Skip to content

The Business of Social Games and Casino

How to succeed in the mobile game space by Lloyd Melnick

Tag: recency

Customer analytics tips for gaming companies

Customer analytics tips for gaming companies

While social and mobile gaming companies are generally at the cutting edge of applying analytics, I recently took an online course from Wharton on Coursera that provided some additional insights in how to best use analytics in online gaming. These takeaways range from ways to improve your UI to how to calculate LTV more accurately.

Make your players wander

One of the most interesting takeaways from the course is that efficiency is not always the desired player behavior in the online world. In traditional retail, retailers found they enjoy much higher revenue when customers wander around the store rather than quickly find what they have come for. In the studies cited, about 75 percent of movement inside a store is not required. Sixty percent of purchases are items people had no intention of buying when they went into the store. Instead retailers optimize for “jiggliness,” as people with the most jiggliness buy the most.

jiggliness

There are uses of this concept for online gaming and iGaming companies. Rather than optimize your lobby and UI (user interface) to ensure your players find what they are looking for, take them on a journey around your game. If it is a social casino, rather than finding the slot they know and love, expose them to some other content, they may find something they prefer.

Higher customer satisfaction may not improve profitability

While customer satisfaction is positively correlated with profitability, the relationship is not linear. Companies with a low level of customer satisfaction, referred to as the Zone of Pain, experience a strong impact on revenue when making improvements. That is, the firms with awful customer service see big benefits just moving out of the Zone of Pain.

On the high end, companies that provide great customer service and differentiate themselves with it experience positive ROI by making the experience even better. These companies are what is referred to as in the Zone of Delight. Retailers like Nordstroms, which enjoy high margins due to their customer service, see a huge impact when they find even better ways to provide a WOW experience.

nordstrom

When customer satisfaction is only a small part of a company’s value proposition, improvements do not necessarily have a positive return. There is a large flat region where increasing satisfaction does not increase profitability. The key takeaway is that the relationship between customer satisfaction and profitability is not linear, but starts with a Zone of Pain, then hits a sizeable flat region, and then moves to a Zone of Delight.

Correlation does not equal causation

We should all know by now that just because two variables have related movement, you cannot assume one is causing the other. I see this mistake made frequently, including by BI experts. Correlation only shows a relationship between two variables. Causation, more critically, shows that one variable produces an effect on the other variable. It is crucial to remember there are three requirements for causality:

  1. Correlation
  2. Temporal Antecedence. X must happen before Y.
  3. No third factor is driving both. Need to control for other possible factors.

Use analytics for pricing

I am surprised at how often pricing strategy in mobile games (the cost of in-app purchases) or in iGaming (RTP and bet levels) is driven by competitive analysis and intuition rather than analytics. Regression, however, can be used to set optimal pricing (including for virtual goods) at the level that boosts profits. Regression can predict demand at prices that have not been tried, thus you can determine profitability for different options. As predictions can be completed for different future prices, you can then determine optimal price. Effectively, you answer the question what you can charge to make the maximum profit (and with virtually zero marginal cost for online products, can be simplified to maximum revenue).

Preparing better surveys

While market research is a less than reliable way to understand customer intent, it still provides valuable insights into your players. Surveys are a good way to learn about potential customers and are relatively low cost. Some best practices include:

    • To improve reliability of surveys, test and then retest. If the results are consistent, it shows you are getting reliable results (people still may not know what they want though).
    • There are multiple ways to ask questions in a survey (comparative, rank, paired comparison, Likert, continuous, etc.) and you should understand your end goal when deciding which format to use. Advantages of open-ended questions allow for a general reaction that can help interpret closed end questions and may suggest follow up questions. Closed end requires a lot of pre-testing but is easier to administer.
    • Focus on drafting high quality questions. Use simple, conventional language and avoid ambiguity. Do not ask any questions more than 20 words. Most importantly, avoid leading and loaded questions (i.e. How bad a job is Lloyd doing?).
    • Pay attention to sequence and layout. Start with an easy and non-threatening question. Have a smooth and logical flow. Have the questions go from general to specific. Keep the sensitive or difficult question at the end.
    • The key to using surveys effectively is validity, how well it predicts variables you are interested in. If you find surveys effectively predict certain behavior, then they are an appropriate tool for predicting that variable.
    • Make sure your results are generalizable to an appropriate population. You need to define clearly the population, choose a representative sample, select respondents will to be interviewed and motivate them to provide information.
    • Pre-test your survey. Ensure respondents understand each question and the questions make sense.
    • Collect data on non-respondents as they may be systemically different. Try to convert them to responding.

Recency is incredibly important

When looking at the future value of a customer, the three keys are how recently they made a purchase (recency), how many purchases they have made (frequency) and monetization (size of the purchase) recency is by far the best predictor of future value. Frequency is then significantly more indicative than monetization. Thus, focusing on increasing the size of a purchase (up-selling) is the least valuable strategy you can pursue to increase your customer’s lifetime value.

Include clumpiness in your LTV analysis

I wrote several weeks ago about the important of clumpiness in determining a customer’s future value so will not go into too much detail again. Clumpiness refers to the fact that people buy in bursts and that those customers could be extremely valuable. When calculating customer value and segmentation, we focus on analysing recency, frequency and monetization of the customer, as I discussed above. This analysis is based on customers making purchases in a regular pattern, i.e. coffee, diapers or milk. For certain products (and I would classify social and casino games here), customers actually monetize in bursts. Thus, you need to add C for clumpiness to your modeling.

Key takeaways

  • People who wander around a retail location spend more than ones who immediately find what they are looking for and retailers optimize to create this jiggliness. Online casinos and games can also build in jiggliness so players find new games and offerings rather than simply quickly go to the one they are looking to play.
  • While satisfaction with customer service positively impacts profitability, the relationship is not linear. Improvements have a strong impact when players are highly dissatisfied (and that is corrected) or when customers with great service make further improvements, companies in the middle often do not see a positive ROI on CS improvements.
  • A relationship between two variables does not show one is causing the other, to have causation there must be a relationship plus temporal antecedence plus the absence of a third variable driving both factors.

Slide1

Share this:

  • Facebook
  • LinkedIn

Like this:

Like Loading...
Author Lloyd MelnickPosted on July 15, 2020June 27, 2020Categories Analytics, General Social Games Business, General Tech BusinessTags analytics, Clumpiness, customer service, Jiggliness, pricing, recency, survey3 Comments on Customer analytics tips for gaming companies

Lifetime Value Part 21: 3D LTV

I recently read an article on Sociomantic, “Customer Lifetime Value in Three Dimensions,” about looking at lifetime value (LTV) tied to the customer journey and it adds another dimension to calculating lifetime value that could greatly improve its predictive value for you as well as pointing to areas for improvement. The article breaks LTV into three dimensions: recency, frequency and profitability (Note: The authors refer to the third dimension as “monetization.” Based on my previous posts on monetization, I felt this term would confuse my readers, as our definitions differ).

Slide1

Recency

The article points out that a key determinant of recency is when the customer last made a purchase (or in a game, last monetized). When examining the recency dimension of your customers, you should analyze which cohorts purchased which items. With this information, you can then predict subsequent purchases, including what items each cohort (actually each customer) is likely to purchase. This analysis provides an LTV for each cohort (or even customer) and can power a machine learning recommendation engine or post-purchase retargeting engine that would increase LTV. Continue reading “Lifetime Value Part 21: 3D LTV”

Share this:

  • Facebook
  • LinkedIn

Like this:

Like Loading...
Author Lloyd MelnickPosted on July 8, 2014July 23, 2014Categories Analytics, General Social Games Business, LTVTags frequency, lifetime value, LTV, profitability, recency1 Comment on Lifetime Value Part 21: 3D LTV

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

Follow The Business of Social Games and Casino on WordPress.com

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 1,313 other followers

Lloyd Melnick

This is Lloyd Melnick’s personal blog.  All views and opinions expressed on this website are mine alone and do not represent those of people, institutions or organizations that I may or may not be associated with in professional or personal capacity.

I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group/PokerStars, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.  Currently, I am on the Board of Directors of Murka and GM of VGW’s Chumba Casino

Topic Areas

  • Analytics (114)
  • Bayes' Theorem (8)
  • behavioral economics (8)
  • blue ocean strategy (14)
  • Crowdfunding (4)
  • General Social Games Business (457)
  • General Tech Business (194)
  • Growth (88)
  • International Issues with Social Games (50)
  • Lloyd's favorite posts (101)
  • LTV (54)
  • Machine Learning (10)
  • Mobile Platforms (37)
  • Social Casino (51)
  • Social Games Marketing (104)
  • thinking fast and slow (5)
  • Uncategorized (31)

Social

  • View CasualGame’s profile on Facebook
  • View @lloydmelnick’s profile on Twitter
  • View lloydmelnick’s profile on LinkedIn

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 1,313 other followers

Archives

  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • November 2019
  • October 2019
  • September 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • December 2010

Most Recent Posts

  • Lessons for gaming and tech companies from the Peter Drucker Forum
  • Chaos Theory, the Butterfly Effect, and Gaming
  • How to give help without micromanaging
  • Measure yourself by your worst day

RSS

RSS Feed RSS - Posts

RSS Feed RSS - Comments

Categories

  • Analytics (114)
  • Bayes' Theorem (8)
  • behavioral economics (8)
  • blue ocean strategy (14)
  • Crowdfunding (4)
  • General Social Games Business (457)
  • General Tech Business (194)
  • Growth (88)
  • International Issues with Social Games (50)
  • Lloyd's favorite posts (101)
  • LTV (54)
  • Machine Learning (10)
  • Mobile Platforms (37)
  • Social Casino (51)
  • Social Games Marketing (104)
  • thinking fast and slow (5)
  • Uncategorized (31)

Archives

  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • November 2019
  • October 2019
  • September 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • December 2010
February 2021
S M T W T F S
 123456
78910111213
14151617181920
21222324252627
28  
« Jan    

by Lloyd Melnick

All posts by Lloyd Melnick unless specified otherwise
The Business of Social Games and Casino Website Powered by WordPress.com.
Cancel

 
Loading Comments...
Comment
    ×
    %d bloggers like this: