The origin of user segmentation based on spending patterns was born from the casino industry. Minnows were considered the players that sat at the slot machines or the bar to populate the casino, the dolphins were the technical gamblers that utilized in-game strategies in an attempt to beat the system, and then the Whales, the high rollers, the consumers that make up 70% -90% of the casinos revenue. A similar concept is found in the application industry where they have their own definition of these 3 terms.
Minnows: Are the non spenders, probably never will, and they will only play as far as the
game would let them enjoy it, and than move on to the next game. Value prop or
sales or nothing will really convert these users.
Dolphins: Are considered the hard core players that theory craft and is constantly looking
for exploits in the game for them to take advantage. They will only monetize if
the value proposition for them to get ahead is a good deal.
Whales: The players that monetize based on emotional variables,
The need to be No 1.
The need to beat their friends
The need of specific content
The need to catch up or be left behind
The need of satisfaction
And many more…
Because of variance with emotion that can lead to monetization of your application, it’s very difficult to pool “Whales’ into 1 cohort and the importance of identifying the different types of Whales and their needs are also very important to maximize the revenue of your game.
The Rich vs The Wealthy
Segmentation in the car industry is a very good example on how these companies effectively position their product based on the revenue generated by the avg. income in their region.
Mercedes Benz was in the past was considered a luxury car where only the rich can afford, starting at around $60,000, but in 2003 they introduced the C – Class which was considered the entry level car, for the middle class that wanted a Mercedes but never considered one cause they knew they couldn’t afford it. This was a huge business shift in Mercedes as they made the appropriate steps to diversify their portfolio and provide a product for all classes. Although not appreciated by the rich as they had no means to differentiate themselves from the middle class, Mercedes benz has managed to diversify their portfolio and grow their company value by 380% since the introduction of the C class.
As for the Rich, The S Class still remains the higher end models of the Mercedes line up and they have advertised this message well enough for the average joe to understand the different classes and models of the Mercedes, That being said, although the S – Class remains the high end for the Mercedes Brand, it doesn’t meet the needs of the Wealthy.
The variance in price in the middle class will be segmented by $1000’s or the $10,000’s where as the variance in the price for the Upper Class is in the $100,000’s or the $1,000,000’s. This is the gap between the top 10% to the top 1% of the earners in the world. The Rich can potentially afford an S – Class Mercedes but the highest end Mercedes model the Mercedes Maybach is completely out of reach for these people, as these cars start at $200,000.
Daimler AG (Mercedes Parent Company) have effectively segmented their products to provide products for the many different income bracket classes in the world and their stock growth represents their success.
The whales in your app should be treated no different than how Daimler AG segmented their consumer cohorts. The only difference is what is the line you draw between Dolphins and Whales. It’s a lot easier for the car industry as the data for avg. income is there to effectively price their car for these cohorts. App developers most commonly breakdown their customer cohorts into Tier Countries, where the 1st world countries obviously generate a higher LTV than emerging countries or 3rd world. This leads to a generalized approach to what ‘Whales’ are and it’s much harder to predict the behaviour of these users as they come and go on a whim.
Each and every company identifies their whales at different levels of LTV and there’s nothing wrong with this approach as well, but the only thing i recommend with your In app product offering is this.
“ Always design a product offering that can scale infinitely. “
There’s nothing worse than having an empty store for whales to not spend their money. This is missed opportunity. It’s hard to understand the mindset of a whales since only 1% of them really exist in the world but these users seriously will buy out the entire store if they like your game that much.
A VIP system is a good example on how you can segment your Whales.