“It Was On Sale, So I Bought Four:” Why The Cartel Market’s Pricing Is Wrong

The Case of the $80 Jeans

I’m at my local department store and I see some really cool jeans.  However, they are $80.  Now, I’m not about to pay $80 for jeans, unless they are the best jeans ever and make me want to burn the rest of my closet because I love them so much.  It would have to be the sort of thing where I wanted to wear them every day and then cried when they were in the wash.

However, they are not awesome jeans.  They are merely OK.  I pass on said jeans, walking out of the department store empty-handed.  Total profit of department store $0.  Their potential profit was much higher – let’s say that it costs them $20 (with labor, shipping etc) to have those jeans, and that would be a $60 profit.  Wow!  That would be awesome.  If I bought it.  Which I did not.

Now, let’s say those same jeans are $40.  I don’t have to love them.  It’s a perfectly respectable price for jeans, so I’d be willing to buy something I liked not that much for less money.  Profit there: $20.  Granted, $20 is less than $60 profit if I had bought them for $80 – but $20 is a hell of a lot more than zero, which is exactly what the store made as I pranced out in disgust without buying anything.

Not only would I buy one pair of jeans, but chances are, I’d pick up two!  Even if I loved the $80 jeans, picking up 2 would be clearly out of the question.  But I’m willing to pick up two of them if the price was reasonable.  Now the store has $80 of my money, and $40 of it is profit.

Sure, again, a $40 profit is less than a $60 profit, but again, this assumes that anyone will buy the $80 jeans.

Cartel Economics

Now, let’s talk about the cartel market.  There are a bunch of outfits that I like on the market, but for the prices that they are, I do not LOVE them.  If I am going to spend 1400 coins on an outfit, my character better not change out of it EVER.  This leads to such careful planning of spending, that I end up not spending anything.

On the other hand, if that same outfit were 500 coins, I’d snap it up in a second.  I’d also snap up a few more.  And start buying cartel coin packs to boot.  Sure, the profit margins would be smaller, but right now the cartel market has exactly $0 (real money) from me.

TL;DR

A smaller profit margin may make more money in the long run.

  • People are willing to buy more items if they are getting a good deal.
  • People are willing to buy things they don’t love if prices are reasonable.
  • And indecision about a large purchase may lead to no purchase at all.

Would you be buying more if the prices were lowered?

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    Comments

    “It Was On Sale, So I Bought Four:” Why The Cartel Market’s Pricing Is Wrong — 28 Comments

    1. Small Profit Margins are supposed to be the backbone of GOOD F2P cash shops, exactly. That is how I spent $200+ in 2 months on another game’s shop, and that’s why Steam Sales are so popular AND lucrative. The whole point is to hook people, and then sell (non-OP) extras piecemeal, making a steadier, bigger total(as $40 Jeans), profit vs the $15/mo “$80 Jeans” so to speak.

      With that said…$40 for jeans? Christ that’s high, too. $20 maybe…lol

    2. I fully agree with you, should the outfit price be lower I would definitely buy a few, as it is I shan’t buy any as they are too expensive without a heck of a lot of consideration before doing so. there are many outfits I would love to have but I’ve only bought one and that will be the last one unless they bring the price down.

    3. This is how economics works, yes – but Bioware (or EA?) doesn’t know how to do F2P. Their current system is horrible on a variety of levels, so it’s no surprise that their pricing is off. I remember buying all sorts of things on Guild Wars, but not TOR; TOR doesn’t even allow you to purchase additional character slots, for God’s sake, and how much of our money would they have if they did that?

      Even just allowing subscribers to pay to move up from 12 to 16 per server would net them a ton of money. Really, their system doesn’t show a whole lot of thought behind it in the first place – let alone intelligent pricing models.

    4. I have the impression that they priced things assuming that most people were subscribers – that is, stuff is priced to be a couple months worth of free coins to a subscriber. Which might prompt a subscriber to shell out some (more) real money to get stuff faster. But that makes things awfully pricy for non-subscribers and doesn’t actually preclude subscribers just waiting a few months.

      Better idea: have lower prices. And enough cool, shiny stuff that subscribers might blow their monthly allotment anyway. (Or just be satisfied with the $15 a month you already get from subscribers and figure anything above that from them is a bonus.)

      • If the assumption is that most people are subscribers using their stipend, that means I can only buy one new outfit, and nothing else, four times a year. Four outfits a year? Eep!

        • I was thinking more that they priced them high enough that even people with the stipend would want to break out the real money (While still making it appear that you wouldn’t have to.). Rather than, you know, pricing them on the assumption that many people wouldn’t have the stipend.
          But I don’t really know what the pricing norm or stipends for subscribers are in other FtP MMOs. It seems off in this one, but I really haven’t played others enough to know.

    5. It really depends on the number of people at each price point, which is the part you are handwaving. If 10 people buy it at $80, that’s better than 15 people buying it at $40. You *assume* that a lot more people will buy it the cheaper it gets, but that is just an assumption.

      And in my opinion, the majority of the MMO audience will not buy the item at $40. They will instead complain that it should be $80. I think something like 80% of the people who would buy at $40 would also buy it at $80.

        • I’m sure there’s a graph for that, some sort of supply/demand sweet spot where the lines converge to Maximum Profit. I do hope underpants collection is part of it.

      • ” I think something like 80% of the people who would buy at $40 would also buy it at $80.”

        The bigger point is that you can always have temporary sales to capture the revenue from people who would buy at $40 but will not buy at $80. Whatever you set the base price at caps your income. Though Njessi’s point about consumer frustration is also valid – as someone who plays half a dozen non-subscription MMO’s, I’ve definitely thrown my hands up and not purchased ANYTHING because I couldn’t make up my mind about how to deal with the pricing model.

    6. I don’t know, I’m with Rohan on this. You can’t really call their pricing flat out wrong without knowing how well things actually sell. IRL I work in a shop that frequently does better during “normal” weeks than during dedicated sale periods, simply because the increased volume of sales at a lower price does not necessarily make up for the profit you can make off people who are willing to pay the higher price.

      • There’s a pretty big difference between Real Life shops of any description and Virtual Item marketplaces though, that doesn’t necessarily apply

      • However – one might argue – the difference between the shop assets and the art assets is that the number of copies is unlimited because you don’t have physical resources to add to a per-copy cost. Once you spend the money up front for the art, the cost “per item” is basically that cost divided by the number of items sold. The more items you sell, the less each item “cost” to produce.

    7. Great article. I agree that items you can purchase as sets or individual gear/equipment seem overpriced. To be frank I have plenty of in-game credits and “enough” disposable income to spend freely if I really wanted to, but that doesn’t mean I’ll spend ‘stupid money’ on things either. I still want to feel like I’m getting good value for my credits/dollars and the time it takes to accumulate both. Some of the “sale” prices we see in the Cartel Market actually feel like the right price when they’re heavily discounted. I realize that perception is somewhat subjective but I see a fair amount of discussion about this subject and most of it seems to lean the same way as the argument presented here. It’s pretty clear that BioWare/EA are learning “on the job” as they move forward with F2P and the Cartel Market. They’ve been fairly responsive when it comes to features on the various tiers of F2P, I hope they’ll be the same with their pricing model on items in the Cartel Market.

    8. My daughters and I have a phrase we use when evaluating purchases . . . “is it cute?” I can’t begin to count the times a daughter will tell me, “Yea, Mom, the shirt is cute, but it isn’t $30 cute,” or something to that effect.

      Even my husband has started to pick up the expression . . . which is very funny when it’s about video cards and such . . .

      • Totally! And how many times have you seen something for a good price and said “oh I’ll also take one in another color”?

    9. I agree with this completely, the amount of times I’ve logged on after the CM update and looked at the new adaptive gear and thought “Looks cool, but…” and that “but” means I end up just spending my monthly stipend on unlocks I want or the odd cartel pack rather than buying some more cartel coins. I would also like to add that I think they would get more business if the outfits were also available completely a la carte. I know I’ve also looked at outfits and thought “Could really use that one piece, but don’t need the rest, so it would be a waste of CC to buy all of it.”

      • I would be spending a lot more on outfits if I could buy a la carte. I love that the low level jackets were on the cartel market for 150 cc. I could see myself buying a shirt here, pants there, if I could pay 150cc per item.

        • Well, it’s slowly improving.. I still can’t believe that the first lot of outfits were level-restricted, which was a huge mistake in my opinion. I have about 3 or 4 different characters who would have happily been wearing the Dire Eliminator’s chestguard if it wasn’t level 43. At least they’ve been listening and the new stuff is just level 1 shells. Hopefully if the calls for completely a la carte continue on the forums, they’ll listen to that too.

    10. I would not be surprised if a lot of the older stuff on the market goes on sale soon. Their strategy is probably, jack the prices up early on so that they get the maximum return from the people who will pay for it. Wait a couple of months, then slash prices so that they get the Njessis of the world to spend some money too.

    11. My problem with the whole thing is that they’re selling it in sets. Why do I have to buy a shit-ugly helmet that I have no intention of wearing? Why do I have to buy an entire set just for the damned boots? Why are there a la carte chests that have no matching legs? And most of all, when I have a choice of paying in-game credits AND cartel coins for an item/perk, why is there no set credit-to-coin exchange rate?!

    12. I can’t fault the maths but I can fault the thinking behind it. You’re looking at the uniform as a uniform that’s too expensive. The people who buy it see it as a uniform that’s more exclusive.

      The price may not be set with profit in mind but with keeping the uniform rare.

      • I kind of lament about the uniforms being sold all together instead of piece by piece. I feel like we’d have more unique looks if people were encouraged to mix and match.