General Pricing/Mark Up For Non-Trivial Items

[GrimwoodCT]

I was wondering what the general practice of the more adept tradeskillers towards pricing non-trivial items where there is a substantial investment in materials.

I will use GM Augments as an example. On Cazic Thule Metallic Drake Scales and Glossy Drake Hides go for about 20k, Purescale Ores for about 1k.

Since I am pushing smithing to its limit right now, I buy alot of materials when I am on a run. Therefore each attempt runs about 21k. I price my augs at about 27k (a little more when the market allows, a little less when the market requires). In general I almost always have the lowest price on in-demand augs or augs made to order.

Since I am on my road to 300 all I really want to do is make a minor profit after fails have been factored into the equation. My fail rate is about 20% (maybe a little less, I haven't been tracking them recently) so I am rationalizing my price as following:

Final Price = Bought Price / Success Rate
26,250 pp = 21,000 pp / .80

So, my question: Is this a sound economic practice as I try and skill up to 300?

Once I hit 300 (and max trophy) I will use up my remaining materials and make items on a "you bring it, I click it, you donate XX plats for a success" basis.

Thoughts?
Grim/Squeaky on CT

[Qaladar Bragollach]

If I'm doing things for pure profit, I consider it not worth my time unless I can gain at least 50% profit margin. That's after factoring in my expected rate of failure.

[Catweazel]

Pricing and profit can vary wildly depending on whether you farm components, make your own sub-combines and factor in both failures and learning curves. At the end of the day, an active market place will probably dictate the price.

I make AAAA boxes for the guild, and will occasionally make a few to sell. In the early days, I kept very close track of component costs (vendor only bought items), bazaar costs for farmable materials and my failures when working on sub-combines. I doubt I am alone in making sure that I am self sufficient in all sub-combines for this partcular item. Anyone who can get to 300 Tinkering is hardly phased by raising JC, Brewing and Smithing to high levels.

The components that you *must* buy (including high quality refined ore, carbon powder, gnomish heat sources, acid, metal shafts, platinum bars etc etc) can be bought for approximately 14,000 plat. Add in items like purified mana vials, various gems (if you buy as opposed to save dropped ones), gears, you can add an additional 3000 plat. If you farm the rest of the drops then your base cost of an AAAA is 17,000 plus your time. If you add a profit margin of 50% to account for failures and learning, a nice round number will be 25,000 to 30,000 plat. I am sure none of you have ever bought one that cheaply.

The two high cost components in the AAAA are the shadowmane pelt and the clockwork gnome bolts. Bazaar prices for these on our server range from 10k to 20k for a pelt, and 7k to 10k per bolt (5 needed).

I use a mid range price of bazaar items to calculate my add on price for farming the pelts and bolts myself (or with others) which adds another 55,000 plat to the base AAAA price of 25,000 to make a grand total of 80,000plat. The key here is that you have already factored in your profit from the earlier step. Adding profit onto these components is IMO not sound logic, although I am sure many might disagree.

I will buy the expensive items in the bazaar if they drop below my average "whisper number". I have paid as little as 3k for pelts and 5k for gnome bolts.

I am reasonably confidant that selling AAAA boxes for 80,000 plat will net me a profit. I can drop the price by using cheaper bazaar or farmed items if the market is flooded. I can raise the price if the market allows. In the early days I could charge 150,000 plat. Now that the manufacturing process is well learned, I can make a box in 45 minutes or less.

I don't really make the boxes just for profit although I know some on our server do. I have yet to see one sell on the open market for less than 75k and some are regularly priced at 200k. Those of us who make them regularly seem to price between 80k and 125k. Other vendors of AAAA boxes charge in "components" (e.g. they sell a box for 10 gnome bolts).

There are a wide range of costs, prices and profit calculations that could come into play just on this one item. What happens if you cannot make all sub-combines? What happens if your skill is not quite high enough and you get more failures? What happens if supplies start drying up? What happens if guilds stop doing bazu aug / last blood aug content?

Like everything else in Everquest, the goal is probably to have fun, and if you can learn a little about world economics at the same time, all the more power to you.

[Qaladar Bragollach]

Calculated of course from the market value of all components whether I farm them myself or buy them in bazaar. To do otherwise would be silly as you'd then be in a situation of making more money just by selling the parts you farmed then by selling combined products.

Economies vary from server to server of course. Pelt/bolt prices on nameless are similar to what you listed but seeing an AAAA for under 130k would be a rarity here.

Of course we're discussing things kinda backwards if we're only doing things for pure profit. From a pure moneymaking standpoint, you don't look at a recipe, add it up, multiply by profit % and charge that price. Not in an established market anyway. Rather, you look at current market price, compute your expected costs, compute your expected profit margin and then decide from there if its worth doing or not. Thus as I said, I don't bother if its less than 50%. Some people do. As long as you are happy with it hey go for it. If you are currently skilling up on your wares then you probably want to count some of that skillup as profit. How much is up to you. I know there were plenty of times when I took huge losses on things and was content to do so because I felt the skillups and/or trophy exp offset the cash loss.

[Bupper]

Final Price = Bought Price / Success Rate
26,250 pp = 21,000 pp / .80

In my experience, failure rates for GM DoN augments vary significantly by armor slot, so pricing them all the same isn't wise. However, I've noticed that many others do price all the same regardless of slot.

When I was active in this augment market, I estimated that I needed to price bp / legs augments almost twice as high as wrist augments. I may have been wrong, but recommend you scrutinize your success rates by armor slot.

P.S. As a business strategy, I don't recommended setting a mininum markup rate over expected costs. It's more important to consider competitive prices, sales velocity, time and effort required, and absolute margins rather than percentages, even when making items purely for profit.

For example, I am happy with a 20% margin over average costs (including failures) for taaffeite jewelry, because it's so fast to make but lots of competition among sellers. The choice is between selling several pieces a month for 10,000 pp profit each with a 20% margin for a few minutes' work, or selling none with a 50+% margin. On the other hand, I can't be bothered making any CEs to sell, though I could expect lots of volume with a 50+% margin.