Steam, the digital game distribution platform owned by Valve, often has these weird bundles for sale where they cram together, for example, every id Software or every Rockstar game or every game featuring squirrels into one package. One message board I frequent has a mega thread dedicated to gaming bargains, and doing a search for “Damn you, Steam” produces results like these:
“Damn… maybe I want Colonization. Have CIV IV & BTS on Disc. Should I just get Colonization @ $10.19 or just get them all and have on Steam for a wee bit more. Damn you Steam.”
“Damn you Steam! More games to buy that I’ll probably never get to play.”
“Damn you Steam. I had just successfully resisted the urge to buy games at both the holiday sale from GoGamer (Heroes of M&M 5 Complete and EU:Rome at $10 each were tempting, and Company of Heores Opposing Front for $5 is a steal) and the last round of Steam Deals (King Arthur especially was calling my name), and now you put Civ IV complete (I own none of the Civ IV stuff) out there for $14. My game backlog can’t take much more of this!!”
“This is madness. I am buying games for a theoretical PC that I will build someday (maybe) so I can play them. Damn you, Steam.”
“Got $170 sitting my cart. Staring at it trying to figure out how to cut it down some. Damn you, Steam.”
People are talking like Steam is forcing them to pounce on such deals when they happen even though they already have a huge backlog and may actually already own physical versions of half the games included.
What makes these plainly ridiculous bundles so attractive? I’m glad you asked, because I can think of at least three psychological principles at play here.
Scarcity
First, In marketing there’s a well worn principal called “the scarcity effect.” When something is scarce, it automatically becomes more desirable to us than it would be if it were available everywhere we looked. This “available in limited number” trick shows up everywhere from collectable trading cards to special “limited” editions of new game releases.1 Ever noticed a store front that had a “going out of business!” sign in the window for months on end? That’s the owners trying to capitalize on the scarcity effect. Buy now, sucker, or it’ll be gone!
Consider a simple 1975 experiment by psychologist Stephen Worchel to provide an illustration of this concept involving baked goods.2 Posing as a consumer products survey, the experimenters offered subjects a chocolate chip cookie from one of two jars. One of the jars had many cookies in it. The other had only a few. Of course, people reported the cookies from the mostly empty jars as more delicious, more desirable, and more expensive. This despite that the cookies in both jars WERE THE SAME COOKIES.
But Steam and similar download services like Direct to Drive sells digital games, right? They’re not cookies that are about to disappear, there is literally an UNLIMITED SUPPLY of the 1s and 0s that comprise these digitally distributed games. True, but the scarcity effect still applies, because it’s not so much the scarcity of the physical product that we react to, but the opportunity to buy it. Often these bundles are put up a limited time sales and people HATE losing opportunities to do things once they think they’re within reach.
Notice the WEEKEND ONLY! verbiage. Act now or you'll lose!
Obscuring True Value
The second psychological principle at play here is the fact that it’s hard for shoppers to look at a bundle like that and understand what its true value is. William Poundstone, author of Priceless: The Myth of Fair Value (And How to Take Advantage of It) calls this the “value meal” strategy when describing the psychology of restaurant menu design. How much cheaper is it to get the bundle? What about if I super size it? With curly fries? Oh forget it, just give me the #3.
Likewise, we look at a massive bundle of digitally distributed games and think about how much could I get those older games for elsewhere? Could I find them for sale used, and for how much? Could I rent or borrow any of them? For the games I already own, how much is it worth to me to have them available through Steam so that I don’t have to dig out my old boxes and CD keys? It’s a psychological truism that we have limited cognitive processing power at any one time, and when our brains are tied up considering these questions, we’ve got fewer cycles to devote to thinking about other stuff, like how much we want to actually PLAY the games and to avoid other irrational pitfalls.
Not that this keeps the folks who run Steam from telling us exactly how much the bundle is worth, though, which brings me to the third psychological factor in play: anchoring.
Anchoring
In the context of the psychology of prices, anchoring refers to presenting shoppers with a number in order to get them to “anchor” their perceptions of value on either a high or low absolute. The “low ball” offer is the classic example –open a negotiation over price with a really low number and you’ll set the stage so that what you’re actually willing to pay looks higher in comparison.
As a simple but elegant example, consider an experiment done by psychological wizards Amos Tversky and Daniel Kahneman.3 The researchers asked one group of subjects to estimate the product of these numbers:
8x7x6x5x4x3x2x1
And then they asked another group to estimate this product:
1x2x3x4x5x6x7x8.
Those of you with a grade school education may know that because of how multiplication works these products are equal.4 Yet the average estimate for the group that was given the problem starting with “8” was 2,250 while those who saw a “1” at the beginning of the problem had an average estimate of just 512. Why? Because one group anchored on a high number and the other anchored on a low number.
Similarly, behavioral economist Dan Ariely and his collegues conducted a study5 where he used anchoring in an auction simply by having bidders write down the last two digits of their social security number at the top of their bid sheets. Those whose numbers ended in the 80s and above actually were willing to pay up to 346% more for things like wine and chocolates than were those whose social security numbers ended in the 20s or below. CRAZY.
Not one, but two anchors here
How does this relate to those Steam bundles? Well, look closely at one of those promotions and you’ll see that the marketing gurus for the service readily list the retail value of the bundle if you paid full price for all games individually. That’s your anchor; seeing that number will cause many people to set their perceptions of the bundle’s value much higher than if they had seen the sale price alone. In addition, the difference between the “unbundled” and sale prices can trigger the contrast effect, which could be considered a fourth psychological principle at play.
So there you have it: you’re broke and have way too many games to play because you don’t want to lose opportunities to buy something, you’re befuddled by pricing, and your perceptions are anchored by arbitrary “normally sells for…” prices. Now, if you’ll excuse me, I have to go play Commander Keen, Doom, Final Doom, Doom II, Doom 3, Hexen, Hexen II, Heretic, Quake, Quake II, Quake III Arena, Wolfenstein 3D, Spear of Destiny, Return to Castle Wolfenstein, and more mission packs than I care to think about.
This is all very true, but we’re not quite as blinded by science as you suggest. The “arbitrary” prices Steam begins with are generally lower than the market averages, and the sale prices are generally cheaper than any other sale price for that game that you’re likely to see.
IN TODAY’S NEWS: INTERNET PERSON COMMENTS ON INFORMATIVE, WELL-WRITTEN ARTICLE ONLY TO CONTRADICT MINOR DETAIL
Thankfully I’ve never been one to “spend to save”. I’ll only buy a big bundle if it ends up being cheaper than my mental value of whatever titles I actually *want* in the bundle.
i.e. When I bought the Orange Box it was because I wanted all the HL stuff and Portal; that TF2 was thrown in didn’t affect my mental calculations for value.
@ Fraser
Are they? They seem to be about the same as retail on new releases, and the older games usually have a leg up because they’re hard to find at retail. And the fact that the sale prices are low is kind of the point.
And besides, what I’ve written still explains why people are attracted to those bundles (and other sale items) on Steam relative to OTHER stuff on steam.
@ Andrew
Yep, that’s how a more rational person would approach it, but unfortunately we’re not all rational all the time.
I always try to compare prices to retail prices, because at least supply and demand has some influence there.
I’d made the connection between scarcity and `weekend sales’, and your point about obfuscating value is patently true — but the bit about anchoring is something of a revelation for me. It reminds of the nasty priming effect I’m forever running into.
Totally minor typo point: `loose’ in the second-to-last paragraph should probably be `lose’. It just screams at me, especially in your needlessly well-written posts.
@ Trevor Fountain
Oops: make that in the last paragraph. Gargh.
@Jamie – I find it interesting that we often don’t even notice that we are being affected by these ideas. We’re raised to believe that there is some concrete value in our head that informs us as to the “real objective” price of a game, but pretty extensive research shows otherwise.
I’d love to see you do a whole series on behavioral economics as applied to the games industry. Most of my colleagues still assume that humans behave “as if they were rational.” Might be nice to have some grenades from psychology to lob in the other direction. 🙂
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@ Trevor Fountain
Whoops, fixed. Thanks!
@Paul Jenkins
Well, that’s pretty much what this blog is about, with some other areas of psychology thrown in. Look in the archives for stuff on framing, hot hand fallacy, loss aversion, prospect theory, etc. It’s a really neat area and there’s tons to draw from.
@ Jamie Madigan
You know, I just looked around and saw a koala riding a kangaroo on an Opera House, and I remembered that I’m living in a country with an infamously price-gouged games market. That probably accounts for my surprise while reading this article, because I’m used to seeing new games selling for $110 AUD (typically about $100 USD, though the exchange rate recently dropped) whereas new full-priced Steam games are little more than half that.
My mistake!
I agree with most everything in this article and am a huge fan of Dan Ariely (see his iTunes University Podcast “Arming The Donkeys”), but when they have Civ IV and all the expansions for $10 bucks (where I had already paid $40 bucks for the original when it came out), and Mass Effect for $5 bucks, etc… it’s hard to pass up such awesome deals.
Well, yeah, sometimes a good deal is a good deal and you buy the game because you know you’ll get a lot out of it.
Good stuff here. Looks like you got a little inspiration from Lehrer’s recent article. 🙂
Excellent article. I really enjoy your material.
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A couple months after I first got the Orange Box (via retail), I went ahead and participated in a couple Steam sales. Then I found my old Half Life Platinum (HL + all expansions and official retail version of Team Fortress Classic) collection and put the code in to get all my old HL games on Steam. Then the id bundle happened the first time (that I knew of). Then I went nuts with the sales for a while before I calmed down. Now I still participate in Steam sales, but not every one.
Beyond what you mentioned in the article, there was another factor influencing me. The ever-expanding list of little icons that represented “my stuff”. Whenever I buy a new console I tend to buy just a few games for it, and it will be about a year before I start getting games regularly. It’s not about hoarding or collecting, but more about “hey I like all this stuff in this format, I’ll probably like this too”. I want to keep the number of different platforms down to a manageable number, especially since I rarely ever sell anything. Thus after I decide that I do like a particular new platform and I’m not going to give it away to someone who will appreciate it more, I am much more likely to buy things for that platform.
I currently have a little over 320 icons in my Games folder (not counting mods). These vary from old, small, and/or indie games to huge AAA games that are a constant reminder of the need to upgrade my hard drive(s). Almost all of them were bought in online sales, though a few I paid full price for (all sequels to titles I really enjoyed).
Damn Steam for tricking me into that Sam & Max preorder deal just because I wanted a Max Hat in TF2… 😉
“Thus after I decide that I do like a particular new platform and I’m not going to give it away to someone who will appreciate it more, I am much more likely to buy things for that platform.”
Oh, and I forgot to add that since Steam won’t let you give your games to other peoples’ Steam accounts, that was another factor that made me initially wary of doing anything with it beyond using it to run the Orange Box: anything I bought was permanently linked to my account*. But they won me over eventually.
I’m also a real sucker for gifting during sales as well. I ask my brothers “hey, if I buy this for you will you play it?”. The whole family benefited when the Popcap Complete Collection went down to 50% off last Christmas.
*And there are a couple games I have ended up regretting and are languishing at the end of my games list under “unsorted”. But mostly I’ve liked everything I’ve bought.
I’m currently taking a Marketing class, and coincidentally the day I read this I also read a piece by Cialdini that overlaps with it quite a bit. (I also read his book “Influence” a few years ago.)
Question to Jamie: Do you think that the folks running Steam are aware of these factors and are using them tactically, or do you think they’ve just stumbled on to something that works? Even though the end result is the same, the first option seems vaguely sinister to me. How common is this in marketing?
@ MadTinkerer
Good points, thanks! Having a growing collection of stuff is pretty engaging.
@Alex Beckers
They probably couldn’t quote psychological studies to explain why, but most of this is common knowledge among marketing types. It’s just what works and they’re pretty savvy about it. But that’s okay; that’s there job, along with offering us products we want at an acceptable price.
Every time I visit this website it is a true joy! So much to learn I can’t keep it 🙂 There are sooo many ideas that can be (or are) transferable to game mechanics that my head is spinning 🙂
Keep up the excellent work!
Hehe =))
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I couldn’t have really asked for an even better blog. You’re ever present to supply excellent advice, going straight to the point for easy understanding of your readership. You’re really a terrific expert in this matter. Thanks for being there for visitors like me.
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