Use Decoy Pricing to Make More Gold

By: The Gnome Investor.

A lot of people use basic economic principles to make gold in WoW, but when you're on a large server and competing against other farmers sometimes you have to apply some more advanced techniques to sway the consumer towards your goods at your price. First though, lets talk real world simple concept and then how we can do it in Azeroth.

The Non-WoW version.

Relative pricing options is when you give someone a choice between two options and introduce a third
(decoy) to encourage the user to choose the option you'd prefer. For instance, the Economist offered a
Print only subscription at $59 and an Online only Subscription for $125 people will choose one or the other and typically the cheaper one. But they were clever and introduced a Print & Online Subscription for $129. People flocked to that option because it seemed like they get a $54 discount on print subscriptions. The company made an extra $70 from the subscriber and really didn't have to do anything extra except unlock content online. They persuaded people to buy higher by introducing a third option and that's exactly what we'll do in WoW. But how?

The WoW Version.

Since there are two main ways to buy goods in WoW (bid or buy), I will deliberately set up pricing schemes to encourage one or the other. If I notice the first page is simply people flooding the market with 1 quantity of an item that stacks I make them the Print only Subscription that I want to turn people away from. I next make 2 auction types. The bid is the Online Subscription and I set it up by making it a quantity of 5 or 20 at a higher price than the 1s but not much, but the buyout is overpriced. This decoy pricing is meant to encourage what I really want people to do which is pay more for my buyout option. By using the same quantity and a slightly higher bid, but a more realistic buyout I can typically get people to spend their gold with me.

Here’s an example with numbers based on what I did last week. I wanted to sell most of my Wool Cloth and I had about 20 stacks in the bank. I decided my target was going to be the power leveler and the convenience of a stack of 20 versus 20 stacks of 1 since I personally used to pay more for the stack (if closely priced) before I got serious about the gold. I used the people already undercutting each other by posting 1 Wool Cloth as the first option I wanted to discourage and used two bank mules to post the following.

--- Assume there are 20+ stacks of 1 Wool Cloth going for BID 45s BUY 50g ---
A. 05 stacks of 20 Wool Cloth with BID 10g BUY 20g (48hr bid).
B. 15 stacks of 20 Wool Cloth with BID 12g BUY 13g.

You'll notice I put a 48hr bid on option A. This was to further discourage people from bidding by making it inconvenient to get the Wool Cloth. My BUY is a full 3g more expensive than buying 1 piece at a time, but I made it so much easier to get and more appetizing by having that decoy price option in there that each of them sold to one individual. I took his name down and then sent him a whisper to ask if he was leveling (he was) and if he had other cloth needs (he did) and we proceeded to negotiate and I raked in the money.

Bonus Mini Tip:
Also if you target power levelers like I do, you may want to throw pieces up on the AH as a decoy price so that you can negotiate higher prices outside the AH since most people use the AH as their measure of something's value.

Side Note:

This method does carry some risk and you can't overprice by too much if you want to make the sale, but you can essentially price a premium for the convenience and ensure they take it with decoy pricing options like this. You can also try the converse by encouraging people to bid by making the buyouts high, but making the bid price and time low.

Give it a try and tell me what you think. It does take a little patience to master, but I find it's completely worth it when I have the money the people trying to flood the first page by posting 1 of an item are going after.

Do you want to write for JMTC? Send in a post to Markco and if it makes it past the initial screening process then I will publish your submission on the blog. JMTC pays 50% commission to writers on the day that their post goes live.

17 comments: on "Use Decoy Pricing to Make More Gold"

  1. What a clever idea, some players are just too busy to check the real values of what you're selling and will pay for the convenience of getting it quick.

  2. This article looked to be a decent read, until I stopped reading when the author failed at basic math.

    not 54

    does no one proofread on this site?

  3. @anon

    Does it Take anything out of the theory and idea that there was a miscalculation?

    Will try This out in the near future, i find it a bit hard to spot the wares to dó This with, though.

  4. of course people will buy your stacks at 13g instead of 20g... why even bother listing the 20g stacks?!?!?

    and someone will undercut your 13g stack, so the next buyer will buy theirs before they buy yours. listing 1 at high price doesn't change this.

  5. @anon #1

    You keep track of your pennies. The rest of use will keep track of our millions.

    @anon #3

    The subtlety of manipulating consumer opinion seems to be beyond you. You go right on shopping at WalMart while complaining about no local industry.

  6. OK so there are:
    Assume there are 20+ stacks of 1 Wool Cloth going for BID 45s BUY 50g ---
    A. 05 stacks of 20 Wool Cloth with BID 10g BUY 20g (48hr bid).
    B. 15 stacks of 20 Wool Cloth with BID 12g BUY 13g.
    So the buy outs per stack are 50g, 20g and 13g. And people buy the ones for 13g..... OK got it.

  7. So people can pay 45s a pc if they bid, then wait and hope it holds up, or 65s per if they buy now. I would buy now if pwr lvling. I really do not see how your other auction of 1g per helps. With the 13g/stack you have the lowest buy out by far. Why would you think that your dummy auction is the reason people are buying the lowest cost buy out option?

  8. I apologize for the typos, with the first being 55 instead of 54 and 50s for one 1 Wool Cloth not 50g. The only one that really changes the theory any is the last one so that one I'm especially sorry for because I thought I caught them all when I sent it off to Markco.

    @Anon3, people will go after bids if the price is low enough to justify it. That's why so many gold addicts pay attention to them. It's how we find great bargains. In the case of the example provided, we were pitting two choices for the person to consider, paying less for their Wool by buying 20 stacks of 1 Wool Cloth at 50s each or 1 stack of 20 Wool Cloth at 13g. Yours is more expensive so the bid option with the 20g buyout changes the tone of the argument by saying you could get it at 10g for 1 stack but you have to wait and possibly compete. OR you could pay the 3g extra since it's cheaper than the 20g to get it from you as a stack. It's a subtle calculation, but one that the subconscious takes advantage quite frequently and leads people to make bad decisions.

    Undercutting happens, but it doesn't last. On my server undercutting is usually done along the lines of cheaper but also flooding the first page of an item with single stacks. This is a way around that.

  9. @anon2
    It does require a decent knowledge of your economy, but I tend to target materials for crafters. It's always in demand even when demand is lax. I find enchanting materials and herbs in the 150-250 leveling range. Your server may be different, but you can look at the crafter professions and see where they have the most demand per yield based on some of the power-leveling guides around the net. Those tend to be my targets and then I start tweaking prices upwards so I can avoid undercutting.

  10. @anon5
    The typo on the first auction confuses the math a little and I'm sorry for that. It should have said 50s not 50g making the comparison between 10g and 13g. It no longer is an undercutting issue as many people seem to have read this to be. I'm sorry for the confusion there.

    To be perfectly honest, it's really difficult to know why someone bought 1 auction over the other. I can only infer based on my experiences. They could be buying for the convenience of the stack of 20 versus 20 stacks of 1. I do know though that when I was testing the theory to see if it worked I saw more sales with the dummy auction included because it changes the expectation of price for the buyer. Changing price expectation is a lot of my strategy because I hate cutting prices until we all lose so if I can make them think it's worth more and that I'm giving them a bargain, I'll do it.

  11. The title threw me off. I thought it was gonna be this technique.

    When people are posting way too many of an item and the price us going down. you throw a couple even more reduced. Wait for people to put undercut the new price then buy them all out

    Example. Volatile water is usually 15g. A few too many sellers at once and the price for the day will be 13g. If you notice prices are still dropping then throw a few single volatile water's in the AH for 11g.

    if they get bought out you only "lose" a couple gold. But chances are you can come back in 15m and buy up all the new auctions for 10g ea. Sell them tomorrow and make some mad profits.

    As for your technique. It works but it's way too much over thinking. Put all your auctions 1 silver cheaper in the bid or buyout and it will sell. Those people don't care to have options. They are going to go in there and buy whichever cloth is at the very top of their AH page. You could put whatever buyout you want on the first auction. they'll bid 10g because it's the cheapest. All you're doing is screwing yourself out of making them pay the extra 3-5g they would have on the normal priced auction. You're basically trying to reassure yourself when in reality you're just dumping goods for lower than their value which goes against basic money making 101.

    reality is you sold your wool for 3-5g less than you could have

  12. Don't worry about the typos, they happen, none of it affects your point. It's obvious that the buyout on singles was 50s, not 50g - and who cares about the $1 on the subscription - that's just petty nonsense.

    That said, I'd have to agree that the 20g "decoy" is beside the point. You're selling stacks for 13g - it's the simplest, most convenient offer out there, and that's why you're selling stuff.

    I have mailbox emptying automated and I would not buy wool singles for 50s if I can buy stacks for 13g.

    The question that kept banging its way inside my skull was "why is anyone wasting time selling wool in the AH?"

    Time is money - anyone with a maxed out toon would be foolish to waste time doing anything with wool. If I just happened to have 20 stacks on a toon (not sure why I would, but I'll play along here), I wouldn't spend time devising a strategy for it, I'd either vendor the stuff, list it all so it would get sold and not return in the mail, or (after a quick check on bolt prices), turn the lot into bolts and list at obscene prices. There are lots of people who will pay ridiculous premiums to avoid having to "harvest/make their own" (I am one of them). I don't mind paying 200g for something that is really worth 100g, if I can make 1000g with the time I've saved.

  13. I'll watch the market cycles like you describe as well. It's part of making sure you make the profit. It's 101 as you said, but that doesn't mean I missed out on 3-5g either. You assume that price for wool on my server at that point is on the low end. It's not really. Plus, you can still use the same technique for peak cycle pricing as well.

    Like I mentioned before, it is difficult to do well and isn't for everyone. My server isn't very volatile in terms of price fluctuations so I tend to have to do a little more work to make sales & because of its size, it is difficult to control an item by monopolizing.

    I tend to use the technique when I notice a particularly long lull on goods that I can probably fetch 100g+ on if people would just increase their expectations.

    You don't even have to use the AH to service the decoy price concept really. You could simply spam trade chat with one price that's overvalued and then come back and go lower on a different alt. You'd still be higher than the AH of course. Your problem becomes when they go to the AH to check prices and find them way lower. You just have to change the offering since you can't change price bid structure.

    Your first sentence throws me off though. It is a technique still even if you don't agree with it and think it is overtly complicated. Which is fine. Your disagreement doesn't change that.

  14. I think what the last anon person meant was...In your example you could have just not posted the 13g stacks and your "decoy" stack would have sold just fine if it remained the cheapest full stack and you didn't post it for something obviously ridiculous like 200g a stack. Like when I sale volatiles - when I go to undercut I skip above anything under a 10 stack and I undercut the 10 stack(or higher). You are reassuring your sale when it probably wasn't needed as every hates buying single stacks.

    Beyond that though, this is probably the best guest post on JMTC in some time and at its core the advice is nice - Use alts to post fake options to make yours look better.

  15. @WoWMidas
    I used to farm my materials and target low profession materials about a year ago. I also tend to keep bags full of mats I need for professions, but lately I've been changing that and professions.

    There's a wide breadth of alts and profession changing on my server so it serves me well.

    It's a good point.

    It works better with more expensive items, but I thought the example I had involving flasks and enchanting pets was way complicated so I used the simpler one.

  16. The premise of this article and the entire Economist example are lifted straight from Dan Ariely's "Predictably Irrational", without attribution.

  17. It's a pretty common study and concept in behavioral economics. His isn't the only example of it. Probably the most widely known. I debated it though when writing and the original article had a mention of it, but I felt it was unnecessary for most people and there were too many people that could be cited as the inspiration behind it.

    But yes, you are right. It is in there although I think he refers to it simply as relative pricing. I should probably go open it back up and see what else is in there that might be useful when applied.

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