Could Pay-what-you-want be the kickstarter sleeping giant?

14/05/2017

 

I've always had a certain fascination in statistics, both how they can provide surprising conclusions to complex questions, but also how they can be twisted to suit one's own narrative. This interest led me to the series of books titled 'Freakonomics', and they are a series I'd highly recommend. Don't worry if you don't have much of an interest in economics or statistics, or aren't very good with mathematics; that's not what these books are. The books examine a diverse range of real-world questions, and simply use the theories behind economics to derive the answers, many of them surprising. Topics include: Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? And why do drug dealers still live with their moms?

Whilst re-reading one of these books, I was reminded of a study they made into "honour" pay systems and Pay-what-you-want systems and it got me thinking, could this be a new way to boost the earnings of a kickstarter campaign?

On the surface these pay models appear ludicrous. Why would anyone pay more than they have to? You'll just have a ton of freeloaders. Indeed, if implemented wrongly, that is probably what you would end up with for the most part. Freakonomics' various explorations into this model started with an economist who turned bagel salesman.

 He operated his business on an honour system, delivering bagels to offices along with wooden payment boxes, and collected them at the end of the day. You would be forgiven for thinking that it didn't go well and while he did not recoup 100% of what he asked for for the bagels, he did recoup between 80% and 90%, without the hassle and expenses of a manned system of payment.

 

The next exploration I read about was with pay-what-you-want. A Canadian singer-songwriter called Jane Siberry offered her music to download with 4 different price options: a) Free b) Self-determined (pay now) c) Self-determined (pay after listening), d) Industry standard of .99. Alongside the payment options were also statistics of the percentage of people that chose each option, and the average they paid for the track. So do you think the payment model worked out better or worse for her?

The accompanying statistics were: 17% free, 37% self-determined now, and 46% self-determined later. The average price per download across the board was $1.14. 8% paid below suggested, 79% paid at suggested, and 14% paid above suggested. So, even though customers were perfectly able to download for free (and some did), Siberry actually made more money, as evidenced by the $1.14 average. It's likely, also, that the number of sales would have been higher than at just a flat rate meaning the system was doubly beneficial.

There have been many other studies of this payment model, and other successes too. Many will be familiar with The Humble Bundle that offers not-so-recent video games in a package deal on a pay-what-you want system. A quick google search offers up many other successes too.

 

So what does this mean for kickstarter? Firstly, it is clear that kickstarter campaigns already share some major similarities. Backers can pay what they want, and can select what kind of reward they want; the big difference being conventionally there is always a minimum value per reward tier. kickstarter also offers some very light statistics to potential backers buy showing how many have backed at each tier. But what if, a tabletop campaign were to follow the model above, as closely as kickstarter's rules allow?

Suppose there was a single $1 tier, for which any backer could have a copy of the game, with a suggested RRP on display? In addition to this the campaign page could be frequently updated  to display the average backed price (although depending on uptake this could be quite a busy job). So if this was done, what would happen? Would everyone simply back at $1?

Perhaps, but that would certainly lead to the campaign not reaching it's total. That would mean that no-one gets anything. Perhaps some of the more-keen backers will then up their pledges to the RRP or above in effort to make the campaign fund. This will either start some momentum that will entice others to do the same, or again, the campaign will fail. But maybe, just maybe, as other experiments have shown, the pricing model will work as intended, pledgers will value the game how they see fit, and on average be close to, or even above the RRP. The one thing in favour of such an experiment is with kickstarter's all or nothing policy no-one will end up out of pocket, forced to manufacture a game that was backed at only $1 each. The worst case scenario is a failed campaign.

Whilst this all looks interesting, and potentially a secret weapon to be unleashed, I must confess for my own campaign I shall be steering clear. As a first-timer I intend to follow the practices and advice that have led to so many successful campaigns before; but I'd be fascinated to see it tried by someone more established.

 

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