For the record; I have played the deep undercut game. I have been both the dominant seller, and the quiet mouse. I have played with glyphs - owning all the recipees since Mid 2010. I have posted with 3 toons, and posted with one.
A few weeks 1 competitor will give up. After a few more weeks the second one will give up. And so on and so on. When they leave u gain market share. increase the ceiling to 40g, then 50g then 60g. Dont be greedy or else they will come back. - Critical Goblin
My understanding of the deep undercut method is that you drive other players out of the market with a very low margin sustained campaign. After a while they will give up; and loose interest; change proffesion, or server change. Once your competition has given up, you can then raise prices and have large profit.
There are a couple of problems with this strategy.
- What if you are running deep undercutting for months and they still have not given up?
- What if you are up against a farming goblin; who is willing to farm his own herbs and sell glyphs below a herb price sustained by alchemists?
- What if your competitors have a range of alts with different crafting professions?
- What if you can make more gold by being greedy and allowing the competition to come back?
Back in the dying days of lich king, I sustained a very deep undercut pricing of glyphs. I knew what herbs I could buy, and what glyphs needed what parchments. I bought all types of herbs and inks; buying whatever was cheapest (including old world herbs as well as northrend ones). The profit margin on glyphs was 50s to 2g per glyph over careful purchasing of herbs. This was done for two months.
My stated goal was to discourage scribes. It did discourage the younger kids seeking a quick bit of gold, it ran out the gold sellers. I know of scribes that left the market because of our deep undercutting. However, there were stubborn toons that matched me - Breevok and Bankzoors, and a few others. Even in this market a new player joined; you may have heard about him - Moonvengence; starting out with only vendor taught skills, but picked up his daily research and glyph books.
Since Cataclysm dropped, we had months (not weeks) of glyphs being at (or under) herb costs; driven by Moonvengence. I am happy to work for minimal profits; I am not happy to work for a loss. I lost a lot of gold buying guild banks (not tabs - banks) of cheap herbs of the AH; sitting on them watching deflation erode my wealth). I dropped out of the Alliance market and moved over to the Horde market (via the neutral AH), and raised my profile in other tradeskills (a notional win for Moonvengence). However, herb prices started to fall, and glyph prices were being chased down to follow them. That is Moonvengence was 'allowed' to own the market at a loss, but not at a profit. Wherever there were small profits (as little as 2g/glyph); there was competition. It was during this period that a new competitor - Neoriv entered the glyph market.
You can play with the cost of milled herbs such that inferno inks are allocated the majority of the cost; but even then, 1 blackfallow has a minimum value of 1/10 of inferno ink; and with the introduciton of trinkets; blackfallow vs inferno is more like 3:1 instead of 10:1. Regardless, spending your time milling unloading inks can be profitable if you drive the price of glyphs down far enough; if only for levelling scribes that dont want to grind Therazane rep.
Don't get me wrong - I still will deep undercut; where it suits me. I just have an expectation that I will reduce a market to a handfull of players instead of driving them permanently away.
Where my sales expectations are not met, I will do what it takes to drive sales. For me; this has meant : getting out of bed earlier and posting glyphs before work; finding new markets (horde ah); deep undercut; followed by a very very distant AH camping.
I can not currently sell a glyph in the evening at my current prices. Within 1/2 hour, I get consistently undercut. Getting up 1/2 hour earler and posting 12 hour auctions before work; and I won't be undercut for 8 hours (but Breevok will - he still goes to work hours before me). To make things interesting - there are some mornings I won't (or even can't) post in the morning.
By previous rounds of undercutting, we weeded out many less committed scribes. We still have several determined scribes.
At the end of the day I am left with the following choice:
- 2 months of 200 glyphs per day at 2g profit each = 24k gold profit
- 2 months of 40 glyphs per day at 5g profit each = 12k gold profit
- 2 months of 20 glyphs per day at 100g profit each = 120k gold profit
By not undercutting, over the space of 2 months, I will earn an additional 96k gold. The higher prices will encourage new competition.
As circumstances and competitors change, I will change my strategy.