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 | No Price marketing | 13 Comments »