Thursday, 24 July 2008

Auction House: Consumer Psychology

Members of my family have always owned retail stores, ranging from fast food, toy shops and even Pound shops ($1 stores which you get over in America). Although these shops had nothing to do with me, I noticed that the vast majority of the items they sold were never a round figure. I carried on this approach to how I've done business on the auction house, and for me it's been very lucrative. While browsing online I came across this article today from the BBC, and if you're new to this theory, it should explain things very well (note; we use Pounds and Pence, instead of Dollars and Cents). Some key points in the article:
- A French study has shown that "lowering the price of a pizza from 8.00 euros to 7.99 euros boosted sales by 15%".
- "In 2005, Britons discarded or stashed away £133m in unwanted coppers", i.e. There is £133 million in waste 1 and 2 pence coins in the UK.
- Consumers "tend to put numbers in categories like under £5".

So how does this apply to you within the World of Warcraft? I'm sure everyone would welcome a 15% increase in auction house sales, which in my experience as a trader was very easy to tap into. I would often visit the auction house and see silver bars listed for 1g, list mine for 99s 99c and sell them out...return to the auction house to see the 1g priced bars still unsold, list some more of mine, and then instantly see them sell whilst the 1g ones remained. Sure that does include the element of undercutting, but usually that was not the case and using the 99copper charge has been an old tactic of mine even when no one else had a similar item listed. Its worth noting in our e-currency we can use this tactic on coppers, silvers and gold, depending on the value of the items we're using. Furthermore, I found that using the 89 silver/copper charge at the end can help even more; not with sellers, but avoiding undercutters. For some reason your usual undercutter will be a mere 1copper under the price you listed. So if your selling something for 20g, he will sell for 19g, 99s, 99c. But if I list mine for 19g 89s 89c, he's far less likely to undercut me, and just set his own price or wait out for my auction to sell. Of course this is purely anecdotal evidence on my side, and could be plain old lady luck.

Using this method is even more useful when it comes to selling those everyday items you come across, stuff like Primal Earth, which is not worth a huge amount but you'll have a large supply off and be able to sell regularly on the auction house. Primal Earth usually fluctuates in price day by day, but within a range. If the average price of Primal Earth is 5g on your realm, you will often see them for 4g and 6g also, depending on rise/fall in demand on any given day. However, using the 99pence method, you can encourage impulse buys. A buyer might see you selling 4 primals for 4g 89s 89c and quickly buy all of them in the fear tomorrow's price will be 6g. In reality he might make a saving or loss tomorrow, but certainly not enough to celebrate/commiserate over. But you've sold your primals and that's the bottom line, whereas had you listed them for 5g the buyer might not have been tempted. The theory apples more so in Warcraft than it does in real life. We all know how much an iPod costs, and the price will be the same tomorrow so I'll hold out till I get my montly salary. In our WoW Economy however there is awlays a fear of rising prices and in a volatile market this psychological trick plays even better.

I never use dubious trading methods in Warcraft, and I despise scammers/hustlers. This trick is useful because it doesn't make me feel bad about the way I trade. The buyer has specifically searched for an item, and you're just helping him make his mind up.


Marylin said...

Now that is a really good tip... I'll start pricing things like this and see how I go. Keep up the great work! :)


Gerald Howell said...

I been reading your blog for a week or two. I must admit you are doing a great job! Thanks for the tips! :D

Wyrmsfire said...

Hey Trader,

Nice article. Very informative, especially to me. I'm pretty AH-Challenged, and usually just list my items according to what Auctioneer says.

Lately, what I have been doing is this: Say I have 3 stacks of Peacebloom, for example. I will search for it on the Auction House. If I find a stack is selling at.. 1 gold, just to keep numbers simple, I'll post mine for 90 silver.

Now, I know this is undercutting. Is this a bad thing? I do not go and seach for stuff, buy it all out, then resell it at a lower rate. I just find what the going rates are for the items I want to sell, and post for a bit lower amount.

I've heard that there are certain etiquette rules to follow when doing the AH thing. Are there certain rules or considerations that should be followed?

Thanks again!

WoW Trader said...

Glad you liked the article guys, I've had a peek at your blogs Marylin & Gerald, some good stuff there. I really need to start keeping some bookmarks though.

Wyrm, undercutting is a subject I could talk a lot about, and it is something I'm planning to cover. Some people can be very reckless with it, and crash markets easily, which is always a bad thing. On the other hand it can be warranted in many situations. So I'll talk about it in more detail soon enough, don't want to give a brief reply on a contentious topic.