We were just talking about how some in the recording industry are realizing that raising prices on downloadable songs may have been a mistake (just as the book publishing world is pushing to raise ebook prices — despite a fair bit of evidence that people actually are expecting prices to go in the other direction). It’s as if they don’t understand price elasticity and how you can quite often maximize revenue by lowering price.
In the video game world, at least, they seem more open to this concept. Last year we wrote about Valve reporting on some numbers that showed the more they reduced the price, the greater the money they brought in. In the case of reducing the price by 75%, Valve found sales increased 1470%. Not bad! But apparently an online video gaming store in Sweden has them beat.
Rasmus Larsson points us to a report from an online gaming store that also reduced prices by 75% and saw sales increase by an astounding 5500% (Google translation from the original). A similar test, with a price decrease of 50% saw sales increase 533%. Interestingly, after each price decrease, the company put the price back up again and saw a (slight) sales increase at the higher price too. As the article notes “the price is marketing.”
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