The fallacy of ‘No Price’ marketing
The fallacy of ‘No Price’ marketing.
If you have interviewed agents recently in regard to selling your home you will have no doubt experienced agents avoiding telling you what they think your home is worth, and then advocating the supposed benefits of ‘no price’ marketing.
You would have heard lines like:
“Don’t put a limit on the price – you might be very surprised at how much the market is prepared to pay…”
Whichever lines they use, proponents of ‘no price’ marketing claim you will attract more buyers, sell faster and achieve a better price. Sounds great doesn’t it?
Our concern is that our industry only tends to tell clients the ‘so called’ benefits of this method. Yet how can you to make an informed decision without considering all the facts?
So in the interests of consumers – here is the other side of the story. We will then leave it up to you to decide which is best for you.
Your house has a price – even if you don’t display one.
Sound confusing? Keep reading and hopefully it will make sense.
Buyers aren’t silly – they know you (as the seller) have a price in mind. If you hide it from them they will use the following 3 ways to try and figure out what you want.
1. Simply ask the agent.
Now here is the interesting thing – the agent has often convinced the seller to market without a price. Yet when asked, they will often tell the buyer how much the seller is wanting. As soon as the agent mentions a figure – there has just been an asking price set. Why not save the buyer some hassle and just tell them from the outset?
However, lets assume that the agent gives the buyer no indication about the price whatsoever. The frustrated buyer, still trying to figure out how much you want, will have to resort to asking the agent …
2. “What’s the Rateable Value?”
If you know anything about our real estate market you will pretty quickly figure out that RV’s are not a reliable way of judging market value. Some are too high, some are too low, some are about right. The point is – do you want the buyer basing their judgement of your price on the RV? If your RV is too low, the buyers will be basing their offer on a low figure. If the RV is too high, the buyers may think you are unrealistic and go off to find something else.
3. The internet
We don’t think many sellers have figured this out yet – but smart buyers definitely have.
You need to understand that every property on the real estate websites must be loaded with a price range.
Here is an article by Alistair Helm, the CEO of realestate.co.nz explaining the issue.
So all a buyer has to do is start with a low price search and work their way up until your property pops up. Bingo, the buyer now knows the bottom of what you are expecting (or thinks they do).
We wonder how many sellers actually know what search range their agent has loaded onto the internet for their property? Lets say you want $280,000 the agent suggests no price marketing but then enters a search price range of $200,000 to $300,000 onto the internet. Your home will pop up in a search of $200,000 which will attract the wrong buyers – continue that thinking through and we are back into ‘Bait Pricing‘ issues.
We think there will be a lot of disgruntled sellers out there when they found out how low their property search range is. If your property is currently marketed without a price, go to realestate.co.nz now and check it out.
What do the marketing experts say?
We can’t find one marketing expert, outside of the real estate industry, who suggests you should market a product without a price. There’s a challenge – if you can find one please let us know.
Basic marketing 101 tells you that there are 4 basic ‘P’s of marketing – Product, Price, Place and Promotion. It doesn’t say Product, Place, Promotion – hide the Price.
Can you think of any other major industries who use ‘No Price” marketing to promote their products?
You would think that international brands like Niki, Apple, or Toyota for instance would have some pretty top end marketing expertise on their side. So if ‘no price’ marketing was so great, why don’t they launch their products into the market without a price?
Imagine walking into a department store and everything on the shelf was without a price tag. You enquire at the counter as to how much the product is and the assistant says – “Make us an offer and if it’s good enough we may sell it to you”. It would be ridiculous and you’d probably walk out in disgust.
Why don’t major brands use no price marketing? Because they know that, contrary to what agents say, you will actually attract less buyers if you don’t display a price.
Buyers simply hate it when there is no price stated. But don’t take our word for it. Do your own research. Ask everyone you know who is looking to buy what they think of ‘no price’ marketing. (Any buyers reading this, we would love your feedback and comments).
What does the research say?
On 28th October the Christchurch Press ran an article by John McDonagh, senior lecturer in property studies at Lincoln University. His article pointed to some research done in the USA. You can find it here, but in essence the study boiled down to:
“In contrast to claims of the strategy’s proponents, the results indicate that houses take longer to sell when using the range pricing strategy after controlling for physical characteristics and market conditions. Furthermore, there is no evidence that this strategy has any significant impact on transaction prices.”
Why don’t the proponents of ‘no price’ marketing tell you about this research?
Where is the evidence and research that backs up their claims?
Many of you may be wondering “why then do so many agents suggest no price marketing?”
That’s a great question and here is one possible answer that we will expand on in a future article:
‘No Price’ marketing is better for the agent!
November 13 2009 10:20 am | No Price marketing
Kathie Shepard on 13 Nov 2009 at 9:56 pm #
Hey Carl Another thought provoking post. I agree with you completely and know at least one of my friends who is a big property investor and won’t even inquire about a house without a price tag on it.
Carl Slade on 14 Nov 2009 at 10:59 am #
Hi Kathie – thanks for your comments. The feedback we get from buyers is pretty unanimous.
Peter Driscoll on 16 Nov 2009 at 9:27 am #
Carl, you know there is book in here amongst all your posts – hope you go there as they are quality, thought provoking and refreshing – cheers
Jodi on 17 Nov 2009 at 9:54 am #
Hi Carl – excellent post, I agree wholeheartedly.
As a buyer, I generally skip properties with no price and I know a lot of my friends do too.
As a seller, “no price” can really attract the wrong buyers. Or frustrated buyers who have had to ask several further questions they shouldn’t have had to ask.
Carl Slade on 17 Nov 2009 at 2:22 pm #
Hi Peter
Thanks again for your encouraging comments
Carl Slade on 17 Nov 2009 at 2:26 pm #
Hello Jodi
Thanks, I’m glad the post struck a chord with you.
Convincing other agents is the hard part, so tell all your friends to comment, then maybe with lots of feedback agents reading this post will have to start listening.
Cheers
Carl
Keithw on 30 Dec 2009 at 8:27 am #
As an infrequent buyer/ investor, I totally agree with your article.
I look straight past any property that does not give a price indication. As you note, the seller has a price in mind.
When there is lots to choose from, I don’t waste my time ringing every agent for every property that looks like it might be interesting, I just keep on scanning until I see something in the right price range that is worth enquiring about.
Unique property may warrant PBN, but there aren’t that many unique properties despite every owner thinking theirs is.
Judy L on 19 Jan 2010 at 5:02 pm #
Hi Carl how does the “no price” argument work with Auctions, in these situations no price is indicated? But they are still touted as a popular option.
On the subject of auctions, whats your honest view, we are trying to work out if this is best over the alternatives. Judy
JohnB on 21 Jan 2010 at 4:32 pm #
I agree, as an investor with multiple properties I avoid looking at properties on the web without a price, and that includes auctions. I have too little time to review everything, especially if I have to ask yet another agent for details, only to receive more spam/phone calls as a result without adding anything to my knowledge or interest.
Your comments apply equally well to auctions, which also exhibit agent suggestions on price. The auction of course is intended to just soften the seller into repricing from their original price offer.
Trish on 03 Feb 2010 at 3:22 pm #
Hi I agree with judy does this apply to auctions as well?
Carl Slade on 03 Feb 2010 at 5:21 pm #
Hello Judy, thanks for your question and sorry for the late reply (Have been a slack blogger and not checked in for some time
)
In my opinion “The Falacy of no price marketing” applies to all forms of marketing without a price – including auctions. Regarding my honest view on auctions – DON”T DO IT. As Neil Jenman the author of the great book “Real estate mistakes” once put it – AUCTION contains the exact same letters as CAUTION. Here is a good article written by him regarding auctions http://www.jenman.com.au/BS_S_Auctions.php Hope this helps you
kind regards
Carl
Bill Glover on 08 Apr 2010 at 6:08 pm #
Hi Carl.
I thought that was an excellent comment you made Carl.
Nice to see you expressing your views on ‘no-price marketing’ as forthrightly as you are.
I thought that I was the only one (in a local newsletter)!
You may be interested to know that we recently sold a property just one day after it had been listed (at a listed price), for $25,000 more than the rejected auction bid, after it had had ‘1 month’s high profile marketing’ (guess who!) and then been on with that company for a further two months. To cap it off, we also had a back-up offer for a further $5,000.
We found the buyer in our Enquiry Log and went from there. Neat !
Isn’t this a great system that we are using!
Kind regards,
Bill Glover
forex robot on 05 Jun 2010 at 5:27 pm #
Great information! I’ve been looking for something like this for a while now. Thanks!