I was reminded recently of an article I read about a jewellery store that chose not to display any of its prices. Buyers would stop, see a piece they liked and enter the store where the assistant would then be in a position to ‘sell’ the value. Or so the theory goes.
This scenario came into play for me recently when I was selling my house. On the advice of my real estate agent we elected to not include a price range for buyers, banking on the proposition that those interested enough would come to the property, fall in love with it and then be sounded out about what they would be willing to pay.
In behavioural terms, we are talking about the absence of a price anchor. In other words, not fixating people on a price point in the hope this unnerve and emotion will encourage them to offer more than you were hoping.
This strategy appeals to those who want to ‘control’ the value assessment discussion rather than defend against a low pitch. However, there are some risks with this play.
1. People simply don’t engage
I typically walk past jewellery shops that don’t display pricing because I want to avoid the power imbalance between the shop assistant and me. I don’t want to be embarrassed if the item I might fancy is out of my range.
2. You create an information vacuum that they will fill somehow
If you don’t provide it, buyers will look for the nearest comparable item against which to estimate price, so you’d do well to anticipate what that might be.
In my case, a house very similar to mine had sold below expectation about six months prior. This caused an issue because people naturally used that price as a proxy for mine even though there were significant, albeit subtle, differences between the properties.
This led to many prospective buyers being ‘anchored’ to the low value and meant my property was at risk of being passed in at auction. Thankfully my agent was able to overcome this during negotiations, but only because the eventual buyer had fallen in love with the house.
Next time around I would insist a price range be specified to avoid this anchoring-by-proxy problem.
3. You don’t filter your buyers
By not providing pricing cues, the jewellery shop may well have had curious shoppers come in and talk with the assistant. But what good is that if they can’t afford the item? You’ve just swallowed up precious staff time.
Likewise, attracting property buyers who are well out of range might generate a crowd on auction day but it’s no good if they are priced out of bidding. This wastes everyone’s time and is one of the pet irritations homebuyers have.
Should you list prices?
Your decision about whether to list prices and price ranges ultimately rests on your uniqueness in the market (i.e. whether and what will serve as proxy) and how you best want to use your sales staff.
This is how I would approach it:
- If I am the jewellery store, I might not list all prices but I would certainly include a few to help people get a feel for the price range. (In fact, this is what I do on my website – I list some services but not others that require a briefing.)
- If I’m selling a house that has comparable properties that have sold well, I would not list a range because the market has created a favourable expectation amongst buyers.
- If I’m selling a house that has comparable properties that have not sold well, I would definitely include a range to signal my differentiation and make buyers curious about why mine is worth more.
If I am selling a house without comparable properties, I would either not list a range and leave the discussion to those who viewed the property, or – if I needed to filter out ‘tyre kickers’ – list a vague starting price that signalled that only offers above that range would be considered.