Raise your prices, otherwise Philip won't grab a clue

Part of the cost of an item is its share of the fixed costs. That part of the cost is referred to as the overhead. The reason prices only tend towards the marginal cost of production is because this is achieved by increased competition from players who have found ways to reduce their overhead.

That's how Walmart works. They not only reduce their overhead, but the size of their business allows them to force their suppliers to reduce the share of the overhead they recieve from each sale when selling to Walmart.

In Second Life it's possible to reduce the overhead due to recurring costs (rent, advertising, etc) almost to zero (which is why people talk about the idea you can put a prim in a vendor and recieve 'infinite' return on your investment), and the overhead due to sunk costs has little impact in an efficient market (because copycat vendors can spend less time on R&D).

Do you have the market research to show that you double your volume when you cut your price in half? I began selling my product in multiple stores in SL and found that selling product at half price did not increase purchases. They either wanted it or not. I actually sell better with my products at 100L instead of 50L. I think the reason may be because people percieve quality by the cost of an item.

Here's a real life example. Years ago, Pabst Blue Ribbon used to be a premium beer. They cut their prices in an effort to create more market share. It backfired. People percieved the beer as inferior, so cutting their prices actually hurt their sales.

I did not say I cut my prices in half. I was simply using those figures as an example. I used 100 and 50 because they just happen to be figures that are quick and easy to work with. I don't cut my prices in half. Sheesh.


And Pabst is an inferior beer in my opinion. Back when I used to drink I hated it.

The biggest problem involved in a wide scale inflation, is that there is to many folks all trying to do the same thing, if you have the market on something, then sure you can raise your rates.. game developers, and skin designers that look proffesional being 2 cases.. clothing designers, house designers, texture creators, scriptors etc etc cannot raise there rates otherwise someone else will undercut them and they won't make any money at all. The problem lays in that some people do this for money, others do it for fun, if they only make 25 L$ on a shirt for example, oh well.. they enjoyed creating it, and it's 25$ they can spend somewhere in the game that they didn't have before. Someone trying to make tier, can't afford to go down to the 25$ level, and wind up either raising prices in which case they look expensive in comparrison, or just giving up and closing down. There really is very little originality left in second life, every one is just copying what everyone else has already done, which is leading to a downward curve, a recession in a ways, rather then an inflation.

Just as an aside, I'm often wary of things priced too cheaply. I know it's not necessarily logical, but high price suggests quality to me. It can also add a percieved status to an item. Consider Starax's fabled wand. I'm sure it's amazing in it's own right, but I notice people usually mention the price, it definitely adds to it's prestige.

I'm definitely charging more for my next build, not to make a point, but because I place some value on my time, I don't want to devalue that.

Spoken like a true Capitalist...

Hi,

I am fairly new to SL, and to tell you the truth, I don't watch the market for what a Linden is worth when I go shopping. I look for quality, usability, and price. Whether the Linden is up or down makes no difference. The trivial amount that it fluctuates means nothing when you are looking for a product. The most important thing I look for is the price, after quality, and usability. I am certain many store owners would have to spend many a nights repricing their items for sale. Then the increase in price would probably be due to the amount of time spent to reprice those items. So, the store owners that say they want to give their customers a good quality product at an affordable price are justified for doing so just by the fact they would have to spend all that time repricing to satisfy some folks who base their personal wealth on the value of a Linden. This would make the store owner a slave to the wealthy speculators just to satisfy the speculators personal wealth problems.

Take care , Kaellic

Ok please try to wrap your head around this.

When I create a product (a couch, a modeling studio, a photo album, a hot tub), I look at the exhcange rate to price my item. I price it in round numbers against what I determine it's SL US dollar value is - it's worth a dollar, or thirty cents, or five bucks.

When the value of the Linden drops by 20%, I am perfectly justified in raising my prices.

In addition, in order to house my stores, I pay rent - in Lindens. As the value of the Linden against the US dollar drops, my rent increases. A lot that cost me $8,400L in monthly rent 2 months ago just cost me $10,400L for this month's rent. That difference has to come from somewhere, and right now it's coming from my profit margins because I am holding off on repricing.

I try very hard to provide excellent value to my customers. I make very well designed goods and sell them at a price people seem to find reasonable. I'm sure I *could* have been charging more all along, but I am not here to suck as much money as possible out of people; I'm here to get a fair US$ return on my time and skill investment.

That doesn't make me a slave to anything except my ability to do math.

With many items, the value drops with time for a couple of reasons.

First, as more people buy something, it becomes less valuable as a unique fashion statement; everybody has one. This is especially true of wearable items (clothing, hair, and so forth), but might even apply to some other things such as houses.

Second, the quality of items available in SL has been rising over time, as designers become more experienced and skillful. Older, less well made items simply aren't worth as much on the current market, because newer, superior designs are available.

If it were not for the inflation of the L$, it's likely that the prices in Lindens of many items in-world would decline over time. Instead, we see things maintain the same price, with the new, higher-quality items being sold at higher prices. (Just visit the store of anybody who has been a merchant in SL for a while; the old items typically sell for their original prices, but the new ones are more expensive than the old ones.) The net effect in purchasing power to people who are buying their Lindens on LindeX is the same; you either get more of the old items for your US$, or about the same quantity of the newer ones.

Shirley: I quite agree, and I'm sure that there are other factors at work here as well. SL pricing structure does not work in the same way as RL at all, as I've been saying on another thread, but people seem to ignore that in favour of simple "money in / money out" models, perhaps because it's actually an awful lot of work to try to fathom how and why prices change in SL. Perhaps an effectively impossible task in fact.

Your problems make for the perfect reason to implement a
Futures Market. Giving players the ability to hedge against the
market to protect themselves from price swings.

A Futures market would require an escrow setup with a 3rd party/system
as a holding institution. Since the legal system in SL is for not.

New folks can get thousands of freebies to toy around with.

Residents who can't afford much can buy inexpensive products.

Luxury and high-end items should (and do) exist with limited demand and extremely high quality. These items should be priced accordingly.


There doesnt need to be adjusting of prices. There needs to be creation of new markets.

y0 send me an email homie.

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| A51-TKN - 2k-2k6 - Area51 - TaKeN |
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I am in fact doing this! Another week or so and it will be alpha ready.

Please let me know if you are interested to help test!

It'll probably be free (no commision trades), at least until we get some significant volume. I have an API as well that people can use to set up their own automated trading systems as well. This may seem like an odd feature, of course, but I did it because I needed to test and thought I might as well expose them to other people.