Monday, January 23, 2012

Pricing & Your Realm’s Population Part 2

This is part 2 of a 5 part series of articles concerning; Pricing Theories, Criteria for Pricing, Methods of Pricing, Customer Influences on Pricing, and Pricing Walls. When you have finished reading this series of articles you should have an excellent understanding of the many tactics used in the auction houses in every realm regardless of faction. You should also come away with an understanding of the basics for how to manipulate markets, and a grasp how much of an influence your servers population has on the “value” of items placed on the auction house.

Criteria to Consider when Pricing

How often have you come across an item for the first time and had no idea what price you should place on it? Lots of folks use lots of different methods to determine how much to charge. In this article I will cover the most prevalent methods, discuss the ramifications of those methods, and in the end discus my preference. As you read through them consider that every criteria is weighed differently by all customers, RP’ers will value things that PvP’ers do not, and PvE players will value things differently still. There are collectors of; discontinued items, pets, mounts, gear, and the list of player types goes on and on. Hopefully this article will help you determine your criteria and reach your preferred customer base.

How difficult is the Item to Acquire?
This is the most misleading criteria. Difficulty is often considered in tandem with perceived value. The simple fact is that the difficulty of acquisition rarely has any direct effect on the price of an item. Many consistent selling items are fairly easy to come by, they can be bought from vendors, farmed from NPCs out in the world, or created by players. Many of these items can be priced several hundred percent more than their original price and still sell. Items that require the farming of thousands of NPCs will inevitably be valued less than items that are dropped in an high-end instance. So difficulty of acquisition is not necessarily a good measure to use when pricing an item.

How often is it on the Auction House?
Some items only show up on the auction house once in a very great while. The infrequency of availability of an item on the auction house is a good indicator of exactly two opposite occurrences, either the item is so rare that it is snapped up whenever it appears, or it is so useless that nobody wants it. Items like the Pattern: Star Belt, which is a low level pattern but demands hundreds on many realms because it is so infrequently available. When you look on the auction house and do not see your item do not just list it for what you think it might sell for according to its level. Look back at the first article in this series and use some of the ideas presented in it to help you determine the right price to sell it at.

How frequently is the item used?
Ideally you want to sell things that are used often by the population and that need to be repurchased regularly. Crafting materials, cut gems, enchantment scrolls, and potions all fall into this category. Finding out if an item is used frequently will help you determine a price that is high enough for you to make a good profit and yet still sell the item on the first or second listing. Becoming fluent in the requirements of the crafting professions is a must for turning a profit.

How rapidly has it sold in the past?
In business there is a concept called “turns”. Put simply it is how fast you make more money with the same money. Knowing how fast an item sells at a particular price point will help you “turn” your product into cash, and your cash in to more product to turn in to more cash…..Some items sell fast because of a patch release, others sell slow for the same reason. When considering how fast you want to sell an item price it appropriately. Lower prices sell rapidly, generally to other bankers, where higher prices take longer but provide a larger profit. If you have never listed a particular item historically, then do some research. Know what you are selling, and get an idea of how fast it may sell.
Is it an altruistic posting?
Altruism may sound like an anti-banker trait but you would be very wrong to think so. Many bankers, some that have played the game for years, price low end items at extremely low end prices. Their thought is that it provides for the market of new players and new characters. I used applaud this thinking. Now I take advantage of it. World of Warcraft is seven years old, new characters are easily provided with enough gear, bags, money, and materials. They do not need the auction house. Twink characters and Alt characters are the low end users of the auction house. These folks have gold and are willing to spend it to avoid having to do the quests for the gear, bags, and materials.

Is there competition for the sale of the item?
Competition is good, unless they have a lot of product and you have a little. If you are the one with a little then you might consider under pricing your item. It will do several things:
1)      it will sell your item first (generally)
2)      it will deny the person with more product a sale (always good)
3)      it will provide you will a faster return of invested time / money

If you are the one with a lot of the product to move you must consider the possibility of taking a loss or holding on to the product until the cheaper product sells. A third option is the buying out of your adversary’s item. I do not buy out a lot of my adversaries items if for no other reason than I do not know what they may have stockpiled in their banks.

Do you have a Regular Customer Base?
I know that there is a theory out there that says customers do not care about who the seller is, I claim differently. Many of my buyers have purchased from me for years, not because I am the cheapest but because I am consistent. I rotate my stocks of gear, I keep the cloth levels on my auction house at a profitable yet reasonable price and I deal with people fairly and openly in trade or in whisper. Reputation as a baker is important because if people like you, like what you do, and like how you do it, they will buy from you consistently.

I hope that this article has given you some ideas on how to look at your inventory and consider your criteria when pricing. Part three will cover Methods of Pricing.

Until then, remember, Time is Money, and if you spent time reading, then this article was worth the money.

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