Why Free Trials Exist and Why Influencers Promote Games – Games and Network Effects
Companies that have products that rely on network effects need to efficiently market their products. These products need to get past the tipping point, otherwise their product is unlikely to succeed. The tipping point is a possible equilibrium quantity which represents the supply quantity of the good. If the population’s expectations for the number of buyers of the company’s product is above the tipping point, then there is an upward pressure of demand.
This causes the company’s market share to increase towards a potential stable equilibrium. If the population’s expectations for the number of buyers of the company’s product is below the tipping point, there is a downward pressure. This causes the company’s market share to decrease towards 0.
Essentially, if a company does not make it past the tipping point, their product is unlikely to succeed. Additionally, if a company does make it past the tipping point, their product is likely to succeed. So why do free trials exist? Companies use free trials as a way to entice potential buyers to use their product. If more and more people use the product, it will get over the tipping point. If the product becomes successful, the company can even raise the price to make more of a profit.
An example of a free trial is Nintendo’s Nintendo Switch Online access. Nintendo offers a free trial so players can gauge whether or not to purchase the full online access. If player’s like playing their games online with friends, then they will be likely to purchase the full version. If not enough players enjoy the online experience that Nintendo offers, then the cost will not be raised and the company will struggle to finance their situation with a free trial that does not create new buyers.
An example of a low-cost trial is Xbox’s Game Pass. The Game Pass is a plan that allows players to have access to hundreds of games and in-game perks. Their first month only costs a dollar, but the following months are higher priced. If players like the games available, they will continue to pay at regular price for the upcoming months.
Additionally, companies’ can go past the tipping point by having influencers use their product. These influencers are likely to have massive followings, so if the influencer supports the product, then their followers will likely support the product as well, whether that be because they get extra perks as part of promotions or they might have a chance to interact with the influencer within the product.
An example of this is RAID: Shadow Legends, a mobile game. The company who produced RAID: Shadow Legends used influencers like YouTubers to spread to market their game. This caused people to become attracted to the product if a YouTuber they watched advertised the game. Thus, these watchers might start using the product as well.
In conclusion, free and low-cost trials and influencers are important in analyzing the network effects to come up with effective marketing.
Sources:
https://my.nintendo.com/rewards/39297bc91370b69a?lang=en-US
https://www.xbox.com/en-US/xbox-game-pass
https://gameworldobserver.com/2021/12/24/plarium-spent-8-66-million-on-youtube-ads-for-raid-shadow-legends-over-last-six-months