Humble Bundle (pay whatever you want)
Last Monday in class we talked about “the effect of multipart pricing on consumer purchasing behaviour”, and “pay what you want” (PWYW) pricing models. Radiohead & NIN both tried PWYW (pay what you want strategy); the one (Radiohead) being more successful than the other as we learned in class.
By using such a pricing model you allow for the market to segment itself. An emerging problem inherent to this type of pricing is that a lot of consumers may choose to pay as little as possible (except if they want to really support the artist/developer because they are “avid fans”).
I would like to share with you today a different example of PWYW pricing (HumbleBundle) which has some subtle differences compared to the ones we originally talked about in class.
Humble bundle is a site/platform where you can buy bundles of mobile- (and to a less extent pc-) games and software (nowadays even bundles of e-books) and pay how much you choose to. However, HumbleBundle have implemented PWYW differently than the previous examples.
The 3 factors differentiate humble bundle from the previously discussed PWYW pricing models are:
- The bundles sold on the site are offered only for a limited duration of time (sometimes only one week); this increases “scarcity” thus increasing customers’ willingness to pay).
- If you pay more than the average price paid thus far, you get additional bonus content (additional software/games). This motivates the customers to pay more than the current average and moves the price upwards while the duration of the current offer lasts.
- The consumers can choose how their proposed price is divided between the following 3 parties:
- HumbleBundle themselves
- A Charity chosen by HumbleBundle
- The developers (or author in case of e-books).
How does HumbleBundle differ from other platforms selling games, software and books (when not looking at the pricing)?
- Firstly, you can only buy bundles, so you will probably always get some games/software that you were not really interested in. However, this bundling increases the chance that you are willing to pay for at least some software in the current offer (even if you do not care about the rest and see it as a “bonus”).
- Secondly when you buy a game/software from HumbleBundle you get access to this on all platforms that it exists (meaning you will get the game on your PC and on your mobile device (provided that the software is available for both). This is a huge difference to other platforms such as Steam or even the PlayStore/appstore. This second part is an innovation that I think is very welcome to the consumers since everyone owns so many devices nowadays.
- Last but not least; products included in the bundles bought from HumbleBundle do not have any form of DRM (digital rights management) allowing you to actually own the products that you buy.
It seems that using this pricing method the total profit of participants are often lower; however, their sales volume is higher. For a lot of participants this is acceptable because most of them are indie-developers that do not have a lot of money for marketing purposes; using this pricing scheme they enhance their sales volume thus increases their products’ familiarity to the public and subsequently increasing future sales (when the product is no longer offered on HumbleBundle).
Furthermore, research suggests that privacy negatively affects the consumers’ chosen prices. When the artists/developer would be able to see your name you might be inclined to pay more (especially if you really enjoy that artists or the product). However, I believe that this does not have such a significant effect in HumbleBundle’s case because they only offer bundles (with products created by lots of different developers/artists).
Is the PWYW phenomenon here to stay; what further innovations can we expect in this field?
(Tobias Regner, Privacy is precious: on the attempt to use social pressure on internet to increase revenue, 2014): http://www.eea-esem.com/files/papers/EEA-ESEM/2014/1102/MagnatunesPrivacy_JEEA2014.pdf
(Tobias Regner, Voluntary payments, privacy and social pressure on the internet: a natural field experiment, 2012): https://www.econstor.eu/dspace/bitstream/10419/68231/1/734357842.pdf
Author: Euclid Alexis Haralambidis