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.
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.
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?