Five Ways to Price Your Products

Lately I’ve been fussing about product prices. As many readers know, I run a particle effects shop in the Second Life Virtual World™ called Electric Pixels. The shop now has around 200 items for sale and many thousands of items have been sold over the past year. But how do you go about setting a price for an item? Or worse, how do you go about setting a price for a custom, one-time-only product?

When I started selling items 18 months ago I really had no idea, and simply guessed. This method still works for me today! However, upon reflection there should be more science applied to the problem. Here are some pricing strategies that work in the real world and may also work in a virtual world:

• Give it away! Yes, this is indeed a strategy. Contemporary web services use this technique often, and survive by selling advertising or providing add-on services for a fee. I suspect this approach may only work for certain kinds of virtual items. Or it can be used if you wish to promote your business or contribute to the community.
• Price based on Effort: How long did it take you to make the item? One hour? Two? What is an hour of your time worth? This approach might make sense to the maker, but often doesn’t make sense to the buyer. Worse, in the virtual world hourly rates are typically not comparable to real-world rates. Some makers use this technique but their products are usually very unique, and that permits them to demand high payment.
• Price based on Value: What will the customer get from using the item? Will it speed up their process? Will they be able to sell more items of their own? How much money will they get by investing in your product? Determine or estimate their value and set your price to be lower than that so that it makes sense for them to purchase. If you set your price higher, they won’t buy it because it won’t make business sense. This is why pricing on sffort sometimes doesn’t work.
• Price based on Competition: What are competing products selling for? Is your item better or worse than the competition? Should you price yours higher or lower? Again, this test sometimes causes pricing by effort or value to fail. Even if your product is a good value, a competitor could still charge less than you.
• Price based on Volume: How many of these items are to be sold? One? Ten thousand? Your effort in making the item could be the same regardless of how many are sold. A single unit sale would have to recover all your profit on that one sale, while profit for a high-volume product can be recovered over a large number of sales. Typically unique one-time products are priced much higher than high-volume products because of this phenomenon.

Which approach is best? All of them! Any product should be considered in all of these dimensions, and if it passes all these strategies, then you probably have a good price.

6 Ways To Run Your Business After You Die!

There’s one aspect of running a business that is often forgotten, and I fear it is totally neglected by almost all Second Life businesses: What happens when you can’t continue?

What do I mean by “can’t continue”? I mean this: you are sick, permanently disconnected, injured, imprisoned, kidnapped, dead or otherwise completely unable to do any work whatsoever on your virtual business.

In RL this is called “Succession Planning”. The idea is that you assume you’re gonna eventually disappear for some reason, and we’d better figure out who’s taking over when you do. Large businesses take great care in laying out detailed succession plans, so that when the execs go down in a fiery airplane crash, everyone knows what to do. Even small businesses take time to consider what needs to happen, if they are well run.

The issues are no different in SL, except in scale.

However, I suspect very few in-world businesses have considered this possibility. And even worse, a virtual environment poses additional difficulties well beyond those encountered in RL business disasters: anonymity.

First, let’s suppose your virtual business has no succession plan. What happens? Let’s examine the likely sequence of events for a typical virtual retail operation:

• You Die (harsh, but it Can Happen!)
  
• Your business continues to operate, since avatars can still visit your parcel and purchase items (hmm… assuming the Grid is operational…)
  
• Linden $ accumulate in your account
  
• Invoices arrive on schedule
  
• Automated payments from your account continue
  
• Fees requiring manual intervention remain unpaid, since you aren’t there, remember?
  
• Fees linked to your Paypal account do get paid, at least for a while
  
• Residents notice your absence and do their best to determine what happened, but unless there is a RL connection somewhere, it is entirely possible no one in SL will know what happened. There is nothing your virtual friends can do
  
• Your RL survivors have no idea or understanding of your virtual existence and do not realize they have a significant asset to deal with. They do not operate your business or even realize it exists
  
• Eventually your invoices do not get paid because your survivors have shut off your Paypal account, either directly or indirectly via credit card cancellation
  
• Your tier is unpaid for a long period, and Linden Lab eventually reclaims your abandoned land. Your carefully constructed objects evaporate and your business effectively ceases to exist
  

A tragedy for certain; not only for the maker, but also for residents because the maker’s wonderful items would no longer be available.

For larger virtual businesses, the amount of cash flow can be significant and the business is a non-trivial asset that just cannot be forgotten. What can be done? Here’s some ideas:

• Decide what you want done. Should your business be sold to the highest bidder? Perhaps you want to give it to a good friend who you think would be able to run it properly. Maybe it should be donated to a worthy cause or organization (who also should know what to do with it)
• Pick someone. Decide exactly who could actually deal with your operation if necessary. Yes, that hunky boyfriend may be your closest friend, but does he have a hot clue about fashion design? If your business is already owned by a partnership, then this step is easy
  
• Make a plan. Your most trusted virtual friends should know what you want them to do in case of disaster. Tell your trusted pals your intentions! And you should carefully define what you mean by disaster: “Gee, you were away for three weeks and I thought you were dead, so I sold your business. Sorry!”
• Leave the Keys. Consider leaving sufficient information with your most trusted pals so they can act on your intentions. It might be as simple as a RL name and phone number so they can contact your survivors and explain to them what needs to be done. It could even be account passwords, but they’d have to be extremely trustworthy to consider that step, especially in a large business
• Advise RL. They may not have any clue about virtual reality, but somebody should at least know there is something to do with your virtual comrades in a disaster. Leave them the account and password information (sealed, if necessary). Tell them the names of avatars to trust, since your virtual friends may be calling on your RL survivors
  
• Get a Coach. If you know a trustworthy SL user in your local area, make arrangements for them to provide assistance to your survivors. Survivors will likely have absolutely no idea where to start, what to do, or even understand what is presented to them. Get them a coach to interpret and guide

Would you bother doing this? I would consider this type of plan necessary only if you have a significant in-world business, either one with lots of revenue or one where many people depend on your operation. Many smaller virtual businesses are barely viable and probably are not worth these steps.

Let’s hope you survive a long time. Note that I don’t say, “let’s hope nothing bad happens”, because something bad Will Indeed Happen Eventually. Plan on it.

Special Delivery!

Hooking up with clients for custom work is often a pain in the a**. Here's the scenario:

• Client contacts me via IM with a vague request for some type of custom work
  
• The description of the work is unclear, so I must ask a lot of questions
  
• Client is typically offline when I am on! (Or perhaps I am offline when they are online) and we can't converse directly
  
• Negotiations occur at a very slow pace since we can't hook up
  
• We friend each other, in hopes of catching each other online and be able to talk through the work description in detail
  
• We don't catch each other because the client is in Australia or some other far away place (at least from me, anyway)
  
• Work slows and the deal fades away
  
• I end up with a bunch of "friends" who occupy space on my list, eventually requiring cleanup
  

That's not a good way to handle business. 

So I developed a couple of simple techniques that I believe overcome at least some of this silliness. 

First, I now try to negotiate via notecard when ever possible. I ask the client to write down as best they can a complete description of what they desire. Then we can edit the notecard and toss it back and forth, resulting in a semblance of a reasonable discussion. At least the avatar-to-avatar bandwidth is slightly better, and you should get a written record of the request for future reference. 

Secondly, I have created a unique "Pick Up" area at Electric Pixels marked as "Special Delivery". It's off to the side away from the main shopping area so that visitors don't confuse its contents with normal products. What do I do with it? I place custom work there for clients to pick up, even when I am not around. This way they can "Buy" the product as if it's a normal product and a traceable transaction is recorded instead of a mysterious "Gift". 

I also use the "Special Delivery" as a place to deposit prototypes for clients to come and test them live while I am off doing RL activities. 

So if you happen to come by Electric Pixels, you might see some strange things afoot in Special Delivery. Do Not Be Alarmed! 

Funky Contracting

A while ago I wrote an article describing a rather embarrassing contracting situation in which I had failed miserably to make proper contracting arrangements before starting on some custom work. I was sleepy and wasn't paying attention! Sorry! I learned my lesson, and told everyone about my mistake so they could learn too.

Today I've been reading about a similar situation involving one of Peter Stindberg's clients. Evidently Peter followed the prescribed contracting procedure:

• Negotiate with the customer before work commences
  
• Agree on the specific work to be undertaken
  
• Agree on the exact amounts and timing of payments for that work
  
• Complete the work
  
• Execute the payments
  

Peter even went further by breaking the work down in phases, so that the client had an opportunity to review, change or even stop the work process in an agreed upon manner.

One interesting aspect of Peter's approach is the breakdown of payments:

• An initial payment to begin the engagement before anything is delivered. This ensures that Peter will start work and also ensures that the client is in fact serious about the job.
  
• Separate payments upon delivery of each completed work phase.
  

Alas, in spite of Peter's excellent contracting practices, the client did not pay as agreed. And that's the problem. No matter how you do it, there is always the possibility of non-payment (or non-delivery from the vendor). Both sides take a risk. Peter's technique of breaking down the work into phases accomplishes something very useful: reducing the risk faced by both parties. Since non-payment will happen only once in the sequence, the maximum amount that can be lost is minimized to a single phase.

But even after reducing the loss, what course of action is left for the victim? Simple: tell everyone about it on the blogosphere! There's nothing better for reputation management.

Moral of the story: be wary when dealing with clients.

Once You Have Tasted flight...

Readers of Second Effects will know that I like to explore whenever I have time to spare, and it can be tremendously interesting. Not only do you see amazing things, but you often meet amazing people too. And then there are those times when you run into a fellow explorer of the Second Life Virtual World™ and compare notes. 

The other week I ran into one such explorer, Dana Musgrave (pictured with myself at the Inspire Space Park). We traded interesting Landmarks like two cowboys at a shoot-out, and I am afraid I lost badly: Dana gave me 51 Landmarks that I had not visited, while I could provide her with only a mere 15 that she had not visited.

Afterwards, I marveled at Dana’s persistence and ability to explore, and thought everyone should get exploration tips from a master explorer such as Dana. I contacted her recently and here is the result:

Second Effects: Thanks so much for answering my questions today! There are many would-be explorers and I am certain they’d appreciate some exploration tips from you. How many places have you visited, and how long have you been exploring?

Dana Musgrave: Well, I would say close to maybe 400 sims, for about a year and a half now.

SE: How often do you go exploring?

DM: Almost every other day.

SE: When you explore, do you have a goal in mind or do you teleport in a random direction?

DM: Yes, I do have a goal most of the time to keep focus, then when I go for whatever it is I am looking for it usually leads me to a plethora of other things!

SE: Where do you find good exploration ideas and tips?

DM: When I see unusual objects in SL or really nicely done objects, the main thing I do is go to edit on them, then look at the picks of the profile of the person that made them, the creative people in SL sometimes have really great places that they have found and cherish and openly want to share them with others. Also, I ALWAYS have my "Camera Control" out so that I can explore a place more thoroughly.

SE: What do you do when you first arrive somewhere?

DM: CREATE A LANDMARK! LOL - Especially since SL is so capricious in nature of crashing!

SE: How do you keep track of all the places you have visited?

DM: I place all the great places on a notecard, simply drag and click them on one, you can do it just as easily as placing them in a new folder but to me quicker and easier.

SE: Favorite place ever visited?

DM: I would have to say.....hmmmm......Inspire Space Park, something so profound and tranquil about it, especially using the orbital pose balls there and the music!

SE: Where are you going next?

DM: Magnanimously into the minds of others, to do as I always try to do, inspire them to travel SL more so that they too can see much of the beauty that it has to offer and maybe, just maybe inspire them enough to create a spectacular sim to be viewed by many as well!

SE: Thanks again, Dana!

I must agree with all of Dana’s suggestions, particularly regarding stowage of landmarks. There is nothing worse than having piles of old landmarks in an inventory folder and not knowing how you came by them, let alone if they are of any value. The notecard idea even lets you write a few words about the landmark so you will always know why you kept it.

I also highly recommend Dana’s choice of the Inspire Space Park, which is truly a magical mix of sight, sound and imagination.

And just for the record, my SLBUZZ profile indicates today I’ve visited some 1008 sims. Now, if only I can remember them... sigh.

Finally, Dana added a special quote for great explorers:

"And once you have tasted flight you will walk the earth with your eyes turned skyward, for there you have been and there you long to return......." -Leonardo da Vinci

The Economics of Second Life Clubs, Part 3

In part 1 of this series, we described a hypothetical club’s monthly expenses, as envisioned by a typical over-eager owner. Our formula estimated an island-filling club would require approximately USD$1,000 to break even each month. Part 2 showed that generating revenue at that scale is extraordinarily difficult.

What can our hypothetical resident/club-owner do to make a go of this? Increasing revenue is very difficult, simply because it’s not directly in their control. The patrons that come by and buy or rent something will do so based on your club's features and attractiveness. You just have to provide a great product.

However, expenses are definitely in control.

Part 1 showed a basic expense model like this:

• Tier for Class 5 Island (USD$295): 80,000L
• Advertising (assume several techniques used): 20,000L
• Staff (5 staff/performers @ 1000L/day): 150,000L
• Contingency (for anything else going on): 25,000L
• Total Expenses each month: 275,000L = USD$1,000
  

Since it’s pretty clear a club could not easily generate the amount of cash required to cover the expenses, our hypothetical club owner should reduce those expenses:

• Tier: Reduce it substantially. Perhaps 1/8 a mainland parcel would be appropriate, and it costs only USD$40 per month, an enormous USD$255 less than a full island. The 8192sqm parcel would offer more than sufficient space for a club, but possibly suffer from nasty neighbors in the sim. It's more likely the club itself would be the bad neighbor, but that’s another story. 80,000L could be reduced to 10,000L
• Advertising: The club must advertise, but perhaps should pay less and use more elbow grease. In other words, our club owner should do viral marketing, in-person visits, contests, group titles, etc., which cost nothing other than time and an active imagination. 20,000L is reduced to 5,000L
• Staff: Clubs do need performers and our club owner can’t do it all on their own. However, instead of 5 staff, we’ll have the owner do more work themselves and save money for performers. 150,000L could be reduced to 100,000L
• Contingency: Disasters and unpredictable events still happen, and they are not controllable. Let's keep say, 10,000L for emergencies
  

Total expenses are now reduced to 125,000L, or less than USD$480 per month. This is much better, and perhaps even achievable. The club needs only to generate 4,200L per day, or 28 sales of 150L items (or a mere 14 sales of 300L items). Rent revenue from other retailers or residents on site is probably difficult due to the dramatically smaller space, but you might be able to cobble together some revenue from vending machines onsite in addition to selling your own items.

Once again, good quality events will attract many visitors. And if you have many visitors, you have the opportunity to sell them products during their visit - but only if they are of good quality. You can increase the probability sales by selling items somehow related to your event's theme. And did I mention that they should be high quality?

This will work ONLY if the club owner sticks to the budget. This may be one of the most difficult aspects to achieve, given all the items one can buy. Stick to the plan! If the plan doesn't work, change the plan. 

If a club in this configuration is highly successful (and ONLY IF), our hypothetical club owner could consider expansion to larger areas. But remember, Revenue Must Exceed Expenses. Or else! Start small and build up only when you can afford it.

The Economics of Second Life Clubs, Part 2

In the previous post of this series, we described a hypothetical club’s monthly expenses, as envisioned by a typical over-eager owner. Our formula estimated an island-filling club would require around USD$1,000 to break even each month.

Part 1 generated some discussion, including this thread, where experienced club operators and musicians correctly point out that I don't know much about clubs. Yes, I certainly don't know much about clubs. But I do know about running a business, and remember I'm describing what I frequently observe: over-eager, non-business-savvy avatars attempting to build a club. Successful clubs would definitely not make these same mistakes. 

With the demise of gambling, there are fewer ways to generate huge revenue. Here’s some basic approaches, although I am sure there are a few more.

• Sell items in the club, especially things relevant to the club’s theme
• Operate a store near the club to take advantage of the hypothetically massive traffic arriving at the club
• Rent mall space near the club for others to take advantage of the hypothetically massive traffic at the club
• Rent residential space near the club, leveraging the theme of the club in residential design
• Charge permission to “sales people” to inhabit your club and sell items or “services” to the patrons. Hmmm...
  
• Finally, Tip Jars. Nothing more need be said about them

Once you have some ideas for making revenue, we need to do a sensitivity analysis. In other words, exactly how much of each would we need to break even?

• Selling items at the club and in a store: Let’s assume a typical sale is 150L. Thus we’d need to sell 1,833 items per month or an average of 62 every single day. Or one sale every 23 minutes all day every day of the year. How likely is that?
• Renting shops/residences at 300L per week: 230 shops must pay the 300L each and every week. Hmm, how many prims can we offer them? If we give them 50 prims, that means there are only 3500 left for the club! Also, where exactly do you put 230 shops?
• Renting shops/residences at 600L per week: 115 shops may be easier to fit, but it would be much more difficult to find 115 viable businesses that could afford 600L per week, especially when there are many places charging less. Again, how likely is this to occur?

All of the above mistakenly assume you’ve got 100% participation. In reality, our hypothetical club owner will find they must grow sales/rentals over time from a zero start. Also, due to regular turnover of residents, grid issues or other mayhem, they may find only a fraction of the potential income is actually there on any given day.

Clearly, the club owner must use a combination of approaches to even hope to achieve profitability, and do each competently and efficiently. Here is a possible target state:

• Sell 40 items per day at 150L each: 180,000L
• Rent 50 shops/residences at 600L per week: 120,000L

That gets us close to the break-even point. But even so, both of those numbers could be very hard to achieve. A business plan this thin would be laughable, if it wasn’t in Second Life.

Worse, if our resident had a store that generated 180,000L per month, why not just run the store and throw everything else away? You gotta love the music to persist.

You can see why clubs vaporize often. In part three of this series, we’ll examine some techniques for making the business equation work.

The Economics of Second Life Clubs, Part 1

We’ve all been to them: those great clubs with dazzling dance floors, animation balls, fun people, and if I’m lucky some particle effects too. They can be a lot of fun to visit. And then suddenly, they disappear! Why does this happen? I suspect the following lifecycle takes place all too often:

• Resident enters Second Life and discover they really enjoy clubbing
• Resident gets over the “what is all this?” stage of SL existence and wants to do something useful and long term
• Familiar with clubs, Resident decides to create one of their own. A big one, of course. Actually, the biggest!
• Resident builds club, advertises, hires, operates and thus creates a truly large operation
• Club fails when Resident realizes they don’t have enough money to run it

Sigh. I’ve seen this happen several times, as many of my particle clients are club owners. Sometimes it’s quite sudden, while other clubs die a slow, withering death of agony.

Why does this happen? I suspect a prime cause is a misunderstanding of the most basic business axiom: Revenue must exceed Expenses. I follow this rule absolutely, and I believe anyone who does can do nothing but succeed.

Let’s examine the typical club as set up by our hypothetical resident. Remember, they want to make it big, so we will assume they are building out an entire island, and are sufficiently capable to do a lot of the building themselves. (Don't laugh - I see this happening constantly!) Here’s the balance sheet:

Hypothetical expenses per month:

• Tier for Class 5 Island (USD$295): 80,000L
• Advertising (assume several techniques used): 20,000L
• Staff (5 staff+performers @ 1000L/day): 150,000L
• Contingency (for anything else going on): 25,000L
• Total Expenses each month: 275,000L = USD$1,000

That’s a fair bit of change for a very basic no-frills club. Not to worry, our Resident/Club-Owner needs only to offset these expenses by generating more than 275,000L each month.

Oh. How do we do that again?

Well, we could require visitors to pay a cover charge. Um, nope that won’t work, because there are lots of clubs without covers. They’d take the customers instead! We can’t rake in cash from gambling, and we can’t charge them for drinks, hot wings or those greasy deep-fried potato chunks, either. So how can a club make some Lindens? Stay tuned for part 2 of this series...

Concierge Party

Somehow I snagged an invite to this weekend's ultra-exclusive Linden "Concierge Party". The party is open to residents with monthly tier in excess of USD$125, and their guests. That's me, the guest. Someday I may require land of that size, but right now my store's portion of my parcel's capacity is only 700 prims and I simply can't justify anything bigger.

Anyhow, back to the party. The theme of the party was "Ides of March", based on legendary Caesarian events. While I am sure someone will blog about the wacky events and amazing Toga-style activities, I want to talk about the amazing way Linden Labs handled the event.

Back at my shop awaiting the opening of the party sims, I wondered how this was going to work. You see, the Second Life Group for the party held over 7,000 members. I mentally calculated how many sims would be required to hold this colossal event. Hmm, 7,000 attendees over 24 hours, with a maximum of 40 avatars per sim before they topple over due to extreme load. Dozens, at least.

Wrong.

They had five.

Yep, only five sims required to handle 7,000 potential visitors! How did they do it? My first clue was the avatar count in these sims. As you can clearly see in the image above, there were actually 81 avatars in Colosseum. A few times I've seen forty, but never 81! I was there. I saw them. I didn't count them, there were far too many. And get this - I was fairly easily able to move around and converse. At one point I was getting almost 30 FPS in a sim containing 68 avatars, although there were times my frame rate dipped down to the single digits.

Here's my observations of how Linden Labs might have pulled this off:

• Limited number of visible textures. While the buildings were attractive, appropriate and useful, a careful inspection showed they made generous use of few textures. Good design!
• No floors. I noticed this immediately upon arriving: most things were simply set directly on the ground. First impressions were similar to seeing those awful "Yard Sales". There were hardly any prim-based walking areas, just dusty ground.
  
• Limited number of buildings and prims. The sims seemed empty, at least when I first arrived before they filled up with people. A check of the prim count in Temple showed 1235 objects of 15,000, 13,765 available. No wonder frame rates were fast: there was very little to draw!
• Havoc 4. The party sims were running the new Havoc4 physics engine, purported to be much more efficient. It certainly seemed to be. Even when things got a bit laggy, I was still able to move about without suddenly lurching forward, crashing into innocents and accidentally knocking them into a pit of doom.
  
• Top class server? I can't prove this, but I wouldn't be surprised if Linden Lab used servers with a bit of extra juice. Why not, if you are expecting 7,000 for dinner?

Good building tips indeed, if your objective is to pack 'em in like sardines. Meanwhile, I'm wondering whether this experience tells us something about future sim performance. Perhaps someday I'll have 68 avatars strolling through my store! For now, I'll be happy with six.

Sleepy Mistake

The other night I made a mistake. A business mistake. Not a big one, but telling the story may help other business owners avoid a similar fate.

It began as I was about to sign off after working on a new gadget in my Lab. I was very tired and sleepy, as everyone seems to be in Second Life lately. Someone was in the store buying a few items. I strolled over to thank them for their business, and she said, "oh can you help me?"

Normally, this means the customer is interested in something that I don't sell. It's an opportunity to make something new. Something people might want. I encouraged her to tell me what she wanted. And so she did. Sort of.

Her idea seemed fairly simple to build, so I decided to build it on the spot. "Real-time Building" is usually a lot of fun, and you can get instant feedback from the customer as you build things: "too big", "not orange enough", "too icky", etc.

The build proceeded. Particle shapes were devised. Parameters tweaked. Parameters tweaked again. And again. And still more. Somehow the build just wasn't quite what was required. Many adjustments were made. I realized at this point that I did not quite understand what she was after, either because she didn't or couldn't say, or because I was too sleepy to hear it or probe for clarifications.

As the tweaking continued, more requirements were stated. Some were easy to incorporate, so I did. Others were fantastically complicated, and would require hours more work. Finally, as sleep was about to overtake me, the item was finished. At least without the complicated add-ons. I noticed the clock said I'd been working on this custom product for a long time, and normally this implies a fairly high price. However, in the interest of speed I quoted a lowball price. She said, "omg - I don't have that much money!"

Yikes! I suddenly realized I had made the most obvious contracting mistake: not determining a price before the work started. A cardinal sin for freelancers. Here's how it should have gone down:

• A clear discussion of what is required, and an explanation of what was possible
• An agreement on precisely what is to be built
• An agreement on the fee for building it
  
• The build takes place
• Goods and Lindens are exchanged
• Everybody happy

But, it didn't work out that way. Instead, customer leaves with a product that is less than they imagined, and contractor (me) receives fewer Lindens than the work deserved. Moral of the story: agree first, then build.

One more thing: Never, Never, Never do work-on-the-fly when you are sleepy! After a certain hour of the night, go dancing, chasing dragons or ride a teacup!

Customer Service Tips

Last week I somehow bumbled into the store of MariaBeatriz Beck, owner of MB Software. While MB is not the biggest script shop, MariaBeatriz's flagship product is a very interesting picture frame that slowly dissolves between images. I've never seen that in Second Life, and clearly she is a talented scripter.

We talked not only of scripts (since particle effects such as I build are also just a kind of script), but of customer service. We both run serious virtual retail operations and have common issues and concerns. Customer service is a critical element for business success in real or virtual life. Perhaps not so strange is that we both had very similar principles of customer service:

• Listening Carefully: Too many shopkeepers talk too much. It's important to listen. Customers often want to tell you things about themselves or what they are doing or what they need. Listen to them, and you will learn how you can help them. At the very least you'll gain some respect from them for taking the time to hear out their tales.
• Asking Questions: The opposite of listening is to ask questions. It's not good for you to tell your tales to the customer; we want them to focus on their own situation, not yours! Take part in their headspace and you may bond with them. A little bit.
• Following Up: Check back with customers to ensure they are good with things they have purchased, especially if they are unusual or custom made. Let them know that you care! (You do, don't you?)
• Being Nice: By default I try to be nice myself, but a few shopkeepers are not. Would you want to shop at store where the owner was abusive or cold? Uncaring? Rude? I wouldn't. Be extra nice: give out some freebies now and then. It costs you very little, especially when you consider the goodwill you generate afterwards. Make sure they leave with a smile, even if they don't buy anything.
• Seeing it from the Customer Point of View. In a way, that's what I've been writing above, but I will say it again; get into their head. If you can deeply understand your customer, you can help them in ways otherwise impossible.
• Being Flexible. You'd be surprised how many customers have special needs. It might be adjustments to the products, the price, the manner of payment or even the delivery of the goods. Give them a break and figure out a way to handle their situation. I really appreciate that when I shop, so why not do it yourself?
• Moderation. There is a point where you can go too far serving customers. Consider the Following Up advice above: how much should you do? MariaBeatriz says:

I always try to IM to see if everything is fine. Of course, not every week... just after the first week, so I do not appear annoying. In my point of view, if you follow up too much, it's like you try to force them to buy more stuff, and I don't like that. It's like going to a car dealer in US, and the *******guy bugs you until you buy something :) You go there and they ask 'Can I help you?' One time, nice. Two or three times? I run away, annoyed!

You really have to know the balance between helpful and annoying.

Probably there are other tips, but we believe these to be the key to successful customer service. Will these make or break your store? They'll certainly help, but only if you do all the other things right too! Bottom Line: Look after their smiles, and your smiles will take care of themselves.

Unstaffed!

Readers of Second Effects may recall a few weeks ago I began yet another business experiment: onsite staff at my store, Electric Pixels. The idea was to have a friendly face meet and greet visitors to the store, and to help them find items they could not locate (which is actually becoming an issue, since I now have over 150 items on the store shelves!)

My observation was that shoppers generally seem appreciative when greeted by a live person, and often I was able to help people find and buy items they probably would not otherwise have found. Also, you'd be surprised at the number of people who come randomly to a store like mine.

One recent visitor, Quanishia Tuqiri, has the bizarre habit of picking a random keyword, punching it into SL Search and then TPing to one of the search results. It turned out to be mine the night she came by, and after a lively discussion of many things, Quanishia is now a good friend. Visitors with no intention of shopping can often be transformed into customers with an explanation of your store's products.

Another important aspect of live interaction is to identify the need for products that don't exist. Shoppers frequently TP through dozens of stores looking for a specific item. If you are there on duty, you can find out precisely what they seek, and sometimes even build products for them right in front of their eyes! This can't happen unless you or your staff are present.

So I hired a very nice friendly face to work at the store. I set up a time clock and began paying hourly wages. Results were very unclear at first, because of the irregularity of SL shoppers - some days are good, while others are catastrophically bad. I decided to run the staffing experiment for a few weeks to see what happened over the longer term.

Unfortunately, after three weeks it was clear that there was no appreciable affect on sales. But there was an appreciable affect on my costs! Overall, I lost a considerable sum of Lindens, but I learned a few things about staffing in this type of sales situation:

• Hourly (or by minute) payments are questionable. It's not clear whether your staff is actually working consistently even though they might be physically present, since its so easy to be busy IM'ing others. Meanwhile, someone may show up at the store and even slight delays in greeting them don't look good.
• Difficult customers are hard to deal with. Somehow I am usually able to successfully interact with even the most dreadful personalities by being very careful what I say and how I say it. However, not every one is able to do so, and in one case I received a complaint during the staffing experiment. Inspection of chat logs revealed a catastrophic miscommunication. Understandable, but still not good.
• Some customers just don't want to talk. Half of our visitors simply didn't respond when addressed. Perhaps they spoke other languages, or maybe they were in a hurry. Some were simple rude. Regardless of the reason, it meant that staff were not required to handle half of the visitors.
• Some customers talk too much! It's fine to be engaged in a discussion, but when things get busy it's often tricky to disengage from one customer and start with another. This always happens in real-life stores, and Second Life is no exception. But staff have to be able to do this seamlessly. Hah - in one case, a randy customer became overly interested in my staff and asked her "when they got off work".

Will I hire staff again? Perhaps, but things will be slightly different. I want to organize a different payment scheme in which salary will be more directly tied to sales results. Not commission payments, exactly, but something close to that. That way the staff will have appropriate motivation to do the work. However, I haven't figured out the right formula yet. The hourly payment scheme attempted this month was just a bit too close to Camping for it to work effectively.

Another change would be to train the staff in sales techniques. While many people may think it's easy to simply jump into a store and start selling, there is actually a science to selling. I have a real-life friend who teaches such skills, and I am thinking of engaging her to train any new staff with proven techniques.

Finally, if I were to hire again, I would have an open job posting and either interview or somehow evaluate applicants until the right one came along. Hmm, that might be a good blog post in the future....

SL Ergonomics, Part II: Building Tips

In a previous article I described what I refer to as "Second Life Ergonomics". It's all about the appropriate design of virtual structures to make it easy for avatars to use and enjoy. My main complaint is that many builders tend to build virtual structures using real-life ergonomic considerations, and fewer realize that avatars have significantly different characteristics that must be accounted for.

Here are a few tips that I have learned during my brief virtual existence (well, brief except for last week when I was online for far too many hours!) This list is certainly not exhaustive - I am thinking of new ideas all the time, and I am positive there many great ideas I have yet to learn.

Phantom Objects - On those days when it's really hard to turn, walk and especially precisely navigate through a crowded area, it's really annoying to get hung up on items in your way. Yes, I know you should walk around them - but sometimes you just can't.

• TIP: Unless the object has some physical purpose make it phantom. That way the object cannot interfere with an avatar's motion, but still adds to the visual effect. Don't phantomize objects that require physical characteristics, such as furniture to sit on or ramps to walk up.

Solid Objects - I can't stand it when I am trying to walk along a narrow path and end up falling off the side, sometimes to my virtual death. Why does this happen? Because the builder didn't account for the sloppy avatar movements.

• TIP: When ever there is a danger of falling, place some kind of solid object to prevent disaster. Avatars need railings, walls or even a slight hump sometimes to channel their movement and overcome occasional inadequate navigation. Even a transparent barrier would be helpful and not interfere with the visual effect. It's quite simple, really - just assume all your visitors are drunk and stumbling around!

Head Space: All avatars by default have their camera position behind and above them. That way you can see exactly what your virtual counterpart is doing, and with whom. Unless, that is, there is a wall or roof in your way. Cramped quarters are really difficult to deal with, especially if the Grid is laggy.

• TIP: Building material is free in Second Life: you can afford to have taller rooms that accommodate the normal camera position. Make rooms with very tall ceilings. Or better yet, don't have any ceilings! In some cases, even walls aren't really necessary.

Curves: The last time I looked, my keyboard did not include a curved arrow. That's why I have a lot of trouble walking accurately along curved walkways. Avatars can most easily walk straight, but curves are harder to follow. Spiral staircases are the worst, and few can successfully navigate them without bumping into the walls or falling off.

• TIP: Don't build curves for avatars to traverse. Do build curves for avatars to admire.

Dexterity: While it is easy to click with a mouse, it's difficult to do so when you must do so precisely. A vending machine with tiny buttons is not good, since it becomes very easy for someone to push the wrong buttons. Misdirected clicks often happens on websites, and it happens in Second Life too.

• TIP: Click areas should be sufficiently large to avoid any confusion with neighboring buttons. This is especially important for buttons that perform actions that count - like paying money or ejecting that annoying person from your land. Use contrasting colors to ensure they stand out and are identifiable.

Smell and Taste: As I said in the previous ergonomic post, thankfully these senses are not yet implemented in Second Life. I can imagine what some people might do if they were. But how can you reasonably approximate these senses?

• TIP: Since smell and taste are absent, you must use a visual experience to hint or remind visitors of smells and tastes. Appropriate images, carefully chosen particle effects, sounds and textures can sometimes convey a message of smell and taste.

Item Layout: Upon entering a store or gallery, experienced avatars simply stay put and motor their camera around to check out the wares. Unfortunately, most younger avatars (and even some old ones) are poor camera drivers. Instead of camming they move their avatar around the area, turning and pausing to examine every item one by one. They walk, turn, tilt, examine. Then repeat. And again. How many times must they do this? Sometimes once for every item in the store or gallery. This is at least tedious and sometimes frustrating when the lag demons are prowling.

• TIP: Make items big enough to see clearly (especially product boxes or photo displays), but not so big as to cause enormous amounts of walking and turning.

• TIP2: Consider displaying items in a circle or semi-circle, where the avatar needs only rotate to easily view a lot of items. I use this technique at my store, and it has proven quite successful. Even better, it really isn't that difficult to build.

Wide Size: Yes, I know the diving board ladder looks realistic, but it is a huge pain in the a** to line up your avatar precisely so that when you go up, you don't fall off. Similarly, smaller doorways are often hard to get through, especially if you have a larger avatar.

• TIP: Assume that avatars are large and size things accordingly. Also assume that it is hard to navigate precisely, so don't make things very narrow if you expect avatars to use them. Use invisible railings or equivalent if there is danger of falling off.
  

Colors and Textures: Avatars have relatively poor eyesight. They often cannot see distances clearly and even up close they can't make out details unless they are able to zoom in. Also, sometimes poor graphics capability means they can see only a limited amount of textures.

• TIP: Try to minimize the number of textures in use, so that once a texture is loaded, it is rapidly displayed on all applied surfaces. If you use many different textures, visiting avatars will spend a long time rezzing all the textures and generally experience local slow downs.

And those are some ergonomic tips for you. As I learn more, I'll post a follow up article with new ones in the future. Good luck with your build!

An Introduction to Second Life Ergonomics

Ergonomics? Isn't that about how you place your hands on a keyboard? How you sit in front of your screen? Yes, but that's Human Ergonomics. Today I am talking about Second Life Ergonomics.

What exactly do I mean by "Second Life Ergonomics"? I mean that those little avatars that we control (or is it the other way around?) have needs just as their human owners do. They can't see as well as humans, they have restricted ways of moving around and have utterly terrible dexterity. Some of them are pretty ugly, too!

But seriously, these "physical" characteristics of avatars really do affect how we travel throughout the Second Life grid. Who hasn't been stuck trying to navigate to a precise spot, overshooting, and backing up? And repeating 0ver and over? Crashing into walls? Getting stuck in a rotating door? Falling off the edge of a ramp? Try moving while the grid is bagged out!

Frustrating, these be.

When I first built my Caso Milo store, I wanted to right some of these wrongs so that visitors would not encounter those issues. But immediately I had to realize that:

Real Life buildings are made to accommodate Real Life people with their physical capabilities

Therefore,

Second Life buildings should be made to accommodate Second Life avatars with their virtual capabilities

Often I encounter Second Life builds that replicate real life buildings, or incorporate real life building ideas. While these builds are not wrong, they may introduce problems for avatars who do not have the same physical capabilities as humans. Our quest to be realistic sometimes results in difficulties for visitors.

What are the characteristics of avatars that make them different than humans? Let's make a list:

• Sight is normally set to a specific view - from behind the avatar, not from its eyeballs
• Motion is normally in straight lines, and difficult to perform accurately in a curve
• Teleportation is possible
• Flight is possible, except in sims where flight is disabled. (FYI - there is a secret way around this, revealed to me late last night by Veyron Supercharge at her demonic industrial build site... but that's another story for another day)
• Dexterity sucks. It is very difficult to accurately touch or manipulate small items
• Smell and Taste are absent - thankfully!
  

And let's add one final one:

• Avatars can't always know how something is going to work, since Second Life objects can behave unlike anything in real life. In other words, humans have half a chance at guessing how something works or acts since physics is, well, universal. But Second Life doesn't operate with the same physics. Pink Elephants can fly, Hearts appear on arms or Particle Fog, Doves or even Cheese can flow out of your butt! It's just a bit harder to know what to do.

Knowing that avatars have differences from humans, do you think that buildings should be made differently to accommodate them? I do! I built my shop after considering these differences. You might be interested in knowing how you can build in an ergonomic way... but I will save those tips for another post.

Burning After Alexis

Alexis Lange is not only a friend of mine, but also a Battlestar Galactica pilot based in Eleggua (call sign "Panther".) Last week she came to me looking for a way to make her flyer more realistic, specifically by adding a massive rocket plume.

Easy, I thought. Just build a particle emitter that shoots out the right mix of shapes and colors to visually appear as a plume. Then paste it on the a**-end of the flyer. I quickly constructed a disc-shaped "Afterburner" emitter that could fit well within the thrust tubes of the powerful flyer, shooting out white-yellow flames.

It was going fine until I dropped by the Eleggua airfield (which is itself hundreds of meters in the air) and gave Alexis the Afterburner prototype for testing. The device worked perfectly, and even synchronized with the flyer's start and stop chat commands.

The trouble began when I suggested that Alexia link the Afterburner to the flyer so that she could fly off and not leave the emitter behind on the deck! However, it turns out that the permissions on the flyer were no-Modify, meaning she cannot link any objects to it, including the Afterburner.

I was about to abandon hope of getting this done easily, short of begging the flyer's maker to somehow include the Afterburner, when I had an idea.

Instead of attaching the emitter to the flyer, I realized we could attach it to Alexis! Yes, while she's sitting in the cockpit, the emitter goes off as designed, but the plume still appears as intended. Flames blast out from her spine backwards and appear to come from the flyer's engines. With some simple adjustments, I'll be able to make a rocket plume Alexis can wear in any vehicle.

In fact, I think I'll be making an entire line of wearable aircraft effects including explosions, smoke trails, rat-tat-tat or what ever else seems appropriate or just plain cool. There will be no need to equip every vehicle with effects - just bring them with you instead! Thanks for the inspiration, Alexis!

Two things were very important for me on this adventure:

• There are always more ways to solve a problem than you think at first. Never give up - just keep trying, even ideas that are, well, crazy at first! You may bump into the answer.
• No matter how bad the situation, you can usually find a way to make something good out of it. Learn something, change something, change your self!

And Alexis, one thing to remember about the Afterburner - be very, very careful where you are when you say the word, "start"!

Tips for a Successful Second Life Club

I came across some very interesting Second Life business ideas the other day quite by accident. Readers may recall my rantings on how best to organize your store for traffic management earlier, but these ideas take them a lot farther.

ATown Fall is the owner of multiple successful sims, most of which involve 24x7 DJ clubs - a rarity itself in Second Life. He sets up sims one after the other, hiring staff and gathering residents and merchants to populate them. While he certainly does the basic things, ATown has several very unique Second Life business approaches that I hadn't considered:

• ATown's admission policy echoes real life - you often must pay a cover charge to get in. This makes the events more important, if only because those who are inside really want to be inside because they paid to get in! This raises the profile of the events.
• Because you must pay a cover to enter events, the concept of VIPs becomes real. All too often clubs hand out "VIP" tags to basically anyone, but that makes the concept of VIP meaningless. However, ATown's cover charge is waived for his VIPs, and the tag is no longer meaningless. You really are "important".
• Many businesses try to increase their traffic by planting as many poorly-paid campers as possible on their parcels. But these zombie-like operations appear quite artificial and often scare away real visitors, who immediately recognize it for what it is - a scam to game the traffic counter. Meanwhile, ATown has a very unique approach to camping. Instead of paying people to camp, he simply has people wait for a specified duration before they are given a pass to enter the club. Of course, you could pay the cover charge and get in immediately, but instead many people simply wait out the time for their pass. And in the process, cause the traffic count to rise - because their wait time in the line is equivalent to a row of camping zombies. But it's much more realistic.
• I've written before about the importance of traffic flow in a shopping mall. Essentially, the problem is that TP allows people to skip by the shops and go directly to and from the entertainment. Many, many clubs have this issue. They hope to make money by renting space to shopkeepers, but fail to encourage traffic to the shops. The shopkeepers fail, and ultimately the clubs are unsuccessful. I've previously recommended using careful placement of the landing point such that arriving TP'ers must walk past or near shops on their way to the entertainment. This has proven successful in a few malls I've seen. However, ATown takes this concept a bit further. He sets his land to no-fly. This, combined with the landing point trick, means that visitors must walk past the shops - and walkers are more likely to see items they'd like to purchase than someone flying by at warp speed.

Why do these techniques work? Simple - they are already well proven in real life! ATown has recognized that the same things can also be done in Second Life. And evidently very successfully.

Top Ten Tips for Starting a Second Life Business

I seem to have developed a rather successful Second Life business, and I am often asked how I did it. There's no magic to it, you just have to do the basics of any start up business and follow common sense. Here's ten tips that might get you started on the way to your first million Linden $!

1. Pick the right type of business. There are limitless possibilities for Second Life businesses, but you should pick something that fits the following: You must be reasonably familiar with the area or topic; You must be sufficiently skilled to do the necessary work, which might include leadership, social, artistic or technical skills; There shouldn't be too much existing competition, especially large and mature competition; Most critically you must have sufficient time to do the work. Don't pick a labor-intensive business model when you have only a few hours per week available to do it
2. Know your customers. To whom are you selling? Is it everyone? Is it a particular Second Life species or group, such as Furries, Japanese, Builders or Club Owners? You must know exactly who they are because all of your subsequent actions - advertising, branding, product types and even product names - must be engineered towards their peculiarities and characteristics
3. Know what your customers need. If you talk to and observe avatars, your close attention will reveal the kinds of things they want. If you understand your customers very well, you may even be able to develop products they need even if they haven't specifically asked for it. Identify a problem they have and solve it! Answer their question, "If only I had...." This is why you should select a customer niche; you cannot listen to everyone to solve all problems
4. Forecast your finances. All too often I find someone setting up an entire sim with a business even before they have a single customer. What are your monthly expenses? Consider not only tier/rent, but also advertising fees. How much revenue will you make? Divide your known monthly expenses by the average price of your products and you'll know how many products you must sell each month to break even. Estimate how many visitors you need to generate that number of sales – and not every visitor will buy something. What's that? You need more customers than you can reasonably attract? In that case increase your prices or reduce your expenses. Business success is often just simple arithmetic
5. Grow slowly. Match your expenses to your revenue over time. In other words, start small and expand when you feel you have enough revenue to pay for increased expenses. That way it's not likely you will lose money. If your revenue doesn't grow, why would you expand? Worse, if you started out too big, you get the same result as if you expanded too rapidly, just a lot sooner
6. Make it easy to buy. You've got visitors in your store, but can they actually purchase your items? Are they visible, findable, understandable? What information do you provide customers from which they decide whether to purchase? Just a product name? A picture? A demonstration? Can they try out your product? Or is it just a colored box? Would you buy if you were a customer?
7. Experiment! Second Life makes it easy to try different approaches. Mix up your products, advertising and store structure from time to time. Not a lot, but do try different things. Then, do more of the things that do work and don't do the things that do not work! Over time your operation cannot do anything but improve
8. Promote your business. No one will buy from you if they cannot find your store. You MUST advertise. Where you advertise depends on the nature of your business, but you must find the right places to promote your products. Don't be afraid to try different and multiple approaches (See "Experiment")
9. Provide great customer service. No one likes an abusive store clerk, so don't be one! Give people refunds if they genuinely have problems. Help them use your products. Ask them if it worked. Give out some freebies now and then, especially to faithful customers. Follow up with them later to ensure they are still satisfied. While this may seem like work for nothing, it is simply the best way to promote your business: word of mouth rules in Second Life
10. Ignore your competition. Avatars can TP to anywhere instantly. Therefore, there is little geographic advantage that you see in RL. Your only hope is to produce new and unique products. How can you do this? By ignoring your competition. If you see what others are doing, you will tend to copy/duplicate/emulate what they are doing. They will be unique and you will not. Have faith in yourself and always do your best

Running a Second Life business is very similar to running a RL business, so many business principles still apply. You can get a lot of excellent ideas simply by reading some business books.

Above all, remember that your business should be addressing the needs of the immersionists. Don't know what that is? Read this!