Overpriced or Underpriced?

Wandering around SL lately, and by looking at the prices, I wonder how many of us are over charging our customers? Does this have to do with the over abundance of lindens out there? Perhaps with the market such as it is today, now is the perfect time to raise prices of items?

I bought Nancy Omegamu's newest necklace and earrings today. Her work is beautiful and the jewelry delicate to be worn with any outfit. What I don't want to see happen is anyone that makes and sells products to feel they have "overpriced" their work. Yes it happens, but some pieces of jewelry, like Nancy's now seem to be "underpriced".

There is also talk about a true lack of sales for many. With so many lindens up for sale, maybe it's part of the trend?

This may just be ramblings of someone up so early Saturday morning, but the market and prices seem to be as shaky as the market for buying and selling lindens.

The problem is, you can't really know. People arbitrarily set prices, and they get business regardless.

For instance, let's look at prefab housing. Some people sell their work for $L250 a piece, some for $L1000 a piece, and some for as much as $L5000 a piece. What's the difference between them? The creator tag, that's about it; all of them are of similar quality.

Custom building jobs are the same way. 4-digit, 5-digit, and 6-digit prices can all be quoted for the exact same job. Again, what's the right one? Who knows. It's all dependent on what the market will bear.

But, and here's the problem, you can't find out what the market will bear; we're all little islands of capitalism. I can't pull up a sheet of what prefab houses go for, with sales figures. I can't see what the global rates for building jobs are. I can't see the average price of a t-shirt.

We need that functionality somehow.

hrmm.. If people pay it it musnt be that overpriced..

This is a good topic...
I am not sure how to answer this other than to talk about my own experiences... I have been told at least a few dozen times that my items are UNDER priced for the quality they are, and at times it makes me want to raise my prices... but then I stop and think to myself... Why charge more when I can sell endless copies of them with no extra effort... meaning, if someone buys something from me, I dont have to hurry up and make another one, the supply for that same product is endless. So, I figure I can sell more of that product to a wider variety of players, instead of raising my prices and only allowing a select few to afford them..
I dont know if that makes much sense, my coffee hasn't kicked in yet =/

Speaking as someone who is only just starting selling stuff really, I am always worried about this. I have been told my stuff is underpriced, overpriced, and "just right." so it's really hard to make any kind of determination.

When I started last year, most clothing items I bought were 200, 300 or 400 dollars and not always for good stuff also. Lately, even good stuff with a good reputation sells for 100 or 200 bucks it seems, unless it's an outfit.

Likewise skins used to be 1000 at the very cheapest, even for a bad one. Now there are tons that are much cheaper and some of the very best are only a thousand, whereas before people would charge 3 or 4 thousand for them.

An interesting thing I have seen is people price things more for what they represent. Does a diamond ring in SL really cost much more to make than a pair of glasses? I bet you will pay more for a diamond ring than a pair of glasses though.

Similarly I have seen things like castles go for more than your standard McMansion. Traditional hardwood 4 poster bed with a more elaborate 'fancy' looking bedspread texture go for more than a 4 poster bed that was more of a cast iron construction.


I have said it before and I will say it again, in SL we are in most cases selling ideas/representations of RL objects, and often the price is part of the idea.

I like to under-price and make it up in volume.

Besides, more people having my stuff is just cool.

In a micropayments economy with easy communication and no location, like SL (or the internet), underpricing and going for volume is usually the standard way to go.

The exception would seem to be skins, which seem to be subject to a "market agreement" that they'll be around L$1000. Not to say that designing a skin isn't a lot of hard work, but other objects with just as much work I've seen selling for far lass. :?

Not really.

Lots of folks like to price their weaponry around the L$1.5k to L$3k range, not understanding the difference between their junk and the rare masterworks of Francis Chung and others. Developing a product that the market would happily value at $2k and then selling it at a fraction of that has always been a conscious decision at differentiation on my part -- one that continues to confuse my more enthusiastic customers (not that they mind).

If I had a penny for every time someone asked "What should i charge for custom building" I would STILL be a poor man...

But! It's come up alot. I generally try to tell them that there are no set prices, but they want to know what I charge then...

I tell them, and they get really quiet, and say, "oh. thanks." and fade from view.

<sighs> I think they're under the impression I just tossed out a high figure to get rid of them or something..

I get told all the time that I should double my prices. The way I look at it.. Everything after the upload costs is entirely profit, on every sale, with no limit to how many times I can sell the same item. I don't need to make oodles of Lindens off every item or sale, or overcharge to make up for a small inventory. (Definitely not my problem.) What I do isn't very hard, it's not very demanding or stressful, there's very little overhead aside from land tier fees... In fact, people are actually paying me to do something I really enjoy doing... why would I need to charge more? I would rather people be able to have fun shopping than to stress over what 1 item they can afford.

While I'm still new to selling too, I've found I have a tendency to set the price based on how much work and time I put into the product. If I spent an hour in photoshop making a cute outfit I price it low. However if I've spent a couple of days getting something more detailed just right with more uploads and time spent adjusting prims or textures, I set the price higher.

That's sort of the way I feel. When I make something, I just want someone else to enjoy it. So I price my stuff pretty reasonably. But sometimes I worry about undercutting other creators who rely on sl income. I'm very torn.

This is a good issue to discuss at sldevelopers.com - it's one of the very basic questions I had asked when I went full-time SL at the beginning of the year.


http://sldevelopers.com/forums/132/ShowThread.aspx#132

I really don't see any consistency at all, and I can't decide how to price my stuff either. I see things for sale for hundreds of L$ which I could script and build while carrying on a conversation and give to the person before the end. Then I see utterly beautiful outfits selling for L$150 that must have taken days. I'm utterly baffled by the price of skins, as I really can't see how they are so much harder to make than other texture-mapped items that they should cost over five times as much. (I've never actually seen a skin I'd consider wearing in SL either, I'm sorry to say.)

I used to sell things for a low price, and then I moved to selling everything L$1 full perms, and then got into a fit of annoyance about people who made their tier back selling junk and I moved to having a few high price items, a few low price items and a freebie distributor with random junk in it. But I don't have any sort of plan for my own product line, and I quite frequently spend the whole day scripting something that's utterly useless and nobody will buy, just because I think it's fun.

I quite like making guns but it really wouldn't feel right just building one, tracking down a few textures and sounds, dropping in a script and tweaking it, and then selling it for hundreds and hundreds. Tthe only one I have that's L$500 took me ages to build and is packed with features - and now that I've discovered Avimator, I don't even see custom anims as really being that significant. They're just more fun for me to test.

I'm just not a saleswoman. I just can't get away from the idea that all I'm doing is making fun toys for people, and I like seeing people have fun, so I'd rather give them all away if it just wasn't for the $40 tier + rental. And that thought actually means that I end up neither giving away nor selling stuff because I can't decide whether I'm being ripped off or ripping other people off.

edit: I tend to judge quality vs price by the most expensive things I've bought, apart from land, which have been (a) a Seburo and (b) one of Enabran's bot avs.

Very intresting question, and very interesting responses, and I agree with all of them, especially Lordfly.

I have been told I'm overpriced (once), and underpriced (often).

One good thing to do is look at SLExchange or another shopping site and look at all the other things like yours. Of course this isn't scientific, but it does give a person a good idea of what things are going for.

I think you also make a sort of estimation - like Yumi talked about - regarding price versus volume. You don't want to be so overpriced that nobody buys your stuff. (Unless you have such a name that anybody will pay anything for your stuff, just to have that name factor.) On the other hand, you don't want to be giving it away.

You might also consciously decide which cachet you want to go for. Do you want to be Prada? Or do you want to be Hush Puppies? Both are reasonable choices. (Being Prada is a bit trickier to achieve. In addition, one can always tranfer to being Prada at any given point, but one may choose consciously not to.)

In addition to doing those things, here's the thinking that went into the prices I set for my things:

1. I don't want to be so exclusive and high-priced that few can afford it. (Even if I could be that, I mean.) I want lots of people to be able to have my things, and I want new players to be able to afford 512 houses, too. And like Enebran feels, I think more people having my stuff is just cool. I enjoy people having the things more than I enjoy the money from them.

2. Like Sensual, I feel it would be kind of nuts charging too much for something I can sell over and over with no further effort. By the time an item has sold that many times, sometimes you end up collecting even more than maybe you would think you "should," given the time you put into it. It all evens out in the end.

3. My houses are somewhat niche. That means many of them are not going to appeal to just everybody. Like in the magazine business, they are "special" - as in, "Too special, don't write that, because the market for it is too special."

It's interesting - my biggest seller is not niche at all, but my second biggest seller is VERY niche. So nicheness itself is no reason not to make something - it's just that if much of your stuff isn't mainstream in the way that so many things in SL are mainstream, then you wouldn't want to slap a huge price-tag on it. Because your potential market will be smaller in the first place.

One exception: Custom work. If you are going to make a one-of-a-kind house (or whatever) for someone, and you really are never going to sell it again, then yes, charge out the kazoo, charge for your time.

4. Avoid what I call the Garage Sale Pitfall: You can't let your sentiment get into the pricing. You may have a favorite, or you may have spent a lot of time on something, but what it's worth to you isn't necessarily what it's worth to others.

To avoid over-pricing my favorites, I use size as the indicator. 512 houses are less than bigger houses. Houses with two bedrooms are higher than houses with one. Critter houses are less than regular houses. Houses with two bedrooms and a living room and a great room are more than houses with two bedrooms and only one living room.

That works well for me, because there are way too many other factors to consider, way too many other differences in the various houses I make. The number of rooms is one factor you can actually compare quantitatively, as opposed to things like style.

Having this philosophy helps me to put all of myself into every house I build, and to go with the flow when the house is telling me what IT wants to be. I can do all that freely, knowing that I will end up pricing the item based on something simple - number of rooms and size of house.

coco

P.S. About this nicheness - some people are just so outstanding in their personal style, they are kind of in a niche of their own. Julia Hathor's houses, for instance. In that case, I think you should charge more, even if it is a more "special" niche. (Her prices are reasonable.)

I must say that while I'm a big worrier, I don't really worry about "the market" or undercutting people at all, unless they're personal friends, and I don't know anyone who makes the same sort of stuff as me.

True, but looking around, it seems that a lot of people - especially newer businesses - are going for the same method of differentiation in order to get started. The fact that the stipend system means there is a price "cutoff" between products that a user can just wait for and ones they have to work/pay US$ for encourages this, too.

While setting price based on workload seems sensible, buyers seem to be more interested in the results

This is a great discussion!

I'm currently in the process of adding animations to most of my furniture, and in the course raising my prices for it (of course while still offering non-anim ones for the same price when asked for)..

But its hard estimating how much to raise them by..

Yes, I should really start thinking about the price vs stipend ratio. Free users aren't going to buy my expensive stuff anyway, they can get the freebies and the cheap stuff (which is perfectly good I'd like to say) but you don't want to price out impulse "payday" purchases.

I just signed up on the sldevelopers site, Hiro.

Another thing to consider is what the market wants. They want clothes and skins, first and foremost, more than houses. Consequently, they are going to pay more for clothes and skins than they are for houses.

And they are going to shop for clothes more often than for houses. Just like irl. Fortunately, in SL, it's much easier to change your house for another than it is irl, so people will buy more than one of those, too.

coco

There's also those market segments that dont consider the work of Francis Chung to be called a masterpiece at all...but that's aside from the point.

It's hard to say what a good price is for any creation in SL. While the market will generally pay as high as they think is a reasonable price for an item, it's not quite that cut and dried in SL. Production costs are for all practical purposes zero, quantities unlimited (except for artificially limited, ie 'collector sets'), items generally do not wear out, and the barriers for ability to enter the content creator's arena are very low.

If one is aiming to maximize their profit, basic economic strategies apply - the sweet spot that has the most customers at the highest price. Their other options are to focus on collectibility (high price/low volume), or mass-market (low price/high volume).

As much as SL is a capitalist-themed environment, I'm still of the opinion it's purely an individual's option if they partake in that economy or not. That means many folks charge far less for the wares they create than they would if trying to maximize their profit.

In other words....maybe one should just charge what they think it's worth, and those who agree will buy. If they dont buy...well then it's a sign it might be too high.


- Newfie