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IAP Price Discrimination with the Big Mac Index

Although i am not a supporter of fast food with what is going on it the food industry but the Big Mac Index is a very useful tool to understand the purchasing power of the people in a specific country.

For those that do not know what the Big Mac Index is,

The big mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.

Essentially, understanding what the acceptable price for a Big Mac is in a specific country, assuming that Macdonalds is optimizing the price for maximum sales. ‘This’ assumption allows you to effectively price discriminate your bundle pricing strategy according to the Big Mac index.

Let’s take a look at how we can establish there prices

Check Big Mac Index Link: Here

U.S.: $5.67

Phillpines: $2.81

Currently, the Big Mac Price in the US is set at $5.67 (as of Jan 2020), now if i refer to the price of a Big mac in the Phillipines, the price is set at $2.81 (as of Jan 2020) which is effectively 50% of the price point Macdonalds set in the United States.

What this is telling you is that the purchasing power of Phillipine Peso is 50% of that of the US Dollar therefore requiring to reduce the cost of the Big Mac by 50%. To the perception of a Phillipino Native its like buying a Big Mac in the Phillipines for $11.33 which is more likely to yield less sales than adopting the 1:1 purchasing power equivalent in an associated country.

If your team was to utilize this strategy you can set all your product pricing in the Phillipines as 50% off the original pricing set in the United States and see the your revenue increase in the Phillipines.

Big Mac Index Integration

To integrate this system into your game, Google has a developer friendly way of price discrimination by creating pricing templates where you can set your Default Price, and customize the price points for the other country users in the game.

Unfortunately, Apple doesn’t provide such service so you”re kinda stuck on how you can approach this strategy on both platform.

What I have done with my products is to create a T1 price point and T2/3 price point and based on which country the player is playing from will display the T1 price or the T2/3 price. Therefore for every bundle i create in the game, the team would have to create to unique price points and attach this to the bundle.

T1 (Tier) can be considered all developed countries

T2/3 (Tier) can be considered all developing countries

Good Luck

Also comment below or email me if this strategy worked for you, I’ll be more than happy to hear from all your results

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