Archived from groups: comp.sys.ibm.pc.games.action (
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Aldwyn Edain wrote:
> On 5 Apr 2005 03:22:51 -0700, "Chadwick" <chadwick110@hotmail.com>
> wrote:
>
>
> >That was the assertion: that you could get the same profits whether
you
> >spent $1m or $10m on marketing. If the profits are going to be the
> >same, then I would spend $10m, because my sales and turnover will be
so
> >much higher.
>
> That is not a guarantee! That is a calculated risk that can easily
> backfire on you. My model is far less risky. Here's an even better
> model to guearantee the same profits. Sell the game at 50% the price
> of most other games. Bulk selling at a lower price garners the same
> profits as selling less at a higher price. Often more profits.
The situation was "I bet they could have spent nine mil less and still
had the same profits." I had to assume the profits were guaranteed and
the rest is just basic maths.
If you are now guaranteeing my profits will be the same, whether the
game is sold at 100% or 50% of "normal" retail price, then I will sell
at 50% because the revenue will be the same in both cases (it has to be
in order to generate the profit), but the number of units sold will
double if they are being sold at 50%.
This discussion will probably continue in this pointless vein until
someone points out that you cannot guarantee profits. Commerce is built
around the balance of risk and reward that is development costs vs
revenue and profit. We can control the cost of sale, but we cannot
control incoming revenue from sales. We can influence sales, but not
guarantee them (except in certain very specific situations, not
applicable to the general retail market).
What I think you and Redmond are tyring to argue is that there are less
risky ways of trying to get the desired profit margin. Instead of
exposing yourself to an additional $10m risk (the marketing spend),
Redmond suggests spending just $1m because you need to sell fewer units
to recover this cost and make an acceptable level of profit. As you
then argued, the game might "sell itself" and make a much greater
profit.
Your alternative solution is to halve the retail price to encourage
more purchases. The danger with this is that you need to sell double
the amount of units. I think you would need clever marketing to avoid
the game being seen as a budget title. There is a marketing concept
best illustrated by Stella Artoi's old slogan: "reassuring expensive".
More simply, you get what you pay for. When comparing two similar
products, people tend to believe that the more expensive product is
somehow better quality. It's not always true, but the perception
exists, and in marketing, perception is everything. ou may recall that
HL2 was sold at top price for a game. Would it have sold better if they
knocked $5 off? Or did the high price pass on a message that this was a
quality game? You also have very little room for further discounts to
push sales later in the product's life.
Dragging this discussion back on topic, the argument is whether Ubisoft
needed to spend $10m on marketing the new Splinter Cell game. Would the
game have sold itself just because of it's name and heritage? Would
word of mouth have been sufficient? Were ubisoft trying to attract a
new group of purchasers who weren't familiar with (or aware of) the
previous games in the series, and who wouldn't necessarily receive word
of mouth? Perhaps they knew the game would sell like hot cakes, and
figured they could afford to spend some money on general publicity (as
Raymond suggests)?
Whatever we think of their budget, would bisoft really throgh $10m away
on a whim, or would they want to see how that money will be recovered?
I suspect they will want to see budgets and forecasts first, and only
sign the cheque when they are satisfied they are going to see their
money conme back with interest.
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