Considerations when Setting a Price

priceconsiderEstablishing the selling price of an item requires research into environmental factors in order to support the final decision. Such research identifies which customer base to target and further determines what are the expectations of those customers at different price levels. The current status of the economy can affect this too because if the economy is on the upswing then prices might be tolerated at the high end , conversely if the economy is in or recovering from a recession prices are likely to be at the low end since customers are likely cutting back.

Sales promotions such as discounts and coupons may result in a quick sale or two, however they should be reserved for products at either the beginning or the end of their existence. Once the standard price is determined utilizing a lower “introductory” price for a limited time period after product release is reasonable as long as the limited time period is honored resulting in a higher price later. Another benefit of offering a product at the lower price is it increases market share for the sell against competitors. At the opposite end of a product existence are “close out” sales which in the real world the purpose is to sell remaining stock and free up shelf space while in the virtual world it generally means the product will no longer be offered for sale through an automated vendor or web site. However, nothing prevents the content creator from selling virtual goods on a case-by-case basis upon request unless the creator closes their account and no longer logs into the virtual world.

Premium product pricing, on the other hand, can project value to the prospective end user if it is apparent that the post-sales service and support of the product is better than the rest. This is similar to generic versus name-brand products in a grocery store. For example, some who have worked in the hot dog industry have revealed that the same exact product is being packaged with a generic name on the outside as are the name-brand and yet the former sells for a much lower price than the latter. The latter benefiting from their established brand name and service justifies the higher pricing. Another example is in the computer industry in that while you can buy a computer from a competitively priced small business at the local strip mall that is only open specific hours and closed on the weekend, there are also similarly-equipped computers selling for much more that make available a dedicated 24/7 toll-free call center staffed with knowledgeable service technicians held to strict performance metrics.

Unlike products resold in the real world, merchandise sold within the virtual world are generally only available from the creator themselves. While it’s true that some creators allow franchise stores and others to rez an affiliate vendor the price is generally locked and the commission structure is usually at a fixed rate. Some items sold in the virtual world can be manufactured from supplies offered by the creator and then a levelling system is used to determine the cost-of-goods. Those who have higher experience at manufacturing have the advantage of having a lower cost and therefore can offer the final product at a reduced price.

The Reality about Earned Income from a Virtual World

ImageOne of the often advertised methods of earning income at home is by creating content within a virtual world. The content’s primary purpose might be simply be for visual enjoyment such as art, buildings, furniture; it might be interactive content such as scripted objects; even commercial real estate of virtual land and rental shops may be a source of income for some. The reasons can vary as to why some would take on such an endeavor such as supplement income, however only a small percentage of those running a business in virtual worlds make enough to cash out real world dollars to pay their living expenses. In fact, for some it doesn’t even cover the electricity used in creating the content nor for their internet access let alone result in a reasonable hourly wage.

However, that is not to say there are some countries where the creating and selling of virtual goods that is later cashed out is equivalent to real world incomes. In various locations the entire revenue of a business is the result of setting up a shared internet connection where workers do nothing but navigate within a virtual world all day to earn a living. Some governments want the opportunity to impose a tax on this virtual income or at a minimum to regulate it in order to prevent money laundering as well as to stop illegal gambling in locations where it is against local regulations. International laws imposed by some countries have even prevented a virtual world from being accessible from another country for political reasons.

The value of such virtual goods is mostly determined by what other avatars are willing to pay for it rather than what the creator wants the price to be. Similar to real-world goods a creator still needs to price their content against competitive products based on it’s unique feature set. While there are some technical mechanisms that may increase the perceived value such as limited time offers or restrictive quantities in the end it is still digital content that the creator has the option to re-release it at a later date with minimal effort which may include making slight improvements. Therefore, when cashing out in great quantities is not feasible many will instead spend their earnings on goods such as decorations for their virtual home or in-world entertainment which benefits other vendors with this reinvestment into the online economy.