Is there a science or psychology to price your client’s property? I believe so, and that price is a direct function of marketing. A strategic market price will complement your marketing campaign and effectively position your client’s house in the market.
Let’s take a look at the four ways psychology can influence the price.
1. The $ 19.99 Syndrome
It amazes me how many agents price with a 999 or 900 at the end. You still see $ 199,999 or $ 199,900. Why do 99% of the agent population follow the crowd and the prices the same?
Well, a lot of agents don’t look at the price based on marketing. The 9’s have been said to have appeared in the 1880s, convincing the gullible they were getting a good deal. Many discounters use 99 in their prices, and that doesn’t fool smart people.
The main reason it can hurt your listing is that most consumers start their search online when they are looking for a home. If a buyer is looking for a home between $ 200,000 and $ 225,000 and you’ve listed it at $ 199,999, that consumer might not see the property online.
The best advice is to set the price at $ 200,000 because you will capture both sides of the research. Someone looking between $ 175,000 and $ 200,000 and someone looking between $ 200,000 and $ 225,000 will find property online.
Additionally, you need to position your client’s home like luxury brands do, not discounters. For example, Godiva chocolate prices at $ 36.00, not $ 35.99, and Neiman Marcus prices at $ 625.00, not $ 624.99. Ferrari and many other luxury brands also use this model for their products. Do they know something or is it just a coincidence? Does the consumer perceive this as a better quality product? These brands apparently think so.
2. The power of four and seven
Through my hours of researching, reading, and studying the psychology of price, the concept of the power of four and seven was evident. For example, a price of $ 247,000 or $ 244,000 is set precisely, and it appears that the seller has looked at the costs, which might suggest to the buyer that there is less room for negotiation. This assumption benefits the seller.
Another reason is that the price is unique and stands out for the buyer. Think of all the real estate listings displayed on all website portals, like the products on a shelf in a store. One price, unlike the others, stands out. Because it is different and more unique, it will catch the attention of the buyer. Examples of this would be Home Depot or Wal-Mart, which frequently use the four and seven on their items for sale. They want to differentiate themselves from their competitors.
There is also something called the âright side number effectâ. So a price tag of $ 227,000 feels like a better discount or value than $ 229,999.
Some believe that using the four and seven in your pricing is more emotional for consumers. It’s a user-friendly number that takes advantage of the buyer’s ego and self-image and has a higher perceived quality of what you’re selling.
And remember: seven is a lucky number.
3. How you write the price matters
If you take your marketing offline like real estate flyers, advertisements, signage, etc., the way you write it can also have an effect on how people perceive the price.
The Journal of Consumer Psychology has found that when people have to spell it in their heads, it rings louder.
Look at these three prices:
The last price seemed lower than the consumer without the comma
So next time you write a price on your flyer or in the newspaper: Price at $ 177,000, instead of $ 177,000.
Conversely, Cornell University conducted a study and found the following:
- 5.00 (sold over)
- $ 5.00 (sold less)
- five dollars (sold more)
You see restaurant prices that way on their menu. How can you apply this in your real estate marketing? Spell it. Instead of $ 100,000, write one hundred thousand dollars or 100,000 on your offline marketing and follow the response you get.
4. Hello for the zeros
For discounts, sales, or in this case price adjustments of a home, add more zeros to your promotion to show a larger discount. When talking about a price change to other agents or buyers, do the following: $ 50,000.00 instead of $ 50,000.
So, is there a psychology in home pricing? You decide. I believe that the price is the biggest motivator when selling a product such as a house. And any advantage you can get for your seller is crucial in any real estate market. Be unique and consistent in your pricing approaches, and use a little psychology. This tool will separate you from all the other agents in your market.
What pricing tactics have you found effective? Share your ideas in the comments section below.
Robert McTague is the team leader of CNY Agent Team from RealtyUSA in Syracuse, New York, where he simplifies the buying and selling process, and provides marketing, coaching and speaking support.
Email Robert McTague.