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The Business of Social Games and Casino

How to succeed in the mobile game space by Lloyd Melnick

Month: December 2014

The perils of saying your product or game is the best

I read an interesting piece in the Harvard Business Review, “The Danger of Touting a Product as The Best” by Jingjing Ma and Neal Roese, on why touting your game or product as the best can backfire. Ma and Roese show that positioning your product as the best in comparative ads actually activates a maximizing mindset with customers, where people regard anything less than perfect as a waste of money. While there are some people who are always maximizers (that is, they consider anything not perfect a waste), with most people this attitude is not fixed.

In Ma and Roese’s research, you can induce the maximizing mind-set with situations that encourage customers to make comparisons or to look for the very best product. Once this is activated, the customer may face post-purchase regret and be more likely to switch to another product after a minor disappointment. This phenomenon is particularly powerful in the free-to-play game space, as losing users early has a very powerful impact on lifetime value.Slide1

There are several approaches growth and marketing experts can use to mitigate this situation:

  • Think twice before running comparative ads.
  • Limit assertions of optimal features.
  • Do not claim overall to be best, even if you are very good.

Key takeaways

  1. Telling customers your product is the best can backfire because it sets unreasonable expectations.
  2. You should consider carefully whether it is beneficial to run comparative ads against your competitors
  3. Limit your assertions of optimal features.

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Author Lloyd MelnickPosted on December 23, 2014December 15, 2014Categories General Social Games Business, General Tech Business, Social Games MarketingTags Comparative ads, marketing messaging1 Comment on The perils of saying your product or game is the best

Testing innovation opportunities

While almost everyone now accepts the value of analytics and metrics-driven decision making, one area where it is often neglected is in implementing innovation. Even data driven companies are hampered in implementing innovation because their data is backward looking. In the absence of sufficient data to inform decisions about proposed innovations, managers often rely on their experience, intuition and conventional wisdom, and none of these is necessarily relevant. Although many of my readers are from the mobile game space, where much is tested, even in the game space pure innovation often is not. An article in the Harvard Business Review, “Increase your chances of success with innovation test-drives” by Stefan Thomke and Jim Manzi, does a great job of showing how to test these hypotheses.

Slide1
Most companies do not conduct rigorous tests of their risky overhauls because they are reluctant to fund proper business experiments and have considerable difficulty executing them. Although the concept of experimentation is straightforward, there are many organizational, cultural and technical challenges to implementing experiments. While running an A/B test on a website is simple, many business need to deal with complex distribution systems, sales territories, bank branches, etc. Business experimentation in such environments suffers from many analytic complexities, most importantly that sample sizes are often too small to be significant (e.g., only a few stores). Continue reading “Testing innovation opportunities”

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Author Lloyd MelnickPosted on December 18, 2014January 2, 2015Categories Analytics, General Social Games Business, General Tech BusinessTags A/B testing, big data, Experiments, innovation, reliability, valueLeave a comment on Testing innovation opportunities

Evaluating your virtual event

As more companies use virtual events as part of their growth and engagement mix, it is increasingly important to be able to evaluate the effectiveness of the event. I have used virtual events multiple times and it is an element of our growth mix.

Slide1

Simply having the event is not a success; you need to measure and evaluate it. Has the event been worth the time and resources devoted to it and should you replicate the event? How can you optimize future events so they have a bigger impact on your business? I read a recent article on MarketingProfs that offers some great advice on what you should track on your next virtual event.

Behavior

Unlike physical events, with virtual events you can measure much of the attendees’ behavior. You can see which content they interact with and how they engage with other attendees and speakers.

Engagement

By tracking attendee engagement, you see what worked and what did not, as well as seeing which potential customers you are most likely to convert. In a physical event, you assume the people playing on their phones are the least engaged. In a virtual event, you can see if they are progressing their slides with the presentation, asking questions, whether they clicked on links you provided etc. Continue reading “Evaluating your virtual event”

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Author Lloyd MelnickPosted on December 16, 2014January 2, 2015Categories Analytics, General Social Games Business, General Tech Business, Social Games MarketingTags analytics, measurement, Virtual events1 Comment on Evaluating your virtual event

It’s all about the base

I was recently reading about the challenges NASCAR has faced in the last ten years and it reminded me of that great philosopher, Meghan Trainor, who wrote “it’s all about the base.” When I first moved to North Carolina in the early nineties, NASCAR was the fastest-growing sport in the world. It went from a regional play to a national television contract and star drivers from other auto-racing leagues switched to the NASCAR circuit. Races were sold out and NASCAR seemed poised to capture the number two spot among US sports (the NFL was still the top dog around). NASCAR moved races from places such as North Wilkesboro and Rockingham to big cities including Chicago and Dallas/Fort Worth.

Since those glory days NASCAR has run into major difficulties. Rather than continue on its growth trajectory, television ratings have plummeted to the point where many doubt the contract will be renewed by major television networks. Moreover, many races no longer sell out and on most broadcasts the empty seats are impossible to avoid.

nascar

Why NASCAR faded

Although there are many theories on why NASCAR failed to live up to the promise it showed in the 90s, it points to a problem many companies have experienced when they lose focus on their most loyal users. In NASCAR’s situation, it was the audience in the Southeast that largely built the sport, the same people who made “Duck Dynasty” the most popular television show at one point. It moved races from local venues, as described above like Rockingham, to big cities where they felt they would get exposure to a larger audience. These moves broke the bond between the people in these communities and the sport. While NASCAR aimed for the big audience, its base started to disintegrate. Now the sport no longer has its core customers (or at least does not have as strong a relationship with them) and has not added enough casual viewers in the bigger market to stem this loss, let alone grow. Also, with the base less engaged, the virality of these fans has decreased and is bringing in fewer new fans. Continue reading “It’s all about the base”

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Author Lloyd MelnickPosted on December 11, 2014January 2, 2015Categories General Social Games Business, General Tech Business, Social Games MarketingTags base, marketing, NASCAR, NFLLeave a comment on It’s all about the base

What it really means to be a thought leader

Although many refer to themselves as industry thought leaders, few understand what a thought leader represents. By leading, true thought leaders initiate new ideas and strategies that others follow and eventually becomes the new normal.

True thought leadership

There is a lot of value in disseminating best practices and strategies, it is what 90 percent of my blog posts do, but that does not constitute though leadership. Leadership is introducing new ways of looking at problems or executing. Reid Hoffman’s ideas on building an alliance between employees and employers instead of the traditional model of long-term employment is thought leadership. Google’s implementation of a multi-armed bandit approach to replace AB testing is thought leadership. Reed Hastings’ decision to rent DVDs by mail subscription instead of through stores was thought leadership. Continue reading “What it really means to be a thought leader”

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Author Lloyd MelnickPosted on December 9, 2014January 2, 2015Categories General Social Games Business, General Tech BusinessTags Reid Hoffman, thought leadership4 Comments on What it really means to be a thought leader

90-day plan to increase your company’s innovation

While everyone agrees that companies need to innovate to succeed, actually doing it is often quite challenging. While most successful companies can lay credit to some innovations, most have occurred by chance and the companies actually lack an orderly, reliable way to innovate regularly. A recent article in the Harvard Business Review, “Build an Innovation Engine in 90 Days” by Scott Anthony and two of his colleagues, does a great job of laying out a tactical plan to help your company to innovate.

Slide1

While some companies address this problem by building large—and expensive—innovation centers or R&D facilities, Anthony shows there is a middle way that almost any company can pursue regardless of resources. In many ways, what Anthony describes (and the term he uses) is the equivalent of the minimum viable product (MVP), from lean start-up fame. In this case, it is a minimum viable innovation system (MVIS). There are four phases to building such a system, and it takes about 90 days.

Phase 1: Define your innovation buckets

There are two types of innovation: improving existing products or operations, and generating growth by reaching new customer segments or markets. For an innovation program (including an MVIS) to be successful, everyone involved must understand the two types of innovation. If your team fails to make this distinction, you increase the likelihood that you either discount the importance of innovations that strengthen the ongoing business or demand too much revenue from the new-growth initiatives too early. Innovations meant to improve the core business (the former of the two innovation categories) should be tied to the current strategy and managed mostly with the primary organizational structure. The return on these projects will be relatively quick with high initial returns and thus should be funded at scale.

While all of your innovation projects may be focused on core activities, they you are probably missing preparing for the future and reaching your long-term goals. New growth initiatives, the latter category, should fill this gap. These new growth initiatives push the frontier of your strategy by offering new or complementary products to existing customers, moving into adjacent product or geographic markets, or developing something utterly original, perhaps delivered in a novel way. Continue reading “90-day plan to increase your company’s innovation”

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Author Lloyd MelnickPosted on December 4, 2014December 15, 2014Categories General Social Games Business, General Tech Business, Growth, Lloyd's favorite postsTags innovation, MVIS, Scott AnthonyLeave a comment on 90-day plan to increase your company’s innovation

How negative churn can be a strong growth driver

I came across a great post by VC Tomasz Tunguz on a great growth mechanism: negative churn. In effect, negative churn creates the same compounding effect as a high-rate bond; over time it generates tremendous growth. Negative churn means that the actual churn rate, the number of customers or players moving out of a collective group over a specific period of time, is lower than the increase in the value of the retained customers.

What is negative churn

Tunguz uses a great example to illustrate negative churn. Say your company has a five percent monthly churn rate, which means that five percent of your users quit each month. In Tunguz’s example, the remaining 95 percent of the customers increase their spend with your company by ten percent, so total revenue from this cohort (group) of users is equal to 105 percent of the revenue from the previous month. Even with 5 percent monthly churn, each month this cohort of users becomes increasingly valuable.

In the 5 percent monthly churn case, the company exits the year with $919 in monthly recurring revenue and the customer lifetime value (assuming a one-year lifetime and no virality) is $77. In the negative churn case (where you have a 10 percent monthly increase in spend), your company’s revenue is 73 percent larger at $1592 and the LTV is worth $133.

In both cases, the company has the same number of customers (or game, players). But with negative churn, revenue is over 70 percent higher. This shows the power of compounding growth every month.

Acct value by cohortThis graphic from Tunguz’s blog illustrates the opportunity:

How to achieve negative churn

Continue reading “How negative churn can be a strong growth driver”

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Author Lloyd MelnickPosted on December 2, 2014December 15, 2014Categories General Social Games Business, General Tech Business, Growth, Lloyd's favorite posts, LTVTags churn, Growth, lifetime value, LTV, negative churn, Tomasz TunguzLeave a comment on How negative churn can be a strong growth driver

Get my book on LTV

The definitive book on customer lifetime value, Understanding the Predictable, is now available in both print and Kindle formats on Amazon.

Understanding the Predictable delves into the world of Customer Lifetime Value (LTV), a metric that shows how much each customer is worth to your business. By understanding this metric, you can predict how changes to your product will impact the value of each customer. You will also learn how to apply this simple yet powerful method of predictive analytics to optimize your marketing and user acquisition.

For more information, click here

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Lloyd Melnick

This is Lloyd Melnick’s personal blog. I am Director of StarsPlay at The Stars Group (PokerStars), where I lead the team responsible for free-to-play gaming. I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.

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