Marketing: Brought to you by the Letter P

(Well, I just had to make that joke at some point.)

I didn’t finish my college degree until I was a working adult.  When I did go back to finish I selected a program in eBusiness, all the rage at the time.  None of my prior education was business oriented, so I was happy to go back and learn all the basics of business.  However when I saw that every student was required to take a marketing course, I was…. well, concerned.  I didn’t care about advertising.

What I didn’t understand is that marketing does not equal advertising.  Advertising, or promotion, is only one part of marketing.  The definition of marketing that I like is:

The management process through which goods and services move from concept to the customer.

That isn’t part of business, that IS business.  It’s what we do even in WoW when we undertake serious gold earning whether or not we realize it.

The Four Ps

Basic marketing courses break the overall marketing process into four parts, called the four Ps:

  • Product — defining exactly what you wish to sell and how you will produce it.
  • Price — determining the right price, including volume pricing, discounts, terms, etc.
  • Promotion — communicating with potential customers to raise awareness and interest in your product.
  • Place — how or where you will actually perform sales transactions with customers.  (Not the best name, but they needed it to start with P.  Think “distribution”.)

Each of the four Ps is interrelated — for example how you produce the product effects the price, and the price might effect who you want to promote the product to, etc.  Modern formulations try to be more “customer focused” by changing product to customer or service, promotion becomes communication, place becomes convenience, etc.  But for our purposes it’s all the same idea.

When you read about a gold earning idea one way to start to break it down, evaluate and understand it is to identify the four Ps within it.  This is a great way to start creating your business process activities and figuring out if there are any gaps in the plan.  Let’s see how this applies to you in WoW by evaluating the four Ps of one gold earning market people love to recommend and write about: mysterious fortune cards.

Well the first P is easy, right?  The product is mysterious fortune cards: all done.  Not so fast speedy — you need to define exactly how you will obtain the product.  For cards you would have two choices: make them or buy them.  You would then break each of those options down further to evaluate them.  What materials are required to make them, and where would you get the materials?  Where or from whom would you buy cards to resell?  You could even consider if you should sell cards only or make some of them into Fortune Cookies, where buyers would get stat food and a chance to win gold.

Pricing mysterious fortune cards optimally is not as easy as it might seem.  Obviously you need to know how much it will cost you to make or buy them.  But then you need to test or guess what price people would pay that would maximize your profit, because presumably the higher the price, the lower the volume will be.  Also, when you think about price, think about the quantity or quantities you want to sell in.  Do you want to sell single cards or stacks of 200?  Finally of course, what is the competition pricing at?  You’ll probably want to do some test marketing and adjust your prices based on your results.

In some ways there isn’t a lot of promotion in WoW.  A lot of the time the only promotion I do is to list an item on the auction house — that’s promotion, it how I communicate to my buyers.  Many of the fortune card advocate out there suggest that more promotion than that is required to maximize the potential of card selling.  By “barking” in trade channel and either selling directly to players, or just using trade to advertise listings on the auction house, they instill interest in buyers who might not otherwise look for cards.

Finally there is place.  Again, in most cases for me I sell things on the auction house.  But you might find it more effective to deliver fortune cards to players in person.  Or who knows, selling outside the capital cities might be worth doing, especially if you are selling cookies.  Perhaps you could start a COD business — card of the day club anyone?

It’s too bad this concept is so wordy, because it is easier to apply it than it is to explain it.  I hope the wonky-ness of this doesn’t turn you off from trying it mentally the next time you read about a potential new product to sell.  It is a powerful concept that can help you make sure you are getting the most from your gold earning ideas.


Auction House Changes Comment Summary

A good while back Robin Torres at WoW Insider posted a breakfast topic that linked to a post of mine and posed the question to their readers “how would you change the auction house?“  I’ve been intending to summarize the comments for awhile, sorry it took so long.

Buy Orders

Simply stated everyone wants them.  Buy orders are the ability to post an offer to buy something at a certain price.  Pretty much the only detail hinted at in the comments is whether or not the system should allow orders to be partially filled.  This point is related to other comments below about how commodities are handled.  I’d say when I set up the buy order I should be able to specify if I want partial fulfillment allowed, but however it would be done it should be consistent with how commodity sell orders are handled.

Options for sorting and filtering auctions

Here’s a list of just some of the numerous sorting and filtering options people would like to see added to the standard UI.

  • Sort by unit price
  • Sort by buy out
  • Search multiple categories at a time like all ranged weapons
  • Exact match check box (ie “Lava Coral” would not return “Reckless Lava Coral”)
  • Filter by expansions (ie Cataclysm herbs… )
  • Cut and uncut gems in separate categories
  • Darkmoon faire artifacts in a category
  • View by stats (gems and gear)
  • View by socket color for gems (ie orange, red and purple for a red socket)
  • Trasmog features, eligible or not, models, colors
  • See more on one screen and summarize multiple listings (“auctionator style”)
  • Search within the filtered list

Make it like the Diablo III auction house, or not

A lot of people love the Diablo III auction house and suggest that WoW should either work exactly the same way or adopt many of its features.  On the other hand a fewer number of people specifically didn’t like aspects of D3.

The main plus seems to be that commodity items in Diablo III are treated more as “fungible” items — in other words if you have 1000 herbs to list you just list them, you don’t package or price them in stacks.  Further when you buy 1000 herbs you are simply presented with the lowest priced 1000 to buy.  I’m neutral about this idea, it would often be convenient but would also take away my ability to package and price items with discounts for volume buys.

Sales information

Most people agree that information is power and we need more!  Pluses sited for getting sales information include that it would help sellers price items, help buyers decide if prices are fair, and hurt those who attempt to take advantage by pricing things in manipulative or deceptive ways.  People suggested that average sales or posting prices should be easily viewable in the posting and buying UI.

Some commenters suggested people just use the undermine journal — I love the undermine journal, but it doesn’t have and can’t get actual sales information, it only know about posted prices.

Other feature and function ideas

  • Buy multiple stacks with one click
  • Buy or sell partial stacks
  • Listing commodities “stackless” like Diablo III
  • Check box to select lines and do something to them all
  • Make the neutral auction house cross server, or add a cross realm/battle group auction house
  • Combine alliance and horde auction houses on the same realm, go all neutral
  • Make it easier to post multiple items by just putting them in a special bag
  • Adjusting auction fees based on reputation or other factors
  • Functions to blacklist or whitelist sellers/buyers
  • Making the mail interface to the auction house better or removing it so that items you buy simply appear in your inventory if you have space, and sales proceeds appear in your gold total without opening mail.
  • Finally I had one new idea while writing this summary — make common vendor items (poisons, reagents, etc) available in the auction house, just as a convenience.

Pricing and selling restrictions

Well all that is already a lot of comments and ideas,  but by far and away the most discussion was had around people’s desire to regulate “bad” behavior via posting or buying restrictions.  These suggestions included:

  • Price caps based on level or numerous other criteria to prevent gouging
  • Limits on the number of auctions you can post at one time
  • Price minimums or restrictions on undercutting existing auctions
  • Limits on buying that would disallow you from buying all of an item in an effort to “corner the market”

I think it’s important to acknowledge the real concerns people have that give rise to these suggestions.  It’s valid to want the market to be useful to players of all experience levels.  It’s valid to want truly new players to be able to level their professions naturally as they level their characters.  And people feel frustrated competing with other players who seem to have vast resources — both gold and time.

That said, numerous commenters pointed out the flaws with these type of restrictions.  While low level characters suffer when low level materials sell for high prices, they also benefit from selling these materials at high prices as they naturally collect them playing in lower level zones.  Concerns about access to materials needed to level professions could be addressed by providing alternative methods to level professions or obtain materials (ie quests or special vendors).  Players who try to “corner the market” quickly discover that if you don’t control the supply, you can’t control the market — while you may not be challenged immediately, anyone can mine ore or make glyphs and disrupt your market at anytime.  More (sales) information and better ways to filter and sort auction listings would help eliminate a lot of the deceptive practices people employ.

Finally regarding undercutting, I’ll quote one of the best comments from rolua89.  (Sorry it’s long but it’s all good stuff — it could be it’s own blog post!)

Here’s the thing about undercutting by a copper: When someone undercuts by a copper, his competitors don’t lose hardly anything by undercutting him back, again by a copper. This means that the most sales will go to the person who has the most time to camp the AH.

Contrast this with undercutting by a large margin: Now, in order to undercut, that player’s competitors must make a non-trivial sacrifice of profit if they want to get ahead in sales. This means that the most sales will go to the player who is most willing to slash his profit margins. It also means that, out of two people equally aggressive with their undercutting, the most profit will go to the one who can produce the item at the lowest cost, since he can make that market unprofitable for his competitors.

If I would rather do something other than camp the AH for hours at a time, I am then motivated to undercut heavily. This immediately gives my competitors a choice: they can undercut me again, and cut their own profits, or they can wait it out and let my auctions get bought out, with theirs next in line. They have a choice between cutting profits or cutting sales volume. Either way they don’t make as much money. Which is exactly what’s supposed to happen when two suppliers compete in a market.

With all this in mind, remember that every sale that is made comes from a player wanting the item and being willing to pay the lowest price listed. If a market has tons of demand, then it doesn’t matter whether your competitors undercut heavily. They’ll get bought out extremely quickly, and then yours will be the lowest auctions up. But if there’s not enough demand to consume the volume being brought in by the suppliers, the price WILL drop, and you will make less money.

But what happens if no one undercuts by much, and the demand drops off? Then you still don’t make much money, because even with all that effort posting and reposting, no one is buying your auctions.

Either way, you still make less money with less demand. But if people undercut heavily, at least you’ll know the market is flooded, instead of posting again and again with no sales.

Heavy undercutting doesn’t ruin a market; low demand ruins a market.

Thanks again to Robin Torres, WoW Insider and all the wonderful commenters!

Is Gold Earning Resume Worthy?

As a new blogger I’m learning that coming up with things to write about that haven’t already been well covered in the extensive WoW fan universe is really difficult.  It’s a “Simpon’s Already Did It” situation.  Whether or not to put WoW experience on your resume is no exception — most recently I heard it discussed on The Instance Podcast in response to a listener question.  But usually the discussions focus on guild leadership skills.  The podcast made me wonder if gold earning skills deserve at least the same level of consideration in this regard.

Forget the resume for a moment.

Do we gain skills or experience gold earning that could make us more effective in an actual job?  In some very niche cases we do for sure — if you modify or write addons for gold earning and want a job as a lua programmer for example.  I’m a bit more skeptical about specific marketing or sales skills however.  The way most gold earners sell in WoW, using the auction house, does not require the same sensibilities that real life sales jobs require.  We do perform market/product evaluations and set prices, but we don’t have to deal with distribution issues or promotion in the same way you do outside the game.

One exception to this might be if you sell items using the trade channel.  If you are persistent and participate in many conversations with “random people” over a long period you will likely learn how to steer a nibble PST conversation into a sale.  It’s hard to learn — my guess is that most people that aren’t born sales people don’t sell this way in WoW.  I generally don’t.

Outside of these specifics, I do think by undertaking serious, goal oriented gold earning you quickly internalize some general market principles that, if recognized, considered and applied, could aid decision making in a real world situation.  For example, you learn the factors to consider in make/buy decisions.  These general principles would likely be best utilized in a real entrepreneurial endeavor as opposed to the more typical situation of working “for the man.”  Play WoW — start a business!

So back to the resume.

Suppose you have learned something while gold earning that would make you better at a job you are applying for.  Should you mention WoW, and if so, how?  The general consensus seems to be that this is difficult and you should proceed carefully.  The biggest barrier is that many or most of the people you need to communicate with will not have a clue about WoW or MMOs in general.  Also gaming and gamers can have a negative reputation with some as violent (at worst), addictive, and worthless (at best).

But don’t forget that putting something on your resume is not the only way to “take credit” for knowledge or experience during the job evaluation process.  Cover letters (which I believe should be one page only please) offer more flexibility.  Usually interviews contain some question about how you spend your leisure time, you can craft a verbal answer to fit there.  You can also talk about your professional values, decision making process, market philosophy and other general knowledge without mentioning WoW.  If they ask you how you developed your philosophy, then you have an opening to discuss it more specifically.

Try this — imagine how you would tell your mother, or her mother, about this skill and why it would make you better at the job in question. Assuming your mother isn’t a gamer, If you can effectively convey the skill and its connection to the job to her, then that method of communication is probably safe to use in a job evaluation process.

One final thought — It’s hard to find a job, believe me, I know.  Sometimes we just need one and we can’t afford to be too terribly picky about it.  But in an ideal world, would you want to work for someone or someplace where you couldn’t discuss your WoW experience?  Even though you apply for jobs and they make offers, don’t forget that you should evaluate the opportunity as carefully as they evaluate you.  Maybe mentioning your gold earning experience in WoW is a good way to test if this is the right job for you.

The Black Market Auction House

Black Market Auction HouseIt was all the way back on May 12 that MMO-Champion first mentioned the black market auction house from the Mists of Pandaria beta.  Many blog posts, podcast discussions and forum comments followed — the topic has been well covered.

Anne Stickney at WoW Insider made great points in her article on 3 things the Black Market Auction House needs to succeed.  Her three keys for success are:

  • Accessibility — items available on the BMAH should be available by other means elsewhere, so if you don’t have mega-gold for that sweet mount you can invest mega-time to get it.
  • Availability — the number of each item available on the BMAH should be limited correctly to keep competition for items high and keep their rarity in line with the same item obtained in other ways.  In other words, if it’s nearly impossible to farm an item because the drop rate is ultra-low, it should only be available on the BMAH in ultra-low quantities.
  • Accountability — items from the BMAH should not be able to be resold, therefore they should either be bind on account or bind on pickup.

I like this line of reasoning.  The idea seems to be that the BMAH should take gold out of the game to fight inflation without changing the rarity or prestige of the items it sells.

What I’m not so sure about is that the BMAH should not sell items unavailable by other means.  There are items in the game now that are only obtainable by reaching high levels of a particular type of game play, PvP gear for example.  Why is it unfair to offer high-level gold earners exclusive rewards just like high-level PvPers get?

Traveler's Tundra MammothArguably the traveler’s tundra mammoth is a reward available only to accomplished gold earners.  When it was introduced the price tag was far out of reach for most players.  Was that unfair?  Offering exclusive, high cost items on the BMAH is actually better and more fair than offering them at a fixed price on a vendor.  It means there will be competition to get the item, and the price will keep up with inflation.

Since we first heard about the BMAH there have been adjustments made to the items offered there, and I believe the cap on bids was raised to match the gold cap of 999,999g. I take these changes as a sign that everything is still on the table, as is always the case with functions implemented in a beta.  We may never see the BMAH on live servers — there has been a big outcry by some vocal players that they hate the idea of it.

The black market auction house would kill two birds with one stone for me — it would be a better gold sink than those of the past and it would offer gold earners some recognition of their accomplishments.  So if it is drastically changed, or not introduced, I hope both of these objectives are still achieved somehow.

Ideas for New Auction House Features

The current WoW auction house has good and bad features.  The standard auction house interface is poor, but Blizzard’s facilitation of addons means that if you really can’t stand the UI (I can’t), at least you can do something about it.  Addon facilitation is a good thing/smart move by Blizzard overall, not just as it relates to the auction house, just ask a SWTOR player.

Of course it would be great if Blizzard simply polished up the standard auction house UI.  Doing that would make things a lot easier for the vast majority of players who don’t spend as much time in the auction house as Frinka does.  But I’d love to see a few new features beyond merely the UI — things that can’t be done by addons now.

I touched on this some already in my post this week for the Blog Azeroth shared topic, and The Annoyed Mage made an interesting post a few weeks ago expressing his views.  Here’s a fuller description of what I’d like to see.

  1. Selling groups of items.  It would be wonderful to be able to sell items bundled together, either multiple stacks of the same item or complete “kits” of different items.  For example you could offer a complete transmog set, or all the components needed to level a profession.
  2. Offers, or bounties.  This is a pretty simple one and it’s been discussed at length in the past.  EQ I even had this feature (although please, don’t make me describe how much more horrible the EQ I bazaar was compared to the WoW AH, just trust me, we have it good now).  Adding the ability to post an offer to buy a quantity of an item at a certain price level would be very convenient, it would help sellers meet buyer needs, and it would make the WoW auction house much more like a real life market (NYSE, NASDAQ, etc.)
  3. Sales informationThe Undermine Journal does the best it can, but lacking information on actual sales means we can’t fully know how the market is behaving.  This also enables certain types of market manipulation (read that as people taking unfair advantage of others) that would be far more difficult if we knew what things actually sold for in the past.
  4. Statistics.  If we had sales information then either Blizzard or someone like The Undermine Journal could generate information more like what we get for real markets, or like what is generated for games like EVE.  Just look at this recent post I saw about the EVE economy — they have price indexes, it’s so cool.
  5. Auctiongroups.  I confess I know nothing about EVE — I couldn’t get past the tutorial.  (I tried, because it seemed like I’d love a game with so many economic features.)  But I believe there is a single server structure in EVE — meaning everyone plays in the same game world and buys and sell on the same market.   If this were the case in WoW there wouldn’t be small economy servers and large economy servers.  I understand that the shear number of players across WoW may make complete consolidation impossible, but maybe they could have “auctiongroups” similar to battlegroups where multiple server’s auction houses were connected.  I can see there would be numerous technical and procedural issues, but if they could be overcome, wouldn’t it be nice for everyone to play in a bigger market?

Hedging and Stockpiling and Flipping, Oh My!

I just listened to episode #27 of the Auction House Junkies podcast where they discuss at length the concept of inflation and how to deal with it in WoW.  It made me think and question some of my assumptions, and while I’m not sure I’ve come to any new, firm conclusions, I feel compelled to share my thoughts.

Different schools of economic thought actually define and measure inflation differently, but they are all trying to determine the buying power of money over time.  Some economists view and measure inflation mainly by looking at the price of goods — if the prices go up, your money buys less.  Others take a monetary view, defining inflation purely as an increase in the supply of money.  I tend to think the most accurate model, especially in WoW, is a mixture of these.  There are some things about WoW that make it very different than real life.

Hedging for inflation is the process of trying to protect your total buying power by converting money (that you expect to lose buying power) into some other asset.  In real life, inflation hedges are often real assets with intrinsic value like gold or land.  These items are expected to rise in price at a rate equal to or greater than the rate of inflation, and in some cases can generate income without being sold.  Some commodities are also considered to have intrinsic value, like oil and other fuels, but they are generally subject to more price fluctuation due to supply and demand.

So what item is like land inside WoW?  One example I thought might be bank space.  The problem is things like bag slots or guild bank tabs in WoW seem to either stay the same price or sometimes even decrease in price.  Same with vendor mounts and abilities like duel spec or epic flying.  These things all cost less gold than they used to despite overall monetary inflation in the game.  So there is no reason to rush out now and buy up all the bank slots for all your alts — you’ll be able to do so for the same amount of gold later.  Also, in WoW these assets and a lot of other items cannot be turned back into currency.

Bags are a bit different.  It probably makes really good sense to upgrade all the bags on all your alts and in all your banks to the extent you can now.  The price of bags does fluctuate and most people think it will go up especially at the beginning of MoP.  And if you plan to roll a monk or other new character, tuck some bags for them away now.

In general I don’t think there are many good, traditional monetary inflation hedges in WoW.   That said you can proceed to take a more price oriented view (as do the hosts of Auction House Junkies) and identify items that you anticipate will rise in price and stockpile them.  Doing this now, before the expansion, is really no different than using these techniques at anytime to earn gold.  It’s just that the expansion brings with it an influx of demand on some goods that effects your choices of what to target.   If you identify items correctly and stockpile them, you will earn gold.  It’s sort of like “extreme couponing”, but there aren’t really coupons in WoW unfortunately.

From CNN Entertainment’s “Cover story: Extreme TV pushes the limits”

As I’ve stated in “Ugh, a Mission Statement. Really?“, I haven’t and don’t stockpile, so I wouldn’t pretend to give advice about what to target.  I may do some experimenting with stockpiling though now after thinking about it.  If you want some advise about what to stockpile, perhaps start by reading these posts from April’s Blogging Carnival at Cold’s Gold Factory.  (Cold is one of the hosts of the Auction House Junkies podcast.)

Monetary inflation does exist in WoW.  New items, mounts and alike, introduced in MoP, will be priced based on what blizzard knows about the overall size of the WoW economy.  Repairs will cost more on higher item level items.  And on the new black market auction house you’ll be competing with other top gold earners for rare rewards.  So do keep all this in mind when setting your goals, and be prepared to reward yourself — that’s why we do this!

Arbitrage in WoW

As you can see, I enjoy thinking about WoW gold making in terms of real world business, and as a consequence, I enjoy reading many of the well know “wonky”, “mathy” WoW gold blogs.  It’s a little intimidating to dip my toe into that arena — not only are some out there quite opinionated, they also back that up with a great deal more knowledge than I possess.  But in any case, here I go…

Technically, but in simple terms, “arbitrage” is activity that poses no risk but provides some reward.  As with many things, it doesn’t work 100% that way in actual practice.  When real business people talk about arbitrage, they usually mean taking advantage of the difference in price between two market places.  If the price for good X in market A is higher than the price for good X in market B by enough to cover any transaction costs and taxes, you can buy in B and sell in A for a “sure” profit.

Remember the Seinfeld episode “The Bottle Deposit” where Kramer and Newman are trying to figure out if they can make money transporting bottles to another state to claim a higher deposit?  That is arbitrage.  If the profit covers their costs it’s a pretty sure thing.  Of course on Seinfeld, hilarity ensues when they spot Jerry’s stolen car and end up dumping all the bottles to chase after the thief.  There was a risk after all, it was just pretty hard to anticipate.

In WoW there is only one true, pure arbitrage opportunity that I can think of, and that is buying items on the auction house that are listed below the vendor sell price.  Because vendor sell prices basically never change, and vendors will always buy unlimited quantities from you, there is no risk.  There aren’t even any fees I can think of.  The only thing that keeps people from making a ton of money this way is that very few sellers list below the vendor price for the obvious reason — it only happens when someone makes a mistake.  It does happen, just not frequently enough to make a lot of money.  (Please comment below if you can think of another example in WoW.)

Just like in the real world of arbitrage, in WoW we usually face the risk of the market price changing between when we buy and when we try to sell.  And worse in WoW than in most real arbitrage situations, we lack good sell price and volume data.  While we know the average posting prices and number of posts for auctioned items, we don’t have actual sales prices or sales volumes (except for our own sales).  So if you see that the auction house lowest price for Whiptail is 2g and someone in trade sells you 200 stacks for 1.5g per, you are taking a risk if you hope to be able to sell them for 2g, it’s not a sure thing.  And every time you post them and they don’t sell, you incur a fee.

Still, people do look for and find arbitrage in WoW.  They fall into these categories that I can think of:

  1. Vendoring — as described above.
  2. Faction — if there is a sufficient price difference between horde and alliance to cover all the costs, you can use the neutral AH to move items from one side to the other.
  3. Server — best I can tell this is only practical if you are planning a server transfer anyway.  You have to spend real money and plan carefully around the limits of what you can take to another server.  The Undermine Journal is useful here if you really want to go for it.
  4. Currency — some vendors sell items in exchange for other items.  For example in Dalaran, Braeg Stoutbeard will sell you one Arctic Fur for 10 Heavy Borean Leather.  In practicality this works like the vendor prices do — the prices of the two items on the auction house tend to stay in line to the exchange rate set by the vendor.

Disenchanting and prospecting (ie “the obsidium shuffle“) are probably thought of as arbitrage by some people, but in reality they are manufacturing processes, at least that is how I think of them.  As the time and skill requirements a transaction requires increases, so do costs and risks.  Same goes for farming herbs, ore, fish, archeology items, or item drops from mobs.  “Time is money friend!”  Stockpiling is not arbitrage, it’s more like hedging, no matter how positive you are that the price is going higher.

What features might be added that would make the data we have in WoW more like what we know in real markets?  How exactly do you move items between factions?  Can you hedge in WoW?  Those are topics for future posts.  In the meantime your comments are appreciated below.