Once again this is a story I was involved in so I will try and be as modest as possible!
In the mid 1980s the games platforms of choice were 8 bit home computers made by Sinclair and Commodore which used audio cassettes as media. Piracy was endemic so the industry responded with “budget games” which were priced at £1.99, so they were hardly worth copying. However the operating margin of the publishers was wafer thin.
I was at a new publisher called Codemasters, in charge of marketing, with a budget of slightly above zero which I spent mainly on PR and trade advertising. We created a brand with the consistent message that these were in fact full price games and that the only thing “budget” about them was the price. This was largely true with the “simulator” series written by the Darling brothers and the “Dizzy” series written by the Oliver twins being the most famous. We succeeded in getting 12 different Dizzy titles to number one in the Gallup charts. Jim Darling used his considerable business skills to make the whole thing work. We shovelled immense numbers of cassettes out of the door but it was not immensely profitable at such a low pricepoint.
Now for an anecdote within an anecdote. At that time the magazines added value by covermounting game cassettes. I persuaded the Oliver twins to let us covermount one of the Dizzy titles on the best selling Sinclair magazine which in those days had a circulation of several hundred thousand. The idea was to build the Dizzy brand and we expected the covermount to kill retail sales dead so we obviously chose a title that had been out for a few months. We were wrong, after the magazine came out the retail sales of the game went up! What had happened is that the covermount had introduced the game to new people and they liked it so much that they wanted a “proper” version of the game. £1.99 was little resistance so they were quite happy to go and buy a games they already had.
So, back to the main story. Eventually we decided to try putting our prices up but we were very nervous about losing sales. So we came up with a crafty plan. In those days there was a constant stream of titles, so one month we told the world that the new titles were going to retail at £2.99 from then on. But the crafty thing is that we told all our trade customers that the trade price would remain the same for the first month. So they made a huge amount more profit. So they bought them like crazy. And the new, higher priced titles dominated the top of the charts. Just before the end of the month we rang round and told our customers it was their last chance at the old trade price and they filled their socks so we dominated the charts even more. Of course after these had sold through they had to re order at the new price and as we dominated the charts they had no option. The £2.99 price point was established and we had increased market share on the price increase.
Then came the masterstroke. We told our trade customers that the retail price on our entire back catalogue was going up to the new price point of £2.99 from a certain date, but that they could continue to buy at the old trade price for a month after that date. They saw a second opportunity to make a killing and sales of our back catalogue shot up. Many of them re-entered the charts, which we then had total domination of. Once again they filled their socks with massive orders just before the deadline. And once again they had no option but to keep on buying at the new trade price once they had sold this stock. Some of these older games went on to make more profit for us at the higher price than they had at the lower price.
In those days the charts were compiled by Gallup and our market share as a publisher peaked at just over 27% of the total UK all formats chart. In fact it was probably higher as we used a lot of channels that our competitors didn’t (we put thousands of racks into all sorts of retail, for instance) and which weren’t measured by Gallup. Obviouly our competitors followed by putting their prices up but they did not do it with the same guile so they lost the opportunity to use it as a tool to attack our market share.
Codemasters became a lot more profitable. We had vastly increased sales, but more importantly, our profit margin had multiplied several fold because our costs remained the same. The company was less than a year old at this stage and this move on price consolidated it’s position as one of the major British publishers.
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