 3 comments »How Easily Can You Be Fooled by a Home's Price
It’s old school to price a million dollar house for $999,900. Were you fooled? How about $19.99 for a twenty-dollar book. Even my third grader sees through that and quickly rounds up. What about that little raised "9" at the end of the gas price? I didn’t pay $1.35 this morning for gas; I paid $1.35-NINE. Really, who are we fooling? Well, while you say you’d never fall for any of the price tricks above, it turns out there you may be falling for a "pricing strategy" widely used by retailers and you might not even know it. Researchers at Cornell University have discovered that consumers perceive that when an item is priced at a round number, say a $500,000 house, it is more expensive than one priced at $512,433. Interesting, huh? While we don’t realize it, we are subjected to this strategy everyday: At Wal-Mart, the paper towels are $2.19, not $2.00. At Home Depot, nails are $3.79 a box; washers are 67 cents a piece. Are you telling me that they know that exactly the cost of a washer and what they "need" to charge to make their margin? Nope, they know we perceive something listed at $2.89 as a bargain because we might think it was reduced from $3.00. I am thinking about using this strategy when marketing homes for sale in Alpharetta and considering that it might work better for home price below $500k than above. What do you think? At a minimum it might cause buyers to take notice and ask: "How the heck did they come up with this price?" I don’t think I will take the price all the way out to the pennies, though, although that would really be a good April’s Fool test. So, let me know: Are you a price fool or not? Would this strategy work on you? NOTE: I initially heard about this research on National Public Radio last week. To hear the whole story, go here: Study Shows Precise Pricing More Enticing to Buyers http://www.alpharettarealestatehomes.com/00390E Comment from: admin1 [Member]  · http://www.technobitionist.com/ I was doing some market research today on alpharetta real estate around Harry Farmers Market, AKA Whole Foods, and saw a house that had been listed in 2005 for $234,567. It thought that was an interesting tactic and along the lines of this post. It sold for $230,000, or 98% of list price.k.  Permalink April 03, 2008 10:24:22Comment from: Lori Latham [Visitor] Hi Kevin - We just lowered our listing from 450,000 to 442,800 (a new price which made the listing agent knit her brow) because I had read a similar NYT article on the psychology of 'complex' pricing. The article I read further expressed that when doing a price reduction, if using a new complex number be sure that the potential buyer can easily do the math on the savings from the original price. Because we started out at the listing agents suggested 450,000 (which turns out to have been a bad, bad idea in this current market) - we thought sticking to even numbers on the reduction would help buyers with the calculation. We'll see - keeping our fingers crossed in the Pacific Northwest... Mike and Lori Permalink April 03, 2008 11:30:21Comment from: Mark Argentino [Visitor] · http://www.mississauga4sale.com/That's an excellent post! In our trading area of the Toronto, Ontario area, almost all of our listings are priced ending in $000,900 In areas that have a high percentage of Chinese buyers we often see prices of $000,888 as the 8's are considered lucky. I've even seen a sold price of $388,888 - that's pushing it a little far. Thanks for the insights and all the best! Mark Permalink April 23, 2008 22:53:04Comment on this article Trackbacks Trackback address for this post:This post has 1 comment awaiting moderation. |
Since it is April Fool’s Day, I thought that I’d see if I can fool you. No better place to start that with home prices.
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