Insert More Coins: The Psychology Behind Microtransactions

by / Thursday, 25 February 2016 / Published in Psychology

Microtransactions have become a popular model for gaming companies to use in order to generate revenue.

You have spent 15 or 20 minutes playing a game on your phone but are stuck on a level. Unfortunately, you’re out of plays for the day, but a window pops up telling you it only costs 99 cents for another 10 plays. It’s only a dollar, so you tap and play for another 20 minutes.

The small purchase you made is called a microtransaction, which is how countless games work. Candy Crush Saga, Angry Birds and so many others use a revenue model based on tiny little payments. When you multiply single microtransactions by millions of users, games can generate significant revenue. Micropayments rely on psychology to convince you that spending such a small amount of money is worth it.

What Are Microtransactions?

Microtransactions are very small payments made in games in exchange for something that can help the player advance in the game. Often referred to as “free to play,” the games are free to download and it is possible for users to never spend a dime. However, it quickly becomes clear that microtransactions will help the player advance more quickly and easily. Potentially, a player can end up spending a lot of money on a game that originally cost nothing.

History of Microtransactions

The origin of microtransactions can be traced back to arcade machines. These coin-operated machines required a few quarters to play. But when lives ran out, players had to insert more coins. The machine asking players to pay to continue is similar to the way free-to-play games operate today. Players are encouraged to move forward in their game by paying for more time.

In the late 1990s, massively multiplayer online (MMO) games began to offer an early version of the free-to-play model. Games like Neopets, RuneScape and MapleStory were aimed at younger players and thus were free. However, MMO games did have pay-to-play components and rewarded players who were willing to pay. Meanwhile, many online games directed at older players stuck to a subscription model that charged a flat fee per month.

The late 2000s brought more microtransaction models to the larger gaming population. More popular MMO games like the EverQuest series transitioned from subscriptions to a version of free to play. EverQuest witnessed a 150 percent increase in logins and substantial growth in account registrations.

Mobile gaming truly made free-to-play games ubiquitous. The structure of the app store allowed developers to sell free games but add in-game payments. In 2011, Yahoo reported that free-to-play revenue was overtaking premium revenue. Data shows that less than 6 percent of players spend money on a free-to-play game, yet their engagement helps companies earn millions in revenue.

Types of Microtransactions in Games and Apps

Not all microtransactions work the same way. Four examples demonstrate the various tactics games employ to generate revenue from micropayments.

1. In-Game Currencies

Certainly one of the most popular microtransactions involves fake in-game money that players can use to redeem many things. Games use these exchanges to hide the true value of what players may purchase and to make larger quantities seem like the “better deal.” This obscures the cost of playing the game and can mislead gamers.

2. Random Chance Purchases

A game presents players with a mystery bag of goodies that could potentially be worth much more than the price of admission. They’re charged real money or in-game currency to open the bag, pack, chest or box. Players are hooked by the opportunity to gain a rare advantage and often cave to the demand. Games may also offer “deals” that make these packs appear to be at a discount.

3. In-Game Items

Despite free-to-play games having no cost of entry, they will offer players upgrades. These items are often better than what players can earn for free, and they can make the game easier. This can pit players who do not pay for upgrades against those who do, giving a clear advantage to gamers who pay and encouraging people to pay more frequently.

4. Expiration

Many games, especially single-player experiences, have components that wear out or can only be used a certain number of times in a given period of time. After the expiration occurs, the game prompts players to use real or in-game currency to replenish or continue. If players feel their experience is being cut short, they’ll be more likely to contribute.

Why We Buy

Microtransactions are rooted in human psychology. Game designers understand what drives people to tap the button and spend 99 cents, and they capitalize on it. The growth in the popularity of games with microtransactions isn’t a coincidence.

Impulse Buying

The concept of impulse buying may not sound foreign. Free-to-play games truly capitalize on the psychology behind impulse buying. Many of the games place a time limit on opportunities to buy, forcing players to make a decision quickly. Games also use tactics to make players unhappy and suggest that impulse buys can make them happy.

If players are struggling to complete a part of the game, the game will suggest something that can improve their experience. Perhaps the player is out of lives; a game will offer a renewed opportunity at a cost to make the experience more enjoyable. Players are more likely to make a purchase when they perceive it will make them happy immediately.

Loss Aversion

Many games use loss aversion to encourage spending. The idea behind loss aversion is that players would rather enjoy the satisfaction of winning rather than losing. This goes a long way toward leading players to impulse buying. The crux of a player’s decision to pull the trigger on a micropayment centers on not wanting to lose the game. The belief that players can continue to win with the item they acquired drives them to pay.

Understanding Business and Psychology

Microtransactions are just one example of how business strategy and psychology intertwine. Touro University Worldwide offers accredited and affordable online business degrees and online psychology degrees that can help students advance in their careers or start on a new career path. Learn more about our fully online programs and how you can achieve your goals with an education from Touro.

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