about deleting or getting rid of something that's mine, I resent that a bit. In the back of my head I can hear myself think "I paid them, I paid them a lot. Why are they taking this from me?" If the reason isn't good (and has to be better than "We're cleaning our servers"), it damages the relationship I have with that company.



They have something of mine, and they'll do what they want with it, unless I pay them. Though technically speaking it's not my data; I feel that they have MY data for ransom. Yes, I might pay the ransom, but I will no longer feel like that company has my best interests at heart.



In the AoC situation above, I'd probably buy one months' worth of time to put all of my really cool stuff on my main, and then sell the rest, and put the cash on my main... And then think long and hard about buying that expansion later.



So yes, it may give a short burst of income, but it can also damage hard-forged customer relations. A risky move, to be sure.

Janne Haffer
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Nice article.

It would definitely be interesting to see what developers could come up with if microsoft and sony changed their achievement & trophy rules and TRCs in order to allow experimentation with these things.

Stephen Chin
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@John Smith: That's irrelevant to the point. The idea isn't that there is a 'right' answer or the actual logistics but rather that people will choose different things based on whether it's described as gaining something or losing something. The language itself could be clarified and the point would remain the same - whether you spent 1000 words describing how many lives would be saved or 1000 words on how many are lost, it'd still suggest that people would pick the given options as mentioned.



@article: It would be interesting to see people taking this approach but like Blake, it'd surely be a risky move if not done carefully and appropriately. It might be more appropriate to do so (framed as a loss) within the context of the game rather than working on the game as a whole where it'd be better to frame it as a gain. I think most would be willing to accept, say, a loss of a game life rather than a loss of a perceived portion of the game itself.

Glenn Storm
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Super cool, Jamie. Psychology used in advertising and game design may be sneaky, but its firmly entrenched. Loss aversion, or to be more precise, the perception of the potential for loss that can shape motivation, correlates with a line of thinking related to a propensity of reliability and efficiency for the mind. I would be interested/honored to hear your take on it, in part or in full; found here: [http://www.gamasutra.com/blogs/GlennStorm/20100121/3911/Sentiolog
y.php]

Robert Ericksen
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I love this kind of Article. Thanks.

Bart Stewart
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Blake's point is excellent. As strong as loss aversion may be in the general public, it seems to be particularly strong in gamers. Any game forum is always full of flames about this or that character class being "nerfed."



There's definitely an issue of perceived ownership by gamers of in-game assets. This is well-documented for online games like MMORPGs, but the various complaints against the DRM systems intended to protect single-player games from piracy suggest that a sense of ownership is in play there as well.



So, here's a question. Some social observers have claimed that young people today seem to have much more of a sense of entitlement than recent previous generations -- they want the best, and they want it now. Is there some truth to that assertion? If there is, wouldn't that explain why the sales technique of framing offers in terms of loss, rather than gain, may be more potent when applied to gamers (who tend to be young) than to non-gamers?



I take no sides on this question; I'm just lobbing it out there for discussion... and then ducking. :)

Mickey Mullasan
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The problem with using loss aversion as a coercion tool is that rarely is there a binary choice of either A or B, there's always a hidden C choice which is a action of escalation. If a company sends a message that they will be instigating a loss in its clients with an ultimatum of A or B, the client may also choose C, which is an aggressive action against the instigator. This could be a criticism, a boycott, petition, or even a violent action like a personal verbal assault. As is presented in the article, people will go to unreasonable lengths to avoid loss, so expect out of the box thinking from people when presented a binary choice.

Tim Randall
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"- Option A gives you a $5 credit

- Option B lets you avoid a $5 monthly surcharge"



These options are not quite the same. I'd be willing to bet that the $5 credit is in some form of "funny money" - by which I mean a form of capital that can't easily or quickly be put back into my bank account - and that the surcharge will come out of my bank account directly and immediately.



Having said that, the basic principle of the article is sound, it was an interesting read, and I appreciated it.

Jamie Madigan
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Thanks for the comments, all! I'm looking forward to sharing more articles here.



@John Smith: not my wording, but it seems clear to me that anyone not saved will die and anyone not killed will be saved.



@Blake Schreurs: I think that's exactly why loss aversion is so powerful -- it does feel like ours, and we don't want to lose it. Even when we logically know that it's not "ours" per se (i.e., it's a virtual thing in a service we actively separated from).



@Stephen Chin: Yeah, there are definitely better and worse ways to phrase it so as to not make it seem so exploitative. Even though, you know, it IS.



@Glenn Storm: Woah, that's a lot of stuff you wrote! I've flagged it for more thorough reading later, but on a side note I just drafted an article about psychological flow and gaming that will probably appear on psychologyofgames.com next week.



@Bart Stewart: Oh man, I can't believe I didn't think of the nerfing angle on my own. That's huge in MMOs or even any multiplayer game. RE: sense of entitlement, I'm not sure off the top of my head if that's been supported by any actual research. Doesn't mean that it hasn't been, though. I seem to remember reading some stuff about generational gaps (e.g., baby boomers, gen-x, geny) that talked about how more recent generations feel more ownership in their careers and less attachment to a particular company, though. There may be an angle there.



@Mickey Mullasan: Wait, wait, wait, are you actually telling me that highly controlled lab experiments don't always perfectly align with conditions in the real world? No way! ;) Snarkiness aside, I take your point. But I think companies like Funcom --especially Funcom, since it's struggling with AoC-- would be more interested in getting some additional revenue than getting some bad forum flak about it.



@Tim Randall: Hrm, I was actually thinking of it in terms of a credit on the subscription, but your idea of "store credit" is interesting too. And you're probably right, but even funny money would have some value (or "valance" in psychological gobbletygook) and research has shown that losing money is about THREE times as painful as gaining the same amount of money is pleasurable. So if the funny money has less than a third of the value of real money, you may be on to something.


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