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Friday, January 09, 2009

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Sigmund Leominster

The "Paralysis of Choice" is a marketing theory that supposes that too much choice decreases buyer behavior, and that the solution is to decrease choice. Barry Schwarz's "The Paradox of Choice" is a good overview of this position.

In Second Life, as in real life, reducing choice involves developing product differentiation. Back in the 90's, anyone could make a cup of coffee, but Starbucks succeeded in making their cup of coffee different. Bill Gates did the same with MS-DOS - made it different.

Of course, differentiation also demands marketing - having better coffee than Starbucks won't make you a Java millionaire unless you (a) tell folks about your coffee and (b) help them make the switch. Take heed of this, OpenSim developers who swear blind that your virtual world is superior to Linden Lab's - you need to spend a few million in marketing dollars to convince people of that.

So, product differentiation and marketing are the twin pillars of making your business work. And how do you differentiate your product? Ah, that's why you pay someone a consultancy fee - 1-800-SIGMUND.

Ann Otoole

I tried to leave a comment over there and it failed. I'll leave a condensed comment here.

The only accessible feed is Free Style. the others are controlled and limited to only a select few people to publish releases. Their prerogative. Fashion Consolidated is almost useless now (see earlier related reference to control being a prerogative). Free Style is fair and balanced so freebies it is. Creamy and her staff put a lot of time and effort into Free Style and it shows. So freebies it is if you want to be seen.

And you can be sure the moment any group of people form a trust and try to intimidate or coerce others to set prices at certain levels then the government will get to step in and establish regulations on this fledgling industry.

A major part of the problem is the uselessness of search. So traffic and profile picks need to be disconnected from search and Linden Lab publish policy about unethical and/or deceptive behavior.

There is a lot of superior talent coming in from Japan and other countries and they are not too interested in setting prices high. So anyone that feels their time is too valuable for the recession/depression era in Second Life then they always have the option to quit Second Life and take their skills to a different economy where they make what they think they rate.

Pappy Enoch

Free n' cheep stuff am not only fun, but it are part o' a idearmerlogimakul revvylushun.

Sum o' us am po' folks, like them-thar hobos hoo follers King Orhalla Zander, o' hillbillies like mee.

I reckons it am tuff enuff in the reel wirld a steppin' n' a-fetchin' stuff tu stay alive. So we gits intu the fake wirld n' gives stuff away (like mah Shine) tu make fun o' awl them-thar corn-sumers a-runnin' aftur bling n' whutnot.

If'n yu am still a-readin' this, jine up wif the revvylushum. Yu ain't got nuffin' tu lose 'cept yo bling :)

Ananda

I wonder if it's possible to dig up any stats on whether the number of things available at $0 or $1 as a proportion of the total number of things available is different now? I ask this because the notion of a designer offering a freebie or gift giveaway is as old at SL itself. The same goes for the consolidation of freebies. In '03 we had the Stillman Bazaar right down the road from the SL outlet general store, whatever it was called.

Sigmund, I would think SL designers are already making great efforts on the marketing side of differentiation as well as the quality side. Maybe not so much on quality - there still seem to be only a handful of prominent designers who even try to bother lining up or matching fabrics at the seams.

In any case I'm not sure how much effect paralysis of choice has on what we are seeing compared to the simple economic circumstances: There being very few ways to make money inworld unless you create content to sell. This leads to brutal levels of competition in any populare niche, which of course drives down prices towards the marginal production cost. And guess what? That's so close to zero on an already-created item that it might as well be free.

J7Sue

Freebies - maybe people like them because if they are rubbish, all you've lost is time. I have several items from Cubic effect that just don't fit, and I don't know how to make them do so - paid good lindens for them, and get no response from the creator. I haven't worked out how to make my displeasure effective.

Product differentiation - I like to try stuff on (avoiding the kind of problem above) and I'll certainly pay a linden to do that. I'd like to know the ARC of items - sometimes I'm looking for low ARC. Again, I bought a really pretty dress, which I like to wear, but it's 12000 ARC - so I'm like a walking lag inducer.
I might still have bought it if I'd known, but maybe not.

Melissa Yeuxdoux

One thing I'd love to see and that would, I think, help with the "paralysis of choice", would be better search facilities, to narrow down one's choices if one is looking for something specific.

In one way, I'd love to have more choice; I'm certain that I, and probably everyone in SL, knows of very few of the vendors of any but niche products. A directory of SL vendors indexed by what they make would be a godsend.

(Side note: I have to laugh at the notion of MSDOS, that started out as a clone of CP/M, being differentiated.)

Sigmund Leominster

I try my best not to prolong a thread on the basis that it can become hyper-focused on some very specific issue and end up as a discussion that should be take offline. However, I'm going to break the rule (again, alas) to add a couple of comments based on what has been said.

Although I mentioned product differentiation as a critical feature of design, I didn't point out that for some products, the differential is intended to help the buyer achieve personal differentiation. Buying Redgrave or Simone! (and I choose these examples because they both represent SL name-brands that earn real world cash for their designers) is a way for the purchaser to look different and indicate an element of status.

This, of course, is once again no different than real life, where both a Timex and Rolex will give you the time, but there's a world of difference between them economically and symbolically.

I also suggest that the freebie marker actually works as a stimulus to the paid-for market. A few chats with a rez of newbies (I'm coining a new collective noun for folks new to SL and "a rez" sounds fun) reveals that a typical behavior is to gather up freebies like autumn leaves and then dig through them for the best items. But this leads on to wanting wanting different products, especially once the individual is exposed to other choices.

The choice process is narrowed by price: If you SL income is L$300 per week, shopping at Redgrave may not be the best bang for buck but other stores may be in your price range. If your income is L$2000+ per week, your choices change. You shop in your price range, which thereby also acts as a choice constraint mechanism.

@Melissa: If a product is a "clone" of another, that doesn't preclude it from being differentiated by market. You also have to make sure the "clone" is sufficiently different to avoid infringing any copyrights or tougher intellectual property. You might want to argue that Windows is a clone of MacOS but it turns out to be different enough to avoid painful and costly legal battles.

Interestingly, in SL there is a big problem with "clones" in the fashion world; and this is a result of the fact that people ARE making choices to buy stuff rather than use freebies exclusively - criminals only commit crimes if there's a profit, and there's clearly profits to be made from SL buyer behavior ;)

Diva Regina

In my role as manager of advertising for Prim Perfect Magazine (latest issue here), I have a lot of conversations about retail economics in SL. The costs to the creator are all incurred up front: creation time, store rental, etc. Additional costs for each sale approach zero -- all money flowing directly to profit -- so the case for effective marketing is enormous. Freebies are one way of making your products known, but not only are you giving away product for free, but collectively, retailers are sapping the need/appetite of the customer. (I confess that I could look really good for days wearing only items I've gotten for free around the grid. A smart customer might ask, "Why buy?")

So some say Search is ineffective; blogging, though perhaps effective, is not a equally-accessible playing field; and designers aren't just competing with the makers of similar items but for anything else that will grab the interest, attention and $L of the residents. How can a content creator market effectively in the Second Life world?

So, talk to me about advertising. Our approach at Prim Perfect is to focus on the fact that our advertisers' success drives our success, so we try to make sure that all our advertisers are extremely well-served, including additional exposure (via blog, etc.), helping matchmake profitable partnerships, inviting participation on occasional special projects, etc. Do you (or people you know) consider advertising in a well-regarded publication to be a good investment? If not, why not? Do you see a difference between channels with good content (e.g. some magazines, in-world TV or radio) and others that may have wide distribution but are mainly just collections of ads? What would make it a more attractive proposition? What can we do to serve content creators better to help them get the word out?

I'm going to post this on my blog at http://divablogssl.blogspot.com and I'd really appreciate comments and input. Thanks very much.

(My working assumption is that the creators are making high-quality stuff. Developing a good reputation, generating word-of-mouth referrals, etc. is the 'price of entry' to being successful; plus Prim Perfect has an investment in its own brand and so wants to be able to confidently stand up for our advertising partners.)

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