2015 has proved to be a "genie-out-of-the-bottle" year for dynamic pricing in video games. And the gaming industry is a good test case, since its "products" don't actually exist.
Monetizing "freemium" games has become an industry standard. That's how Zynga and King Digital Media went public. But costs are very different for gaming compared to most industries, as pricing is done with an endless supply at zero marginal cost.
"Once you have created the code, the magic source of the game, it doesn't matter if you sell one unit or 1 billion units; it all comes at virtually no extra cost," said Niklas Herriger, CEO of Gondola, a game analytics service with an active registry of more than 100 million players. "The trouble [for us] is that part of the justification for surge pricing is the scarcity of goods," Herriger said. "Yet for the majority of the user base, we are able to actually reduce prices."
Gondola helps video game companies use analytics to dynamically price their games, so that novices can be encouraged to play (i.e. spend) more, and heavy users can be milked for more revenue. Or as Gondola says on its marketing website: "Monetize whales properly with higher prices while maintaining low-entry prices for casual players."
These services are able to instantly adjust both the price of virtual currency and of virtual items. Virtual currency, however, is not adjusted on the dollar side but rather on the amount of currency "rewarded" at a certain dollar amount. Changing the quantity of virtual currency — and not the dollar amount — makes the small subset of paying "freemium" users much less price-sensitive.
Hypothetically, a player who buys a $9.99 pack of 2,500 gems several times could see that $9.99 pack give them 2,250 gems the next time they buy it, because of the demand. But someone who's never paid may see the "reward" for the $9.99 pack is 2,900 gems.