As a bit of a follow up from my recent post about deep undercutting, I'd like to take this opportunity to explore the other side of the equation. When there's more supply than demand, deep undercutting is more money for you, but less for your competitors. What about when there's a lot of demand, but little supply, though? Obviously, this is when you should raise your prices.
Overcutting is a term coined by Tim in the comments of that last post. Thanks Tim; I'd been looking for a word for this. When you have something for sale and it is literally flying off the shelves, there's no reason to undercut. At least, not the lowest price on the auction house. When there is lots of demand, you can take the opportunity to maximize your profit margins!
Instead of matching the lowest price on the AH, start paying attention to the volume of product posted. If you have 100 Greater Cosmic Essences and it's Tuesday night after a patch, look through your competitors' auctions, and find the first one who has posted in volume. That's your undercut target -- not the guy who posted a pair at 19g each, but the guy who posted 50 of them at 30g each. The heavier the demand, the farther down the list you should look.
If there is no deposit cost, feel free to err on the side of being too expensive, and see how many sell. Returned or canceled auctions won't cost you anything. If, however, there is a hefty deposit, err on the side of lower prices. Ignoring a huge patch of competition to gain 1g per item is a loss if half of it comes back unsold with 2g taken off for listing fees.
Another valuable tactic: if your stock is limited and the demand is even stronger than you expected, your first reflex should be to try and create more goods if you have more crafting to do. If you're all out of mats and don't have time, however, you can always consider buying your competition's auctions. This is risky, and will cost you money if the demand goes away before you can sell everything, but if you're successful, it can add margin for little work. You are adding to a level of demand that's already higher than current supplies can accommodate.
This last tactic is often called "trying to control the market". It's a bad term, however, because you're not controlling anything. All you can control is how much demand you generate, and the price and quantity for the auctions you list. Don't fall into the trap of buying literally everything below your "threshold", as this will likely result in your holding inventory and paying your competitors way more than usual for stuff you're normally selling against them.
I prefer to call this technique "demand juking". There are two ways I'll do this:
- If there are a few small auctions priced below what all your large quantities of auctions are at, then buy out the small ones and relist them with your regular stock. This is low risk, assuming you're dealing in large numbers.
- If you are currently the lowest price and see your auctions selling so quickly that you suspect you'll run out, cancel all your auctions, buy up the next cheapest lot, and relist everything slightly over that. This is high risk, as you never know when a competitor with a ton of stock in his guild bank will log in and undercut you, however if the demand really is strong enough, you'll not only sell your own goods, but make a profit on your competitors' goods too.
Being an auctioneer is like being able to print money. Or gold, as it were. Wait, that doesn't make sense... you can print on gold, but you can't print gold. That would be closer to transmutation? I can transmute titanium, but that's only worth it if the price of saronite is low enough to justify the time spent making it. I need some sort of analogy here. Whatever, I'll figure it out later. Making gold? Every so often, Basil will post about various strategies he's learned on the AH.