I’ve used this philosophy for about 6 years. Some agents don’t believe in this and yet many of my Ad Agency sphere follow this almost religiously.
Brokers and Realtors that follow my blogs may recognize this philosophy and will find that Robert McTague provides some observations helpful to homeowners considering selling as well as Realtors. Is there a science or psychology to pricing your client’s property? Robert believes there is, and that price is a direct function of marketing. A strategic market price will complement your marketing campaign and position your home effectively in the marketplace.
Let’s look at the four ways that psychology can influence
the price. I’ve shared this with my sellers, and at times my sellers will share
before we settle on a listing price.
1. The $19.99 syndrome
Roberts observation notes many agents price with a 999 or
900 at the end. You always see $199,999 or $199,900. Why does 99 percent of the
agent population follow the crowd and price the same way?
Well, many agents are not looking at the price as a function
of marketing. It has been said the 9s came about in the 1880s convincing the
gullible that they were getting a bargain. Many discounters use 99 in their
pricing, and it does not fool smart people.
Robert introduced this philosophy to sellers when marketing
their home. The main reason it can hurt your listing is that most
consumers start their search online when looking for a home. If a buyer is
looking between $200,000 and $225,000 for a home, and you priced yours at
$199,999, that consumer might not see the property online.
YES, the internet brings transparency to today’s marketing
and provides data that recognizes the fair market value to buyers and
The best advice is to price at $200,000, as you will capture
both sides of the search. Someone looking between $175,000 and $200,000 and
someone looking between $200,000 and $225,000 will find the property online.
2. The power of four and seven
Through Roberts hours of research, 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 precisely priced and appears
that the seller has scrutinized cost, which could suggest to the buyer that
there is less negotiation room. This assumption benefits the seller.
Another reason is that the price is unique and stands out to
the buyer. Think about all the property listings displayed on all the website
portals, like products on a shelf at a store. A price, unlike the others,
stands out. Because it’s different and more unique, it will attract the buyer’s
attention. Examples of this would be Home Depot or Wal-Mart, who use the four
and seven frequently on their sale items. They want to differ from their
There is also something called the “Right Side Digit Effect.”
So, a price of $227,000, has the perception of looking like a better discount
or value than $229,999.
Some believe that using the four and seven in your pricing
is more emotional to consumers. It’s a friendly number that leverages the
buyer’s ego and self-image and has a higher perceived quality of what you are
selling. “And don’t forget — seven is a lucky number.”
3. How you write the price matters
If we take your marketing offline, such as property fliers,
ads, signage, etc., the way you write it can also have an effect on how people
perceive the price.
The Journal of Consumer Psychology found that when people
have to spell it out in their heads, it sounds higher.
Look at these three prices:
The last price seemed lower to the consumer without the
comma, now how our Multiple Listing Service defines this may need an
Conversely, Cornell University did a study and found the
dollars (sold more)
You see restaurants pricing this way on their menu. How can
we apply this in our marketing? Spell it out. Instead of $100,000, write one
hundred thousand dollars or 100000 on your offline marketing and track the
response you get.
4. Cuckoo for zeros
For discounts, sales or, in this case, home price
adjustments, perhaps add more zeros to your promotion to show a bigger
So, is there a psychology to pricing homes? You decide.
Robert McTague believes that price is the largest motivator when selling a
product such as a home. I try to be unique and consistent in my pricing
approach and use a little psychology.