IGO Tips & Tricks: How to Price Items for Buy a Feature
One of the essential activities when designing your Buy a Feature game is pricing the items within the game. The goal is to develop a pricing scheme that helps you gain insight into your customers true motivations. Here are some tips and techniques to help you. I’ll cover:
- Simple pricing, when every item is the same price
- Pricing based on shirt sizes
- Complex pricing schemes
The good news is that you can play around with a variety of different pricing schemes to help you determine the best approach.
Simple Pricing: When Everything is the Same Price
The simplest form of pricing items is to make every single item the
same price. You should use this technique when the cost to create these items and/or the value that these items provide are roughly the same. Which means you’re probably not going to use this approach very much, because most of the time items have a differentiated cost. And, since the players of the game know that items have different costs, the game is actually less fun if the items are priced the same when they cost different amounts to create. So, use this approach with caution.
In 2010 we helped IAM Magazine research the key issues facing IP professionals around the world. The results of these games were used to prioritize the topics that would be addressed by a team of world-wide IP leaders through in-person games at the 2010 IP Business Congress in Munich. The collaborative purchase model of Buy a Feature online enabled us to capture the ranking of the topics and the chat logs helped us understand the deeper issues around these concepts. By “purchasing” a specific issue, a person playing these online games was saying: “This issue is really important to me. I want to hear what key leaders in the IP Community think about how it should be addressed.”
Here is what the pricing looked like for a subset of these items:
|Increasing IP Licensing Revenue||How can CIPOs, who are responsible for maximizing license revenue from their IP portfolio, respond to the challenges they face in extracting value from their assets?||This session will explore best practices for maximizing licensing revenue from IP portfolios. Topics discussed include managing Board, Investor, and Analyst expectations.||$200|
|Improving Realization of IP||CIPOs are responsible for helping increase the market value of their companies by helping investors understand and appreciate the value of firms’ IP assets.||This session will explore the ways in which leading CIPOs are showing how well-managed IP programs can increase the market value of their companies.||$200|
|Protecting IP Budgets||Global economic conditions have forced significant budget cuts across all corporate units. IP budgets are no exception. But have the cuts gone too far?||This session will explore ways in which CIPOs can make “smart choices” when faced with tough budget cuts and arguments they can effectively use to minimize cuts in the first place.||$200|
Pricing Based on Shirt Sizes
It’s more common to base the proposed cost of an item based on its projected cost of development. For example, if you’re using the game to prioritize a list of projects in a project portfolio, you might want to price the items based on a rough estimate of their costs. We typically use shirt-size estimates and pick a randomly generated price within a defined price range. The reason we pick a random price within a range is that the game is more fun to play when there are slight variations in the price. And, since you’re goal is to get directionally correct pricing, you want to vary this a bit.
The good news is that our software helps you in this process – it is literally built right into the platform. So, all you have to do is develop shirt size estimates of costs and let our platform do the rest. The picture below illustrates this process, in which we use shirt sizes to capture the different costs associated with creating different features. Of course, you can adjust the final prices used for the items if you don’t agree with the prices suggested by the game.
Complex Pricing Schemes
The most complex form of pricing is to use projected development costs as the baseline. This is more complex because it requires you to work with another team to develop these estimates. And, you’re still not done! For example, you might have customer requests for features that you think may not be within you best strategic interest. Even if these features are easy or low-cost, consider pricing them relatively high to help gauge customer desire. Alternatively, you may have expensive features
that you think are quite important to your strategic future and therefore price them lower since you’re also predisposed to do them.
Value-based pricing is always appropriate, and it works in Buy a Feature too: Price features according to the relative and/or absolute value they provide to customers. Be careful, though: Buy a Feature is not designed to be a formal method for testing the actual retail prices of features or a replacement for a more formal conjoint analysis. If you need to accurately determine retail pricing of products and services, we recommend using another method.
Of course, you’re designing a game, and pricing based on direct options doesn’t have to be so serious. For example, suppose you wanted to use Buy a Feature to price party drinks. Here is a set of prices based on the rough costs of the drinks.
The Last Word… for Now
Pricing items for Buy a Feature is an important step in designing a game that help your understand your customers’ motivations – and is fun to play.