Lowering the Premium Subscription barrier

The majority of virtual worlds in the KT&T space rely on the premium subscription model. A straightforward enough concept – offer a basic experience of the platform for free and then incentivise members to ‘pay for more’. The operators generate their revenues from this transaction and obviously it’s a numbers game – push as many people through the doors as possible, knowing that a % will take the premium route.

The problem is, only a very small % actually take this route. Or rather, (for the younger aged worlds) only a very small % of the parents of the members take this route. This means it becomes even more of a numbers game, requiring in most cases hundreds of thousands of registered members to go through the upgrade gate and become premium subs.

Some simple numbers, assuming a 3% conversion rate of registered members becoming premium members (3% is generous by the way).

200,000 (registered) x 3% (conversion rate) = 6,000 premium subs.

6,000 premium subs x $5 (monthly price) = $30,000.

And don’t forget the $30,000 isn’t all margin as we need to take out processing/transaction costs for this. And, before we even get to staff costs and other opex we need to account for server and bandwidth costs.

So, taking the gloss off the exciting virtual worlds sector, there’s a hard reality out there – the premium subscription route is a difficult one. And it’s made even more difficult by the intensity of competition growing by the day as new worlds launch. So many choices for KT&T’s and it’s not even always a case of ‘where shall i spend my money’ – clearly in most cases money just doesn’t come into it as so many members never even consider upgrading to premium subscriptions.

Clearly this is a growing issue for virtual world operators.

So what can be done to lower the PremiumSubscriptionbarrier?

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Viral marketing and customer acqusition strategies

This is a post about customer acquisition strategies for KT&T (kids, tween and teen) virtual worlds.

How do newly launched virtual worlds attract sign-ups (users, members, residents, customers, etc etc) during open beta and early launch stage? Or to be more precise, what are the marketing strategies developed for these worlds?

As someone with agency and client-side experience in marketing and advertising, this is a topic close to my heart and also a topic paramount to the success of virtual worlds.

The vast majority of virtual worlds seem to be relying on viral activity as the primary (or in some cases only) method of attracting new sign-ups and for some worlds this is a one way street to failure,particularlyfor worlds classified as pure-play – developed and created specifically for the virtual space with no real world brand awareness or presence.

It’s a flawed strategy because:

• They have no real-world customers to leverage into their world
• Their brand means nothing – it has no value or equity

So, for pure-plays the road to acquisition starts at zero (or maybe K Zero ;)) and it’s a long road to walk with competitors around every corner. Yet they still base the crux of their marketing strategy on viral. This problem becomes increasingly compounded with a lack ofdifferentiationbetween offerings. Worlds in the KT&T space are casual gaming or socialing plays, or a mixture of both and there’s little to tell them apart, except that they probably start with the letter Z, Y or X.

So unless these pure-play worlds can either create a new compelling sub-category or create atrulyunique proposition, they’re going to find it extremely hard to acquire new customers using viral alone – they need to develop a marketing strategy. After all, taking a step back from this a little, should the latest form of social engagement and online immersion be left to using the worlds oldest form of marketing for it’s success? I think not.

Virtual worlds based on real world brands have a much easier path. They have existing customers, measurable levels of brand awareness and importantly, established communication channels to exploit with their new messages. And, let’s not forget they already have teams of marketers who understand these three elements because that’s their job, day in day out.

Pure-plays have a much harder challenge to acquire new sign-ups but this doesn’t mean it’s impossible.

What is means is that sooner or later (sooner if they want to succeed and later if they want to just become noise) these pure-play virtual worlds need to ‘take it to the streets’ and start advertising their platforms. This also means they need to build higher marketing costs into their business plans (and funding plans if they’re in dev mode).

What methods of advertising or promotion are currently being used by worlds that don’t just rely on viral marketing?

Most virtual worlds appoint PR agencies. Seems like a pretty good idea – create a comms plan, build a candidate list and get the messages out. This is a good strategy for worlds that allow brands into their worlds as part of the audience will be marketers with budgets. But it confuses me slightly when virtual worlds less reliant on third-party marketing dollars rely heavily on PR agencies. Do kids read press releases, newspapers, websites or blogs? Does PR effort influence KT&T’s into joining new virtual worlds? Not really.

Virtual worlds presence at conferences is also common. Again, this makes sense if the worlds in question are looking to attract brands in – as long as these brands are present. But this doesn’t work when the primary revenue driver for these worlds is from resident income (via premium subs, virtual goods etc). The kids don’t go to conferences. This might sound obvious but you’d be surprised how many of these worlds allocate marketing budget to stands/sponsorships at expos.

So what about TV, radio and print channels?

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