Short-ish post today on the proper method of undercutting your competition. First, I'll point you to a post that will likely explain it far better than I can (the goblin). Now I'll explain my take on it, what I do, and how it's done. First, I undercut by a lot more than your average person does. When people post a gem for X gold, somebody will post the same gem for Xg - 1 copper. Me? I'll post it for 4g less, sometimes even more. Other times, I'll simply post 1g lower than the next lowest listing. The when and why you undercut is more important than the amount.
The reason that I undercut by large amounts is to get rid of the AH campers. Any up and coming businessman knows these people. The ones that sit in their parents basement all day, spamming their AH refresh button, undercutting your stuff immediately after you post it for 1 copper less. Or they wait for you to log then post under you. Now there's no magical trick to this because you can't MAKE them stop posting. What you can do however, is make them no longer want to list for 1c less or make that market simply not worth their time.
Or you can do what I like to do and mess with them relentlessly by logging on your toon that you post on before you leave so they think you're posting again when you're not even there. Or if you're only working a small inventory, send your stuff to a different toon and post on them. Sure this takes some time, but it TOTALLY is worth it when the hate mail flows in >:D
I will undercut down to a gold above material cost without hesitating (and I get my mats very cheap), I'll drop the price by 20g at a time without feeling bad about it in the least. Just because the "cool ppl" say you should only undercut by a few silver, doesn't mean that you HAVE to. After all, these "cool ppl" saying that "you're screwing yourself out of profit and losing money" are the ones sitting with 1k gold and think of themselves as AH wizards. Not the case. Now keep in mind, I am not advocating undercuting by 50g every single time you are undercut. That would be plain silly. Deep undercuting without reason is plain stupid.
By undercuting by large amounts you'll push away the campers and the casual sellers, leaving the market mostly to yourself and a select few others. It's rare that you'll have an entire market to just yourself and the occasional random sellers, so once you notice that there's only 2-3 people competing with you, you can go back to undercuting by smaller amounts. The people that aren't scared or annoyed by your deep undercutting are the ones that have been in that market for a while and have plenty of money and stock to deal with it.
Suffice to say, unless you're 100% confident in not needing money from that market and have plenty of spare time, you won't get rid of them. Granted this will royally piss off the HC campers and the Chinese gold farmers, so you may end up not making much profit for a week. Lord knows I've had this happen to me a few times. Sadly when 2 leave, it seems 4 pop up in their place.
Also of note is the lower the price, the faster something will sell. So if you just have a few things you know are worth some coin, go and throw them up for far below average if you're nearly broke. Otherwise don't worry about undercutting by huge amounts as it won't get you anywhere.
Naturally the amount you want to undercut depends on your profit margin for that market. The higher your profit per item sold is, the more you can undercut with it still being worth your time to list. One example is inscription where you can undercut by extravagant amounts and still make great profit since a glyph costs ~3g to craft. Selling one for 9g just took your investment and tripled it. Where as with gems your profit margin is far smaller so the more you undercut the less the whole process is worth.
This is the sort of thing you'll only come to truly understand with experience in your personal market because you won't notice the campers or how much actual profit you're getting (every server and market has several campers I promise) and simply say "profession Y is fail for making money, you're just lucky!" Once again, I'll ask you this: how much is your time worth? Think about it.
This blog is about discovering all of the ways to make money in Rift. There are no cheats, hacks, or exploits used in any of my methods.
After amassing a 2 million gold fortune in wow I decided to come over to Rift and see how well I can do there. It is my belief that the game does not matter as much as the methods used and mine have already been proven to work and work well.