Architect Archive
Thread: What are houses going for?
Not trying to offend anyone, but honestly, the ones who intentionally sell for less than market price (otherwise known as Price Gouging) are the ones who are hurting the Architect profession as a whole.
People see the average Joe architect selling there goods for a decent markup in order to sustain themselves. Then comes in the price gouger with his just barely making a profit scheme in order to make the other Architects look like there ripping people off.
People now ask the average Joe architect why he charges so much and then gets theYoubetter lower yourprices or youwon't sell anything" speech.
Now for the kicker, who's doing the right thing and who's doing the wrong thing? Neither are actually doing anything wrong since anyone can charge whatever price they want for the goods.
But ethically, the Price Gouger is harming everyone due to selfish behavior and lack of concern for his/her own profession.
Dayln, you are right AND wrong.
Just because a business is successful and there are real life examples, does not mean it is right or ethical.
Good business? Good as in proffitable for you, yes, good as in ethical, just or fair, maybe or maybe not.
You seem to come from the school of thought that (in this game or real life) anything that makes a profit for some individual is good. While I do not believe in price fixing, I do not believe in a totally open and free economy with0 restrictions or regulations. It has been proven over and over(in real life) that if you let people do something, they will.
Remember a couple years ago after 9/11 and all of the inflated gas prices from certian businesses? It turned out that these business how no foundation to jack those prices. The government went after them and put a stop to those criminals.
How about the latest from that wall street money grubber. Some compensation package for over 140 million, granted to him, by people he put on the board.
Now, with your ideas, that would be "good business", for the man in question. From a legal stand point, he did nothing wrong, he was just smart, and very business shrewd. From an ethical and moral standpoint, he is riding off on the backs of the stockholders of a company. He walks out of there with140 millionfor.. what.. golden toilet seats?
You would have been more accurate saying something more like..
Undercutting and price gouging is profitable business, not necessarily a good, ethical, moral, or honest one.
I am sorry, but in this game and in realy life, I do not believe in the idea that..
If I can make a buck, or a credit, no matter who I have to step on to do it, is immoral.
What Dayln says is to a large degree correct.
To be honets though, he isn't realy in the group that drops the price waaaaay down.
Just like the real world there is a place in the game for both the reasonable/higher (take your pick) prices sellers, and also for those that sell lower.
The only issues that I have with anyone selling lower than what I consider reasonable are...
a) Manufacturing is a 'Value Added'activity. Taking raw resources and turning them into a usable item SHOULD increase their value. In the real world you would have to sell for the cost of the materials, plus labour, burden, overhead and subcontract costs. To this you would add your margin to arrive at a price. If you arent pricing based on your 'Value Add' then you are telling everyone your profession has no value.
b) REAL businesses exist to MAXIMIZE PROFIT, not just to cover costs or make aLITTLE bit. If you could still sell all of you product at a higher price, then you are not charging as much as you should be.
Dayln rightly points out (in many places) that his material costs are very low. I believe his figure is around 0.5cpu (?) I don't like the way he arrives at the number because I don't think it takes into account the real value of time etc, but that doesnt realy matter. The important thing to me isthat I can't consider architect a business unless I sell for more than the materials are worth. This hasn't been a problem for me so far, and a slowly declining bazaar price for material willlikely prevent it happening for a while. If it does happen though, I will simply do architecture only for friends as a hobby, and sell the resources instead. I would simply have movedmy business from Architecture to Mining.
If Dayln's business was real world and of a reasonable size it would probably be split into two divisions, Mining and Manufacturing. In his current pricing model the miningdivision would be showing substantial profits, and the manufacturing would be being run at a loss (cost of running factories for zero addition to product value).
I dont think the Wal-mart analogy holds.. becauseWal-mart certainly DONT sell for less than the market value of the materials used... in fact they have to cover all of their suppliers costs (material,labor,burden,overhead) plus their suppliers margin, plus their own labor, distribution and marketing, and STILL add a margin to that. The reason they are sucessfull is that they have reached a size that allows them to squeeze their vendors margin very low and also acheive economies of scale in distribution etc. They may have reached this size to some extent through loss-leading etc, but that wont work for Architects in this game as they cant possibly get this big (so why bother loss-leading). The only way we can come close is if we buy huge amounts of resource from miners at a discounted price... but you would need to be buying substantialy below 3cpu for this to work.. and I dont see many miners selling that low yet.
Selling for less than the competition is fine in my book. Dayln is right... free market economics should always apply. They fail us a little though in a game where businesses can succeed (stay in business) without actualy behaving like a real business.
Oh dear.. i seem to have written an essay again. It's all Dayln's fault for replying to your thread 
Sorry, correction on that last statement. I meant to say...
If I can make a buck, or a credit, no matter who I have to step on to do it, is ok.
Personally, I think that type of behavior is immoral.
A couple corrections, minor ones
Wal Mart was taken to court for selling items at a loss, even less than the cost to make them. They won the lawsuit and the right to sell at whatever price they wanted. They sold some items at al loss in order to attract customers ( I have never done that )
A business goal is NOT always to make the most profit on a single sale, Where have you been for the last 60 years? A business goal is to sell a LOT at a margin enough to cover manufacturing costs and to keep profits up and to be able to take more market share from the competition.
If given the choice to sell
1 PA hall for a 300k cr profit
2 PA halls for a 200k cr profit each
3 PA halls at 150kcr profit each
I will sell 3 PA Halls at 150k cr profit each.
Not only does it net me more profit, but it also encourages all three customers to come to me for any other items they need. That is a part of my goal of course and should be for any solid business.
Perhaps i should have written less, because I don't think you read it correctly...
I stated that Wal-mart had 'probably' used 'loss-leading'... no argument there... but I guarantee you they do it on a tiny fraction of thier sales... practicaly every big company does, as it draws people to your business where they then buy your profitable ites.
If you would care to debate the fact that they sell above material value (overall) plus all the associated overheads etc then please do. Unless they make a loss every year there is clearly no way you can make this claim, since they don't run the entire vertical for every product they sell. Their suppliers MUST make a profit also.. so you already have money above material cost befor it even gets to Wal-mart.
I dint say anything about making the most on a single sale.. so im no sure where you got that from.
Your PA Hall example is to say the least an obscuration... let me expand your example....
Assumptions -
a) Your materials are all self-mined at a cost of 0.5 cpu (I think this is aprox the number you use?)
b) You have all the materials for 3 PA Halls (otherwise your example is flawed from the outset)
c) The market allows you to sell the PA Halls at the volume/profit combinations you stated
Scenario 1
yOU
You
Say the material used to make a PA hall could be sold on the market for 160K (Remember we are making up numbers)...
You are already assuming you have the materials available for 3 PA Halls (otherwise your example is pointless)
Scenario 1.
Sell 1 PA Hall
My goal is not the most profit from the least ammount of work, if it was I would just sell resrources, however resruce prices are dropping on my server too.
I am no longer booked up in back orders,
I could sell 3 PA halls this week, in fact I hope too( realise that I use the lots of 3 people, partners
On those sales I would rather make a smaller but solid profit on 3 then a huge profit on 1
My point stands
Gah.. stupid message board editor
My appologies for those screwed up posts.
Let me try again...
Ill only bother with your example of so called profit optimisation....
Assumptions
1) You have all of the material for 3 PA Halls
2) You mine it all yourself for a cost of 0.5 cpu
3) You can sell at the stated volume/markup combinations
4) A PA Hall takes 64000 resources (ie. Cost 32000)
Scenario 1.
You make 3 PA Halls and sell them for 182,000 (150,000 profit each)
Total Cost 96,000
Revenue 546,000
Profit 450,000
Scenario 2.
You make 2 PA Halls and sell them for 232,000 (200,000 profit each)
You sell the remaining material for market rate of 3 cpu
Total Cost 96,000
Revenue 464,000 (PA Halls) + 192,000 (Raw Materials) = 656,000
Profit 624,000
Scenario 3
You make 1 PA Hall and sell for 332,000 (300,000 profit)
You sell the remaining material for market rate of 3 cpu
Total Cost 96,000
Total Revenue 332,000 (PA Hall) + 384,000 (Raw Materials) = 716,000
Profit 684,000
I believe I just made 50% more profit than you...at the same time i did a heck of alot less work, and had only 30% of the risk of a critical.
NowI fully realise that this won't always hold true(it dependsprimarily on the difference betwen the cost of mining raw materails, andtheir value on the open market), but clearly if you aren't going to bother taking into account the market value of raw materials than you determination of maximum profit isworthless.
The Wal-mart model works if you can make such a large number of small profitsat a low price that they are greater than the total prfit of moving a lower volume at a higher margin. It is a very hard model to follow since youhave to haverelatively unlimited supply, a huge market, and the ability to squeeze expenses out of the system. Generally a higher volume business incures mare management overhead, which in turn must be offset by economies of scale in distribution etc).
oh.. i didnt do all the math, but i believe that dropping the market value of raw materialsto 2 cpu will move the optimal profitso that you should build 2 PA Halls. The market rate for RMs would have to be <1.5 for it to make sense to build 3 PA Halls. I would need to check that though.
Finally, while it MIGHT encourage all three customers to come to you next time (though I think that is debatable), it also means that when they come to you next time they are again going to expect to pay 2.8 cpu for their structures.
No no no.
The choice was
Sell 1 for 300k profit
OR!
Sell 3 for 150k profit each.
Both what yousay and want I say are making assumptions, But that is part of business, whatI am doing is not stupid. ( and by the way those were totally arbatrary numbers they have nothing to do with my actual prices )
Also the advantage for my selling 3 for less goes way beyond the inital sales, It makes good assumptions about future purcheses by the same customers.
There is no definitive right or wrong ( although there is a guy in another thread that is so wrong I can hardly believe it )
Twilahs wrote:
I don't understand the inconsistency in pricing. Like Dayln (poor Dayln always being picked on hehe), your price for larges is 3.5 cpu, but your price for a medium generic is only 2.5 cpu.
I mean it's the same resources to make them both and they cost usthe same to harvest/buy, so why is the medium selling for so much less profit than a large? I've noticed this on my server also.
This is not a flame! I'm just curious why this seems to be happening so much
Because people unthinkingly base the price on the size and try to fit it in between small and large and forget to actually look at the cost to build and cost per resources (what the others are) to sell. Just another case of not looking before leaping.. happens all the time
Oh I think I am a more dedicated capitalist than you I am all for the free market economy.
I despise what OPEC did today ( read the news ), price fixing on oil by banding together with other oil producers to gouge the customers.
I could not disagree ( in a nice way ) more, i would not only make more profits by selling 3 PA halls ( resources are jsut .5 cpu to me ) then 1, and not only that but I have opened a door with potential future sales to the same customers that I would not have received at the higher price.
I am not interested in being a resource dealer, I want to provide my customers with a competitive product at a low price.
Dayln.
p.s. of course this is a purely hypothetical argument, It is not that I am trying to convince you ( or others ) to price my way, in fact , I hope you don’t. I only want you to understand me, I am not the enemy, I am just following the market using time tested business practices.
The enemy is the low demand and the high supply, that is what we need to attack and I will join you in that effort, it would increase my profits ( read as raised prices ) while still being the low cost dealer.
p.p.s. You are one of the moreenlightened posters on the board, I dont need you to agree with me, but I do want you to understand me.
I think Ive mentioned that I am also in favor of a free market so Im not sure what you are getting at..
While i dont care for Opec much, it seems to me that they are doing exactly what you extol... saying 'to hell with everyone else, only I am important'. Thats your espoused business goal... and basically since the 'Business' that you are trying to destroy are other players trying to get enjoyment/recreation out of a game you are hurting other people. Opec are doing the same... saying 'My country is important, yours isnt'. Not much different to me. Its a free market... (sarcasm warning)...we are all free to go get our oil somewhere else, at whatever cut-throat price someone is willing to sell it just cause its above their cost
On the profitability calculation i can't see how you can dispute the numbers i presented. (But im willing to listen)
The numbers absolutely show that you would NOT make more money selling 3 PA Halls (based on the other criteria you gave).
I used your own number of 0.5 cpu for your cost of resources in the calculation. And i even calculated the effect ofreduced raw material market values.. because I know that you believe the bottom is about to drop out of that market.
I will grant that ensuring future business is a valid reason to drop prices a bit... but Im not so sure that customer loyalty in this game is bought merely with a low price. If as you say your service is excellent too, then Im sure you will be around for a very long time (much to the dissapointment of many).You probably deal with a totally different client base than I do, so Im not in a possition to judge the effectivness of your business strategy.
For myself, I would rather not have the future sales of additional low margin houses. They simply take resources away from my making higher margin structures. The housing market is totally messed upprice wise.. and isnt likely to improve since houses have very limited utility.
I think I do understand where you are coming from... and I dont have a problem with it. Even if i realy cared about other peoples prices, yours are nowhere near the bottom.. in fact on houses I would say you are overpriced (hehe).
I just view your business as being one that is making alot of profit on the resource extraction side.. and then throwing some of it away in a trade off for the enjoyment of building stuff and marketing it. To me that isnt a bad trade off at all, and in fact I do a similar thing but in a different way. I make more money on what I sell, but then I try to do social things with it.. in effect throwing some of my profits away in the cause of fun.
Sounds to me like a winning way to get your money's worth out of the game.... now if only we could get SOE to make a few tweaks here and there