Xboxist

Should Microsoft Abandon the "Points" Payment System?

In marketing 101, the first thing they teach you is that customers are more likely to part with their hard-earned money when they feel that the value of the product outweighs the relative value of their disposable cash. That is why we typically spend our pocket change more freely than we do larger bills. Clever companies have latched onto this idea by studying consumer psychology, and have tried to find ways to entice customers to spend money more freely. One popular method has been to abstract cash into another form of exchange: credits, points, units, whatever you want to call them. Once cash is abstracted into an unfamiliar mode of payment, the reasoning goes, we will be more eager to spend it.

That is one reason why both Microsoft and Nintendo opted to use points systems in their respective digital download marketplaces. In Microsoft's case, points have been deliberately offset from their monetary counterpart to make it difficult to do the mental exchange rate: 800 points are worth $10, 1200 points $15 and so on. By all accounts, the Xbox Live Marketplace has been successful for the company, boasting more than $1 Billion USD in revenue since the launch of the console in 2006.

However, there are signs that the point system could be starting to backfire for Microsoft, and the company may want to re-evaluate the utility of continuing the scheme. First of all, the numerical values associated with XBLA game prices have started to creep steadily upwards. At first, games were an affordable 800 points. Later, they rose to the more impressive price of 1200 points, with 1600 point games not far around the corner. The effect of using the point system here has had the inverse effect - customers are actually hit with sticker shock even though the price of games has only risen by $5 or $10. What will happen when Xbox Live releases start to approach the quality of retail game releases? A typical retail title would cost 4800 points ($60) under the current system.

Microsoft seems to be aware of this problem, and that would be one reason why they have opted to abandon the points system in their new Games On Demand service. These downloadable retail games will be priced in real, earthling dollars and can be bought using a credit card.

A final reason why Microsoft may fully ditch the points system is that Amazon is now selling Xbox Live Arcade games. These titles are priced the same as their Marketplace counterparts, but the prices are listed in dollars, which makes buying them that much easier. And certainly if there is anything else they teach you in Marketing 101, it is that customers like convenience.