Talking about software #4 - Marketing a games App

Now we’ve developed some focus and context, we can now turn to some specific marketing related issues for Games-Apps and examine some specific examples of practice.

Where to start? How about channel strategy? If your app is for an Apple device, there is only one choice – the App store as part of iTunes. Apple take 30% of the price the end user pays – and decides whether or not they want to retail the App at all – sometimes a problem if your App contains adult orientated material like sex, violence and profanity. In return for the substantial slice of the pie and they host the App on their servers for download and integrate it into the online catalogue, as well as managing feedback and payment.

Firemint.com

If your business is involved with traditional physical goods, the feedback you get from your channels can be delayed, incomplete or inaccurate. This makes good decision making difficult. This isn’t true for Apps. The above graphic shows the sales chart of a game called Flight Control (Firemint, 2011). As you can see, even with millions of copies sold, Firemint knows exactly how many were sold overall, how many in specific national markets and the impact of significant events like a change in price, some publicity or even just a release of an updated version. Within each market they also know their ranking in the sales charts. The pie chart below shows the relative importance of each national market. Unsurprisingly the US is no. 1, and the UK is certainly doing well – but look at the surprise entry at no. 3 – Australia. When you have this level of detail and precision, making good decisions is easier.

 Firemint.com

After distribution and sales management, perhaps it is time to look at pricing. Further interesting things are happening here as the nature of Apps means that great flexibility is possible. The price of an App can be changed almost instantly, meaning that price can easily be used as a promotional tool or to establish a user base for future exploitation. Apps can even be offered free via the Apple App Store. Why would any company give away its product? There are some good reasons. As just mentioned, the short-to medium term objective might be to establish a reputation or gain publicity and attention. Once achieved the App can have a price change upwards. Electronic Arts used this tactic before Christmas 2010 to considerable benefit. Slashing prices across their range of games, they quickly occupied most of the top ten positions on the charts. After Christmas, when millions of owners had unwrapped their new Apple devices, EA reaped the benefit from their games being front and centre. Some Apps are deliberately released with only a portion of the functionality operable. If the user wants to get the full benefits, then a payment must be made.  If this were a car, we might refer to that as a test-drive. If the App-sample isn’t to the liking of the user, then there is no cognitive dissonance – no money was wasted. This switching on of the functionality of the App isn’t even as simple as an on-off switch – the App creators might have adopted a pricing model called freemium - a word you will hear increasingly often in the future. Freemium means the App itself is free or very low cost to download, but once installed the user must make what is called an in-app purchase to unlock portions of functionality. In game terms, this might mean extra levels to play through for a few pennies, or new items for in-game characters to be equipped with. This model is one which is increasingly attractive with App developers as it means they can create a stream of revenue from each user, rather than a one off payment and achieve this without the substantial costs of developing an App from scratch.

Firemint (2011) Flight Control Sales Per Week From: http://firemint.com/wp-content/uploads/2011/01/FlightControl-PerWeek.png see also Firemint Backgrounder at: http://firemint.com/2010/firemint-backgrounder-current-as-at-15-july-2010/

Talking about software #2 - Applications

 

Given the vast number of companies and products and uses for software, it simply isn’t possible to cover all issues. Instead, it seems far more sensible to limit ourselves, in form and function. Therefore, this case will focus on the marketing of what are popularly known as ‘Apps’ for mobile devices like Apple’s iPhone. What is an App? The name is an abbreviation for application – a piece of software with a set of capabilities and functions. Microsoft Word is an application, and so is the web browser Chrome. What the abbreviated name refers to though, is a relatively small [in terms of file-size] self-contained piece of software that has a very specific and focussed purpose. Most so called smart-phones come with several of these pre-installed. The calendar is an App, the contacts directory is an App, the web-browser is an App and so on. What makes Apps worthy of particular interest is the after-markets – Apps offered for sale by third-parties to smart-phone users.  Let’s quickly review some quite dazzling facts and figures.

How many apps – products – are there? No one knows for sure, and the number is growing too rapidly to get a good fix, but Apple have indicated that for their smart-phones and portable devices [iphones, iPads] there are at least 400,000 choices. The online store [which itself is a piece of software] only opened in July of 2008. Arithmetic tells us then that in somewhat less than a 1000 days, the Apps added to the list of choices to buy from the store increased by 400 a day, per day, every day!

Just because there are so many products to choose from, it doesn’t mean that people are buying them though, does it? Let’s check that out as well. How many of these applications have been downloaded from the store – and note the word downloaded rather than sold – an issue we’ll come to later? Apple do know that – they know it perfectly. They recently held a sales promotion with a large prize for the person who downloaded the ten billionth App (Apple, 2011). Some context for the figure – 10 billion. That digital music, marketed through software portals like iTunes has revolutionised the marketing and consumption of music is surely beyond question. The rapidity with which the marketplace changed beyond recognition from what it was even a decade below has been breathtaking. One research group has recently compared the growth in sales of digital music with the growth in sales of Apps (Dedieu, 2011). Music had a four year headstart over Apps, if Apps haven’t overtaken music yet then inevitably they will do soon.

Asymo.com

Apple (2011) The App Store has Reached 10 Billion Downloads From: www.apple.com/itunes/10-billion-app-countdown

Dedieu, Horace (2011) More than 60 apps have been downloaded for every IOS device sold From: www.asymco.com/2011/01/16/more-than-60-apps-have-been-downloaded-for-every-ios-device-sold/



Amazon buys Lovefilm

One of the earlier posts on this blog concerned my predictions for the future of the company Lovefilm. You may remember I was less than totally convinced that it would thrive in an environment where digital download/streaming/piracy was becoming so much easier. I noted that environmental change had allowed Lovefilm to replace companies like Blockbuster.

Amazon clearly disagrees with me: Amazon takes full control of Lovefilm . The price is believed to be about £200m. Much froth at the Lovefilm webbie: BREAKING NEWS: AMAZON TO BUY LOVEFiLM.

Amazon sold its own DVD rental operation to Lovefilm a couple of years ago. I'm intrigued to see what they will do with the company in the medium to long term - the Guardian article notes the recent upsurge in members streaming via a games console - and my prediction is that they will try and evolve it towards being digitally/internet focused, rather than physical media focused.

As for me - after being a member for nearly ten years, I think I'll be cancelling my subscription at the end of the month. Nothing political, I just don't feel I get better value than I would on a pay-as-you-rent basis via my Apple TV - on which note: Users now watching more Netflix on Apple TV than on iPad. Netflix to come to the UK, entering via Apple is my second prediction

Lovefilm and Blockbuster

In the last post I mentioned that my VCR had been taken out and put down for humane reasons. I also noted that for organisations that were founded and grew on serving markets related to video rental, the advance of technology was a significant issue.

Blockbuster evolved, moving from cassettes to discs, and from films to a range that included games, TV series and an unhealthy amount of sweets and chocolates. That kept them going for a while - but about 8 years ago a severe blow was struck by a new entrant - Lovefilm

Lovefilm operates in a very different way to the traditional video rental companies like Blockbuster. Disc only - for films and games. No retail outlets - customers/subscibers receive films and return them via mail. Films have no time limit, and you can choose a package to allow you a fixed number of titles at home. You pay by the month, not by the film.

Plus points - no need to watch a film the night/weekend you rent it. No having to return the films to the retailer you got them from. Subscription means you know exactly how much you will be paying. Management of your films/account online 24/7. Downside? You queue films, but can't be sure of which ones you'll get. There will probably be a two day delay between a disc being dispatched and it ariving in the mail - the same the other way as you return discs.

This model was replicated by other firms - most notably Amazon. Over time though, through brand building, stock management and superior customer services, Lovefilm bought or defeated most rivals - even taking over the Amazon service. Poor old Blockbuster has tried to catch up, but never quite managed it. I'm afraid I don't hold out much hope for their survival in the long term.

Lovefilm came to dominate their market by taking advantage of possibilities allowed by adopting a different supply chain. They in turn though are coming under pressure from technological developments - namely, digital distribution.

Consumers now have a number of options to receive and watch media they haven't had before. The BBC iPlayer, Freeview/Sky boxes with ability to revord HD programmes and of course internet based distribution - legal or otherwise!

A recent option is the new Apple TV product. Why wait for the film in the mail when you can select and view it within moments?

Lovefilm haven't been caught out by these developments, and now offer films to view on your home PC as well as discs in the mail. What remains to be seen is if this hybrid approach can compete against purely digital distribution - and the ability to conveniently watch on the living room TV, rather than a computer screen.

Not to worry the Lovefilm management, but I've been a subscriber since 2002, and I'm now thinking of cancelling.