Service Design in Video Games

Introduction

For the past twenty years, video games have evolved into one of the largest entertainment industries on a global scale. The revenue generated by the gaming industry today exceeds the total revenue of the film and music industries. The fundamental transformation driving this growth has occurred in the nature of games themselves: games are no longer products sold and consumed once, but rather services that are continuously updated, developed, and establish a long-term relationship with the player. This article approaches modern video games as services and examines them through the lens of service design.

Service design is an approach focused at making a service functional, useful, and desirable from the perspective of both the people who use it and the organization that provides it. Stickdorn and Schneider (2011) define service design through five core principles: user-centered design, reliance on co-creation, sequencing of interconnected actions, making the abstract service visible through physical evidence, and addressing the entire process from a holistic perspective. Although these principles were initially developed for traditional service sectors such as banking, healthcare, or hospitality, video games; which are digitally designed and measurable at every stage, constitute one of the areas where these principles can be observed.

This article argues that the business models – freemium structures, microtransactions, battle pass systems, and in-game secondary markets – that have become dominant in free-to-play games align closely with service design principles. An examination of these models reveals important lessons regarding the design of the customer journey, co-creation of value with the user, and the ethical boundaries of monetization. Moreover, these lessons are not limited to the gaming industry; they align directly with the European Commission’s entrepreneurship competence framework, EntreComp (Bacigalupo et al., 2016), and hold significance for entrepreneurs across all sectors.

Applying Service Design Principles to Video Games

Service design is a concrete applied practice. Stickdorn and Schneider (2011) emphasize that good service design is not completed at a desk but it matures through cycles of prototyping, testing, and continuous improvement. Video games are developed precisely according to this logic. Even after a game is released, it does not remain static; developers observe player behavior, identify problematic areas, and redesign the game through regular patches. While improvement cycles in a traditional service may take weeks or months, in a game, this cycle can operate on a daily basis. In this regard, modern game development serves as a vivid example of the “continuous improvement” philosophy in service design.

The most effective way to analyze a modern game from a service design perspective is to treat it as a customer journey. This journey generally consists of these stages: the player’s discovery of the game and initial experience (onboarding), fostering regular engagement, player retention, monetization, and finally, the player’s transformation into an advocate who invites others to the game. At every stage of this journey, the player encounters touchpoints: the user interface, notifications, in-game store, friend and clan systems and community platforms outside the game. The principle of service design comes into play precisely at this point. Successful games organize these touchpoints into a deliberate flow.

Video games offer the most transparent environment for examining service design. There are three primary reasons for this. First, every user action within the game is measurable and recordable; unlike a restaurant, developers can see exactly where players are struggling and where they are leaving the game. Second, the entire service is digital, so design changes can be implemented quickly without physical constraints. Third, iteration cycles are extremely short. When these three characteristics come together, the principles of design and continuous improvement in the gaming industry shift from theory to daily practice.

The Evolution of the Business Model: From Premium to Freemium and Battle Pass

 Historical changes happened during the early 2000s to how developers viewed producing games that had weekly or monthly updates rather than publishing a game and then letting the revenue come in. Core examples of these so called “live service games” over the latest years are Fortnite and Hearthstone introducing a changing scenery and set of environments approximately every 2 months. This constant change of environments kept players and customers excited and hooked on the games and waiting for new updates constantly. The best part about this was that developers could listen better to players and update the game quickly on the fly.

As a natural segue it’s also worth talking about “Freemium” service design and why it’s so effective. When a game or service is free the threshold to try it is naturally low and doesn’t require commitment rather than buying a game for a fixed price. The games give the customer and guide them towards “microtransactions” which means buying small to big in-game currency to spend back in the game for example. Skins. Many games also have the option to buy extra downloadable content or often referred as “DLC” to an already free game, sometimes they can be even free.

Fortnite mainstreamed the Battlepass model, which later became the global standard in live service gaming. A battlepass is a seasonal progressional system that gives the players rewards for playing the game. The battle pass typically costs around five to fifteen euros and it is designed to lower the bar of usually the first purchase inside the game. The battlepass encourages repeated interactions within the game through progressional challenges and unlockable rewards. This creates habits for daily or weekly engagement and increases the likelihood of future in-game purchases. From a pure business perspective, the battle pass creates strong predictable recurring revenue while strengthening long-term players retention.

Why Do Players Choose Free-to-Play Games and Make In-Game Purchases?

It may seem counterintuitive that players would prefer to download a free game and spend money within it rather than purchase a game they have already paid for. However, from a service design perspective, this behavior is quite consistent. Free-to-play games allow players to experience the service without taking any financial risk; this creates a low psychological commitment threshold that operates on the “try before you buy” principle. Consumers want to test a service before committing to it. Free access reduces friction in the early stages of the customer journey to nearly zero, thereby enabling a much broader user base to join the journey.

When players spend money, they pay for cosmetic items related to appearance and identity. In their study examining players’ purchasing behavior toward virtual goods, Hamari and Lehdonvirta (2010) found that a significant portion of these items serve the need for self-expression and personalization rather than functional utility. When a player purchases a unique outfit for their character or a rare weapon skin, they are essentially building their digital identity within the game world. From a service design perspective, this means the service also offers emotional and identity-based value.

A rare or expensive item becomes a status symbol within the community for the player who possesses it. When other players see and recognize this item, it provides the owner with social proof and prestige. The “evidencing” principle of service design operates here in an interesting way: an abstract service experience transforms into a visible digital object that the player can show to others. Social touchpoints enhance the perceived value of these items and create a powerful motivator driving players to spend.

The revenue model of free-to-play games is typically supported by carefully designed behavioral loops. Items offered for a limited time encourage quick decision-making by creating a fear of missing out. Daily login rewards and variable reward systems ensure the player returns regularly. From a service design perspective, these mechanisms are effective tools for keeping the player engaged throughout the journey. However, as will be discussed in later sections of this article, these same mechanisms also highlight the fine line between user benefit and user exploitation, a reality that brings the ethical dimension of service design to the front.

Case Study: CS2 Skin & Knife Economy and Ethics

Steam has an ecosystem in which digital assets have real genuine resale value. Cosmetic items such as knives can be traded between players with some notable exceptions exceeding 1000€ in market value. This system transforms players from consumers into active participants in pricing of these assets and act as speculators. Some companies include loot boxes in their games that have gambling like resemblances. You pay a small fee to open digital content vault that may have similar references to slot games. They often use so called “whale-targeting” strategies which means they are designing the game for a small number of big spenders that generate the most profit. Belgium and the Netherlands have acted against gambling resembling activity and banned loot boxes in fames as a regulatory pushback. 

Some companies include loot boxes in their games that have gambling like resembelences. You pay a small fee to open digital content vault that may have similar references to slot games. They often use so called ”whale-targeting” strategies which means they are designing the game for a small number of big spenders that generate the most profit. Belgium and the Netherlands have taken action against gambling resembling activity and banned loot boxes in fames as a regulatoru pushback.

The ethics of spending on digital assets within gaming ecosystems raises concerns. Notable examples are around ownership, monetization techniques, and the customers’ vulnerability. Even though players often invest large amounts of money in cosmetic items, such as skins. These purchases typically give only the license to use digital cosmetics rather than full ownership of the product. This creates uncertainty, as access to already purchased items can depend entirely on the platform’s policies. People and often parents raise ethical concerns about gambling like mechanics, such as loot boxes or randomized rewards, which can encourage repeated spending through small chance-based outcomes. These systems are especially dangerous due to their impact on younger players, who may be more vulnerable to an unknown design. Looking from the Entrecomp perspective, these issues spark the importance of ethical and sustainable thinking in entrepreneurial environments.

EntreComp Connection & Conclusion

Spotting opportunities and valuing ideas – Companies see players as a continuous audience to serve and the demand is only growing. The mindset has shifted from a one-time buyer audience to continuous revenue generating customers over a long period of time. Companies have knowledge and deep understanding about lifetime value of customers and have constant trackers and indicators and forecasts on how much on average does paying customer generate. These indicators ignore most of the time non paying customers for example on a free game and focuses on those who spend, helping them understand their behaviour and how to change it. 

Companies monetize their games in ways that respect users rather than taking advantage. Instead of treating a product as a one-time purchase, companies now design them as a living service that evolves over time with the customer being a part of it. Success depends on ongoing engagement of the customers, rather than one time purchase or sale. It is often more effective to improve retention than acquiring new customers as they are often costly and unsustainable on their own. Long term customers generate compounding value and reduce the pressures of constant new customer growth. 

Video games are a great benchmark on how far service design has evolved, turning engagement into something that is constantly tweaked and shaped over time through relentless feedback. But the same that make them engaging can also make them addicting if they are not carefully designed. That’s where the ethicality and good intentions matter the most with entrepreneurs and companies.