Money from the NPC: Setting the right retail price.

[Guest]

People are always coming up to me on the street:

Person: Hi Knolls!
Me: Well hello hypothetical random person!
Person: Knolls, you are obviously very skilled with math, and economics, and women.
Me: Yes. Yes. Good point.
Person: But I can't help but thinking that you don't get me.
Me: How so?
Person: Well know that the ROI says Cotton is better than Cattle. And I figured out that Stones are better than Toys. But I want to make Toys anyway, because it's fun to be a toymaker. So your brilliant posts don't help me unless I want to switch.
Me: Well what if I could tell you a way to make more money with any finished product?
Person: Why that would be great! You're the best person ever.
Me: Aw, thanks. Well I'm very glad I imagined meeting you.

It's true. Every day people are missing out on caps because they set the wrong retail price in their stores. It's an easy mistake to make.

Picking the perfect price

When you have a producing building (plantation, factory, well, etc) then you know how much to make - as much as you can, every day. And you sell for whatever you can get. But with a store, you pick how many to load up. And you pick what price to buy. And this way you can control how long it takes to sell.

You want to pick the right price and quantity to get the most profit. There is always a perfect point where charging less makes you less profit (less profit per item) and charging more makes you less profit (fewer customers).

Figuring out this perfect price is easy with just a few numbers in a spreadsheet. However, first you have to understand what the product is really worth. If you bought something to sell, then it's easy - just use the price you paid. But if you made it yourself, you better not be using that price in the warehouse. If this is not clear, I really urge you to read this post by me about paying yourself for each building. Or for a more detailed analysis, This post by Capitalis about understanding Value.

We're going to use for discussion Beef - one of the products discussed in that article. In there, we decided that Beef is worth 23 - but when I look at the market now, I see that beef is selling for closer to 19. (That's the thing about economics, prices change.) I'm going to use 20 for our calculations because it's a nice round number.

Product: Beef
Value to us: 20
Store sold in:Grocery store in Germany
That store could be anywhere, but I expect Germany will pay well.
How many: 250
We're just testing the market right now. A 20 m

[Guest]

Great guide.
You could however add another column calculating ROI. It doesn't help to set the best price but it helps comparing how profitable your store is compared to your other buildings.

[Guest]

repect

but I have to disagree here, this would be perfect aproach, if you could set the sales in advance so you won't have to get to computer every time you want to set the sales again
i like to sell my full store in 12h, your perfect price is sold in 13.5 hours, that is hardly possible to achieve, if you don't want to wake up to set your sale
on the other hand (as you also mentioned), the curve is quite flat, so if I was selling in 12 hours, i would make 2.12 instead of 2.14 per minute and that is not that big difference (0.93% to be exact) so i will be doing fine when selling in 12 hours
but I really suspect that you would get close to 12 hour with all products

[Guest]

Knolls, I honestly think that I should retire from writing and just let you do it

Great post. It was funny to find that your spreadsheet

A. looked like mine

and

B. used the exact same formulas

....that is, except for the ROI's and Expansion ROI's and production facilites used and daily profit and Joint Retail and Production ROI's and all the numbers I just end up hiding along the way.

Do you think all that is worth explaining? Maybe I should send you the spreadsheet and you should explain it

[Guest]

Wonderful post! I used a similar method, so that is reassuring.


My question is quality. Often products aren't really great profit until you increase the quality. Do you know if there is a way to approximate the effect of quality increases?

[Guest]

Well, if you have a couple qualities to try out, you can measure the curve. The best way to do this is at a give time to sell a certain amount - like 800 over 24 hours for a grocery.

(I am not saying that you should sell groceries or at that time - it is just an example)

- Capi

[Guest]

Thanks guys. I really couldn't sleep last night so I just ran with it.

i like to sell my full store in 12h, your perfect price is sold in 13.5 hours, that is hardly possible to achieve, if you don't want to wake up to set your sale

If you wouldn't mind may I direct your attention back to section 5?

The perfect price for quantity of 250 sells in 13.5 hours. But yes that is a pain. So what you can do is load less (about 220) to sell in 12 hours, or more (441) to sell in 24 hours. Either way you're still selling at 27 and getting the same rate per minute.

My question is quality. Often products aren't really great profit until you increase the quality. Do you know if there is a way to approximate the effect of quality increases?

A magic answer that I have found - no I don't. For a very rough rule of thumb, I like to assume that each quality bump will let you raise the price about 5% and sell the same quantity in the same time. But there's really no way to know for sure except to do it. Which is why the Excel workbook for my products has a separate page for each quality.

Well, if you have a couple qualities to try out, you can measure the curve. The best way to do this is at a give time to sell a certain amount - like 800 over 24 hours for a grocery.

Graphing Q v T at fixed P? Interesting, I might just do that.

You could however add another column calculating ROI. It doesn't help to set the best price but it helps comparing how profitable your store is compared to your other buildings.

Let's just say that it's "left as an exercise to the reader."

It is certainly possible as some of you have done to tie ROI in here. If people are now familiar enough with ROI to want to add it on, I say go for it!

[Guest]

knolls, you are great!

This post like the others you had write must go to the kapitimes. Not all users come to the forum..

Me: Well hello hypothetical random person!

lol, that kill me. it

[Guest]

this helped me soo much, but i have two questions,

1.does it mater if you put in more stuff eg. insted or 100 gas 7500 gas? will it chance the calculations

2. does quality matter?

please post the answer here, or seend igm to Con inc. thanks

[Guest]

With this spreadsheet setup, I found out that my fruit's most optimal price is 2.55 (cost me 1.19) its not alot of profit pr fruit, but I can sell ALOT of fruit and earn 4 times as much pr day, than I normaly would..

Awesome!

[Guest]

myth,

Price sets the rate of return (ie. 2.14

[Guest]

1.does it mater if you put in more stuff eg. insted or 100 gas 7500 gas? will it chance the calculations

2. does quality matter?

Of course Quality and quantity matters, but the important thing here is THE PROCEDURE, like knolls has explain so well.

If you follow the procedure knolls has explained, you will find the best price for this particular store, for the particular good and market you have tested. Remember that in a store with ads is different than without it, and in France, maybe different from Germany.

I think that for the same good, the "optimal price" is almost the same in every red market, but there are some goods (with different average qualities) that would be different.

[Guest]

1.does it mater if you put in more stuff eg. insted or 100 gas 7500 gas? will it chance the calculations

Here is the basic procedure:

Step 1) Pick a quantity at random just for testing (250 in this case)

Step 3) Figure out the perfect price. (27 in this case)

Step 5) Figure out the right quantity.

The price is going to determine how many sell per minute, which is how we know what makes the best profit. But by putting more in the store or less in the store, that just changes how often we have to come back.

This was covered in the "Step 5" section above, but I'll do it again here. And this time I'll use hours instead of minutes - which is a little simpler but uses some rounding.

What we had learned by the end of step 4 above was that we like the price 27, and with 250 beef that will take 13.5 hours. (But we don't like 13.5 hours, that's weird.)

So you just set up a ratio and do a little cross-multiplying.

Code: Select all

Desired quantity        Desired time
----------------    =   ---------------
Test quantity           Test time

If we wanted 12 hours

 N     12
--- = ----
250   13.5

    12 x 250
N = --------
       13.5

N = 222

So we could set 222 products at 27 and it would take 12 hours.

If we wanted 24 hours

 N     24
--- = ----
250   13.5

    24 x 250
N = --------
       13.5

N = 444

So we could set 444 products at 27 and it would take 1 day.

If we wanted 48 hours

 N     48
--- = ----
250   13.5

    48 x 250
N = --------
       13.5

N = 889

So we could set 889 products at 27 and it would take 2 days.  HOWEVER the store only holds 800 at a time.  So I would have to put in 800 and raise the price just a little (to get it to a 48 hour time) or I'd have to settle for a 24 hour time.

And then just to clarify step 6, what I said there was that day by day the price will shift a little bit as the stats change. But it's not a huge shift, so what you would do is put in the quantity (222 every 12 hours, 444 every 24 hours, etc) and then just tweak the numbers (try 27. Too long? Try 26.8. Too short? Try 26.9. etc) to get the timing just right.

2. does quality matter?

Every time you get a different quality, it will let you raise your prices. But we can't predict exactly how much, so your choices are

A) do the test again to find the perfect price for the new quality.
or
B) Say "ah, close enough" and use the quantity again, (444 for 24 hours) and then just raise the prices a bit until time time is about 24 hours.

Method A is better, you should do the test again like it's a new project. But if you don't feel like retesting, you can use the number and the time to tweak the price.

[Guest]

the sad thing is that you have to do all the math again when :

- your producting building change
- you buy the same product at a different price at the market.
- you sell another product in the same shop
- you sell the same product in another shop

I have become lazy and always put the calculated price. sudden drop and rise on the market sometimes cause me surprise.

but it is an useful tool.


I prefer work in constant flow : when my ideal price is calculated, I put the maximum quantity, and reload each time it fall under 3 h (or before going to bed).
it mean keep on producting. my warhorse is Chicken, which imply constant product of seeds and corn too.


golden necklage is a uncanny problem since the ideal price imply a loooooooooooooooong selling time, when producting time is really short and goldmining is both long and expensive.

[Guest]

the sad thing is that you have to do all the math again when :
- you sell another product in the same shop

Yes. But well then it is another product.

- you sell the same product in another shop

Only if the other shop is in another country. And as I suggested, It's probably not that much of a switch. You could use the old country's numbers as a guide instead of recaluclating price and quantity

- your producting building change

No real recalculation necessary for expansions. Buildings don't get less efficient so if your 20m building expands to 40m, you keep the same price and instead of selling 411 a day you sell 822.

However ads will change it.

- you buy the same product at a different price at the market.

This one you definitely don't have to test again. Just open up the sheet and change the cost column. The price & sales time data don't need to change, so you instantly get the updated results.