How irrational pricing models can work

16 September 2010
Posted in Business Strategy

Henry Yates (of EstateCreate fame) is one of those people with a knack for finding thought-provoking videos online. One of his tweets today was a link to another one.

It was a talk by Dan Ariely on irrational decisions, which is both amusing to watch and makes a very good point about pricing.

By adding product and service options which are obviously poorer value than others you provide, you can direct people's behaviour. By making some options appear to be better value, you encourage people towards the purchases you would prefer them to make.

How could you apply this to your estate agency?

business improvement , psychology

Leave your comment:



What you said:

Henry
16 September 2010 20:07:44
Thanks Martin. I will keep pinging the videos your way!
O - T
20 September 2010 22:43:49
Can using 3 options push more landlords to a managed rather than let only service? Say...
10% Let Only
15% Managed (no property inspections)
15% Managed (regular inspections)

Thanks for sharing the video Martin (and Henry), very interesting
The Modern Estate Agent
21 September 2010 10:20:34
I think there's probably a line where something that is obviously better value becomes something that risks appearing illogical - and therefore raises legitimacy concerns.

Has anyone else got any other ideas on this?

Martin
Jamie
21 September 2010 14:53:46
TBH, letting agents already do this in a way. The 3 options are generally:

- Let only (Which can be anything up to 1 month's rent)

- Rent collection (Going from my area is generally 10%)

- Managed lets (Generally around 12%)

Certainly from my point of view, managed lets have always seemed so much better value for money.

In terms of estate agents, there tends to be less tiering of services but perhaps there is scope around the different types of advertising and a fixed fee service.