Balancing Cash Shops

MMO/MMORPG games often survive on micro-transactions.
Unless a game is ad-filled hellscape or costs a subscription(an outdated model that is not suited to mass appeal:many will not "try the game"), it requires a stream of cash from players.
Cash-shop usually divides the playerbase into haves and have-nots. While some cash-shops are cosmetic(decorative pets/appearance changes/costumes/bell and whistles), many provide some tangible advantage in-game.
The key to balance is that each item in cash shop should be also available in-game(regardless of time-investment. e.g. rare drops) or though crafting/vendors - violating this rule or making in-game equivalent of cash-shop items very hard to get/worse in stats breaks the balance.
In general cash-shop influence on gameplay must minimized and controlled: otherwise the game atmosphere will shift from immersion fantasy to artificial economy simulation.

Common advice:
1.Putting prominent buttons/links to cash-shop everywhere is wrong(It annoys players and cheapens the game feel, like ad-supported games).
It should be discreet "open secret", optimally also accessible through web(many non-gameplay tasks like auctions/trades/cash-shop easily tend themselves to be web-enabled).

2.Resources/Simple items in demand should be listed as having a cash shop currency price, everywhere. It allows subtle advertising of cash shop currency as "in-demand".

3.Allow premium(cash) currency to be traded and exchanged by players: this allows non-paying members to use and appreciate the shortcuts cash-shop provide from time to time.
Alternative is to sell in-game currency for cash: however this may lead to inflation and less control from developers. Selling cash shop items in game-based currency allows to appear more fair to all players(it also allows to add such items to normal vendors as premium/luxury goods. see http://videogamedesign.wikidot.com/rpg:invisible-cash-shop ). Either way, cash shop must not be limited to those who pay.

This doesn't mean the below:

4.(possibly Game-Breaking) top-level items should not be available to the masses via cash-shop directly. Instead they should be ingame reward for crafting something that requires vast investment/grinding/farming that would be easier if premium currency was used or aided in some way to make it faster.
I.E.tasks are simplified and reduced in duration(reducing farming) if ingredients/resources are purchased within cash shop as opposed in-game collection.

5.Cash Shop should not influence game mechanics or patches.
If someone(realistically thousands) could buy X in cash shop and use it to dominate the game, mechanics changes and nerfs won't save the game reputation as Pay2win.
Game attraction should be fun, not unfair advantages: this will drive normal players away - leading to cash-shop players competing at who can lose money faster and leave the game in frustration.
Winning the game, ends the game. MMORPGS are not meant to be won, they are continuous story. Cash Shop pay2win is cheating to get automatic win, which removes all challenge and fun.
Even if pay2win doesn't lead to immediate top-level power it creates a maladaptive game trend which is attacking the issues with "solve-it-by-cash-shop" strategy, resulting in games which are only viable by paying to cash shop(many Asian MMOs are essentially financial traps exploiting players sunk-cost fallacy thinking and emotional character attachment).
MMORPGs that exploit players invite anger, resentment and boycotts, with wide social circles of players can turn reputation of companies to dust in hours - gambling on cash shop exploitation will not be a good long-term strategy.

6. If Cash Shop gives advantage in PvP it breaks player trust, but some non-combat PvE advantage (such as faster expirience gain, slightly better drop rates) don't raise much objections.
The principle of fairness is comparison: if two players are playing in "different"(easier gameplay) type of game thanks to cash shop, the game is pay2win. A balanced cash shop would not alter PvE more than having a normal character getting the best gear/items.

7.PvE advantages that reduce difficulty significantly: loot chests, monster-immunity potions, overpowered pets/mounts, top-level gems/craft material,inventory pages, all make the game easier.
These are inherently unbalanced items which change the game as follows.
A.Loot chests: skips the loot finding, danger of the game. Basically virtual items for cash deal that instead better addressed by making items that 'increase drop rates/magic find chance' such as scroll that gives that buff for N hours.
B.Monster-immunity potions: replaces PvE with pinata hunting sessions. Instead cash-shop should sell ingredients for crafting potions/armor/weapons/gems/charms that are also available in-game, that reduce the danger monsters represent without outright immunity.
C.Overpowered pets/mounts:instead the cash shop should aim at having multitudes of pets/mounts with unique cosmetic looks, aiming at player that want to feel unique or want some beautiful/cute pet with unique(but not overpowered) characteristics.
D.Top-level items should be available as in point #4(gems and crafting material as in-game reward for crafting using vast resources/currency which is easier with cash shop purchases).
Crafting resources for crafting is the central idea: base resources are in-game awards(loot/mining/chests), which are upgraded to higher-level resources which are crafted to top-level items/gems/resources,etc.
E.All player should have opportunity to expand inventory space: the cash shop should only serve as shortcut.
A typical solution is having "Inventory expanding stone" as final result of some high-level crafting recipe, which expands inventory when used by N cells(adding a new page if necessary).

8.Cash Shop as method for reducing grind would be impractical at long term(as players would see the cash-shop as unfair way to skip grind eventually), so alternatives for non-paying members should also exist. A typical idea is quest rewards for difficult quests or completing hard achievements, would be premium currency or cash-shop resources/items, which in turn allow purchasing a limited number(due per-character limit of quests/achievements) of expirience boosting resources.
A typical idea is temporary 'expirience boost scroll': permanent boosts are inherently unbalanced and should be avoided in cash shop(instead resources for crafting would be sold, and some crafting recipe will result in exp-boost modifier items).

9.Meta-services such as character transfer, character name change, private chat channel,custom title/rank ,custom clan icons/heraldry/etc, should be a prominent section of cash shop.
The idea is many players tired with game content will want social/cosmetic/roleplay features or meta-game changes.
skill/stat reset and gameplay enhancements(such as inventory expansion) should be gameplay elements, not exclusive paid service.
E.g. Scroll of Forgetting(reset skills) available both through the game and cash shop.
The thumb rule: meta-services don't change gameplay, they change/advantage/appeal to the player himself.

10. The Whale Economy trap: Many MMOs(especially Asian) exploit a certain class of well-off players(whales) who spend disproportionate amount of cash to buy cash shop items, relying on them as form of "whale-centric economy".
Most MMOs disguise this with seasonal/limited item sales, allowing a bunch of whales to grab the top-price stuff and recycle the scheme next month/week.
While it might be tempting to have expensive unbalanced items for whales, the game would lose its appeal(whales would become obvious targets) and whales would leave with masses of normal players. MMORPGs which run on whale economy maintain a shaky balance by nerfing whale items(allowing them to push new items) or creating slightly better items(each month) that obsolete whales past purchases.