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Analysis: Three Reasons Why We Buy Those Crazy Steam Bundles
by Jamie Madigan [PC, Console/PC]
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June 7, 2010
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[In this new Gamasutra analysis piece, psychologist and gamer Jamie Madigan explains some psychological reasons why those big bundles from Steam and other digital distribution platforms are so hard to resist.]
Steam, the digital game distribution platform owned by Valve, often has these weird bundles for sale where they cram together, for example, every id Software or every Rockstar game or every game featuring squirrels into one package. One message board I frequent has a mega thread dedicated to gaming bargains, and doing a search for "Damn you, Steam" produces results like these:
"Damn... maybe I want Colonization. Have CIV IV & BTS on Disc. Should I just get Colonization @ $10.19 or just get them all and have on Steam for a wee bit more. Damn you Steam."
"Damn you Steam! More games to buy that I'll probably never get to play."
"Damn you Steam. I had just successfully resisted the urge to buy games at both the holiday sale from GoGamer (Heroes of M&M 5 Complete and EU:Rome at $10 each were tempting, and Company of Heores Opposing Front for $5 is a steal) and the last round of Steam Deals (King Arthur especially was calling my name), and now you put Civ IV complete (I own none of the Civ IV stuff) out there for $14. My game backlog can't take much more of this!!"
"This is madness. I am buying games for a theoretical PC that I will build someday (maybe) so I can play them. Damn you, Steam."
"Got $170 sitting my cart. Staring at it trying to figure out how to cut it down some. Damn you, Steam."
People are talking like Steam is forcing them to pounce on such deals when they happen even though they already have a huge backlog and may actually already own physical versions of half the games included.
What makes these plainly ridiculous bundles so attractive? I'm glad you asked, because I can think of at least three psychological principles at play here.
Scarcity
First, In marketing there's a well worn principle called "the scarcity effect." When something is scarce, it automatically becomes more desirable to us than it would be if it were available everywhere we looked. This "available in limited number" trick shows up everywhere from collectible trading cards to special "limited" editions of new game releases (which usually aren't all that limited in all actuality). Ever noticed a store front that had a "going out of business!" sign in the window for months on end? That's the owners trying to capitalize on the scarcity effect. Buy now, sucker, or it'll be gone!
Consider a simple 1975 experiment by psychologist Stephen Worchel to provide an illustration of this concept involving baked goods. Posing as a consumer products survey, the experimenters offered subjects a chocolate chip cookie from one of two jars. One of the jars had many cookies in it. The other had only a few. Of course, people reported the cookies from the mostly empty jars as more delicious, more desirable, and more expensive. This despite that the cookies in both jars WERE THE SAME COOKIES.
But Steam and similar download services like Direct to Drive sell digital games, right? They're not cookies that are about to disappear, there is literally an UNLIMITED SUPPLY of the 1s and 0s that comprise these digitally distributed games. True, but the scarcity effect still applies, because it's not so much the scarcity of the physical product that we react to, but the opportunity to buy it. Often these bundles are put up a limited time sales and people HATE losing opportunities to do things once they think they're within reach.
Obscuring True Value
The second psychological principle at play here is the fact that it's hard for shoppers to look at a bundle like that and understand what its true value is. William Poundstone, author of Priceless: The Myth of Fair Value (And How to Take Advantage of It) calls this the "value meal" strategy when describing the psychology of restaurant menu design. How much cheaper is it to get the bundle? What about if I super size it? With curly fries? Oh, forget it. Just give me the #3 with an ice tea.
Likewise, we look at a massive bundle of digitally distributed games and think about how much could I get those older games for elsewhere? Could I find them for sale used, and for how much? Could I rent or borrow any of them? For the games I already own, how much is it worth to me to have them available through Steam so that I don't have to dig out my old boxes and CD keys? It's a psychological truism that we have limited cognitive processing power at any one time, and when our brains are tied up considering these questions, we've got fewer cycles to devote to thinking about other stuff, like how much we want to actually PLAY the games.
Not that this keeps the folks who run Steam from telling us exactly how much the bundle is worth, though, which brings me to the third psychological factor in play: anchoring.
Anchoring
In the context of the psychology of prices, anchoring refers to presenting shoppers with a number in order to get them to "anchor" their perceptions of value on either a high or low absolute. The "low ball" offer is the classic example --open a negotiation over price with a really low number and you'll set the stage so that what you're actually willing to pay looks higher in comparison.
As a simple but elegant example, consider an experiment done by psychological wizards Amos Tversky and Daniel Kahneman. The researchers asked one group of subjects to estimate the product of these numbers:
8x7x6x5x4x3x2x1
And then they asked another group to estimate this product:
1x2x3x4x5x6x7x8
Those of you with a grade school education may know that because of how multiplication works these products are equal (40,320 if you were wondering). Yet the average estimate for the group that was given the problem starting with "8" was 2,250 while those who saw a "1" at the beginning of the problem had an average estimate of just 512. Why? Because one group anchored on a high number and the other anchored on a low number.
Similarly, behavioral economist Dan Ariely and his collegues conducted a study where he used anchoring in an auction simply by having bidders write down the last two digits of their social security number at the top of their bid sheets. Those whose numbers ended in the 80s and above actually were willing to pay up to 346% more for things like wine and chocolates than were those whose social security numbers ended in the 20s or below. CRAZY.
How does this relate to those Steam bundles? Well, look closely at one of those promotions and you'll see that the marketing gurus for the service readily list the retail value of the bundle if you paid full price for all games individually. That's your anchor; seeing that number will cause many people to set their perceptions of the bundle's value much higher than if they had seen the sale price alone. In addition, the difference between the "unbundled" and sale prices can trigger the contrast effect, which could be considered a fourth psychological principle at play.
So there you have it: you're broke and have way too many games to play because you don't want to lose opportunities to buy something, you're befuddled by pricing, and your perceptions are anchored by arbitrary "normally sells for..." prices. Now, if you'll excuse me, I have to go play Commander Keen, Doom, Final Doom, Doom II, Doom 3, Hexen, Hexen II, Heretic, Quake, Quake II, Quake III Arena, Wolfenstein 3D, Spear of Destiny, Return to Castle Wolfenstein, and more mission packs than I want to think of.
[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.]
References:
Ariely, D., Loewenstein, G., & Prelec, D. (2003). Coherent arbitrariness: Stable demand curves without stable preference. Quarterly Journal of Economics, 118, 73-105.
Tversky, A. & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, 185, 1124-1131.
Worchel, S., Lee, J., & Adewole, A. (1975). Effects of supply and demand on rating of object value. Journal of Personality and Social Psychology, 32, 906-914.
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(3 games on Steam I have bought/been gifted that haven't been installed yet...)
" I have already noticed some rumbles of disquiet (on Twitter) from people who have purchased a game on Steam, only to find that days or hours later the same title is available for a fraction of what they just paid. To these consumers, paying two to ten times as much for a particular product just due to the timing of their purchase is a violation of consumer trust. How will these consumers respond? To my mind, they may quit buying games on Steam at full price, unless they are motivated by some factor like enjoying the multiplayer swell of popularity of a new release. If such a factor does not exist, Steam may inadvertently find itself creating the opposite effect with these sales than what it originally intended: a hesitancy, a reticence in its consumers to buy a game on Steam UNLESS it is on some crazy sale.
What may end up happening is that consumers lose trust that Steam is getting a reasonable profit margin on its regularly-priced offerings. If Steam can afford to sell software at 10% of its usual cost, without the brick-and-mortar need to move old product out of inventory and make room for new product (that Jake Jabbs avoids with his warehousing system), people will begin to wonder how much it truly costs Valve to sell something digitally, and therefore whether the margin Steam makes on a full-price sale is a fair one."
Read more: Steam Sales, Jake Jabbs, and the Perceived Value of Intangible Items http://www.bitmob.com/articles/steam-sales-jake-jabbs-and-the-perceived-value-of
-intangible-items#ixzz0qBbYQF00
This factor is at play all over the software industry, and, since games and software is one of the few things America bothers to manufacture anymore, may even be a factor feeding into our economic instability. As a service attempting to persuade gamers to buy software in a new, less-trusted distribution model, Steam should be very careful of the long-term seeds they sow in consumer trust and price/value expectations.
For the time being, there is a price-point of "leading edge gamers," what amounts to a premium that can and will be paid by gamers who want to play the latest releases as soon as they come out. This is premium revenue model is enjoyed (of course) by online multiplayer games which enjoy a heyday of community play until "the next big thing" comes out. It is also supported, in many titles, by the gaming press itself, by the sense of community a gamer gets by playing the latest releases as the gaming press is writing and podcasting about them.
Yet these kinds of pricing differences erode the perceived value of the product. A gamer can pay $110 for Fallout 3 and each DLC chapter on the leading edge, or wait and pay $50 (or $45 used at Gamestop) for the same content AFTER the community swell has passed. Even if you don't factor the fact that certain gamers will just wait YEARS and buy the product for $20 at Gamestop, or through Steam, the difference between "leading edge" pricing and "somewhat later" pricing is so great that it introduces instability into revenue expectations for any gaming company.
As beloved as "Steam sales" are to the PC gamer, I posit the unpopular notion that their model is becoming very much like Gamestop's used game sales in its ability to erode game sales at the higher price points that publishers are hoping to use to make the bulk of their revenue, for recent releases.
For really old stuff, on the other hand, so much the better that a gamer buy an old title first-hand through Steam, rather than second-hand. The decision of which titles to include in these sales is, no doubt as a result, the subject of much negotiation between Valve and its content providers.
With digital distribution coupled with such a large audience of consumers (the last study I read stated that the United States has 175 million people who claim to be gamers), there is no need for a physical product to be produced. So why the price? Two things: talent and discoverability. You want to have a great team of people who love their jobs and are good at it - and these people deserve to get paid what they are worth.
Also, you need people to find out about your games, so you need to market the hell out of them.
The second point is where the savings come in with venues such as Steam or the Apple App Store. If you develop a great product and invest a modest amount of marketing, the distributor can feature your product in some way and aid you in your quest to connect to your market. Once this happens, the need to pour buckets of money into your marketing machine are greatly diminished, and it's at this time that you can afford a significant price drop.
The thing about "the marketing machine" is that the nature of it is changing as well. Traditional marketing and advertising outlets represent such a steep upswing in cost, particularly when you involve a creative agency; a media buyer; a PR firm; and umpteen cable, network, local broadcast, and print outlets; etc., etc., etc. Yet with gaming's market penetration into mainstream, there are appropriate products which call for an attempt at gambling this sort of money to try to grab the attention of the fringe. Did EA reap appropriate benefits for the cost of a Dante's Inferno super bowl ad? I'd love to see the numbers...
But for Apple store product, for Steam games, experimental games, online games, and games on the indie front, hell, even for Zynga, spending this kind of money is a questionable decision that may just drain the coffers enough to force you to eliminate the kind of ongoing development and community-building that will give these products "the long tail."
Much as with development, using that money to retain quality marketing people, even at the developer level, and have them love their job enough to be personally invested in growing your product over time, is becoming greatly preferrable than leaving your marketing efforts in the hands of your publisher. Even if your publisher is Valve!
After all, the greatest counter-argument to my concerns about the perceived value of digital downloads is the fact that, after a Steam sale, interest in the title swells and regular-priced sales grow as the product bubbles further up in mind-share. Having someone around to capitalize on that opportunity in the lower-cost community-building, social-media front (even the developer front like with Rebellion's server support of classic Aliens Vs. Predator), can turn that price-drop into a swell of revenue generating "reinterest" in the product.
Full argument on my blog here: http://soulrift.com/index.php?article=19
I see that most comments are concerned about inflating the game value. I can partially agree with that but in fact the situation is a bit more complex.
First of all the thing is that majority of game sales in retail are accumulated in the first weeks. After that the sales are dropping drastically and once they stop the publisher/developer is making 0 money out of it. Those crazy bundles are released months or even years after their retail launch and the games are again generating some revenue so this is good for the developers. Basically anything in plus is better than 0 even if its sold for a dollar.
Secondly in retail you can not keep the game on the shelve for long because there are new titles coming in and you can not make such crazy promotions because the manufacturing and physical distribution cost a lot of money. In order to make any profit the box price needs to stay around 15 dollars. Selling a game for 2,5 in a box is only possible in second hand market.
The third significant factor is availability and piracy. Basically on Steam you can find older games that you can not find in retail stores. This means that if you wanted to play an older game the only way to get it was to download it from an illegal source because you couldn't find it in a store. Before Steam the pirates were in many cases offering a better service than the legal stores. I think that thanks to Steam the piracy is decreasing which is very good for the industry.
Of course all of those effects can result in a situation that gamers will have a lot of content that they haven't tried yet and will be less likely to purchase new games. They can simply say "I don't need more stuff for now".
There are many more factors to that and I guess we will just have to wait and see what happens :)
"Anchoring" has never affected my Steam purchases, thankfully. The retail price barely registers in my brain, if at all. Scarcity is perhaps the strongest motivator, but I feel like there's always going to be another sale later when I'm able to have the time to play the game.
I bought Stalker at the $1 price, for the reasons you mentioned, without any real intent to play it. Then a few months later Call of Pripyat came out, and I heard heaps of people evangelizing it, so I went to buy it, and there was a "loyalty" deal where I saved $10 on CoP. So because of my impulse buy over the holidays, I was up $9 a few months later when buying CoP. I kind of spent -$9 to buy the original Stalker, but reverse...
It hurts my head, it does.
Steam had a great set of sales around Christmas/New Year's, with a daily 5-title sale, plus general discounts. I bought a lot then. I check http://store.steampowered.com/ during the day to see if there's anything interesting. Of the recent sales, they're either uninteresting (tip: I don't want to see any of the dozen Railworks DLC packages spamming the list), or I already have them (HL2, Portal, etc).