Manoj Thomas, Daniel Simon, and Vrinda Kadiyall, researchers at Cornell University, have found that consumers determined incorrectly that homes for sale at precise prices (such as $325,425) were lower in price than homes that were for sale at rounded-off prices (such as $325,000).
In other words, customers concluded that they're getting a better deal if they buy a home priced at a precise number than a home priced at a rounded off number. Their research suggests that buyers perceive precise list prices to be lower, and therefore would make buying offers that are closer to the listing price rather than offering the seller a price that is much lower than the listing price.
Many retailers have taken the "precise pricing" approach, too. Instead of selling a widget for $49.99, these retailers are selling this product for $51.23 or $48.87. Wal-Mart and other retailers have had success pricing products in this manner.
Read the abstract of the precise pricing research.
Read an article about the Cornell study.
Please comment if you have thoughts about this research.
Skip Anderson is the Founder and President of Selling to Consumers, a B2C sales training and consulting firm. Subscribe to the free Selling to Consumers Sales Tips Newsletter.
Sure am glad Ricardo twittered a link to this post! A new site to follow... terrific.
Susie
Posted by: Bucking the Real Estate Trend | 29 March 2008 at 06:24 AM
Hi Susie,
Thanks for stopping by...Skip write some excellent articles here so I'm glad you subscribed.
I felt this one was particularly relevant given a lot of us are practitioners in the Real Estate field.
Posted by: Ricardo Bueno | 29 March 2008 at 06:34 AM
Welcome Ricardo and Suzie. As you're both in the real estate industry, do you have any comments about the "Precise Pricing" research from Cornell? If so, please feel free to share them here.
Posted by: Skip Anderson | 29 March 2008 at 09:41 AM
It is interesting that it took three researchers to come up with this theory about precise pricing. I have been using this "closing technique" for over twenty five years in my real estate career. Yes, buyers perceive "precise pricing" to be a bargain, but my experience has shown there is a reason. Whenever I have buyers who make an offer on a home 238,000, and the seller counters the typical 245,000... I always counsel my buyers to come back with a "precise counter"... for example... of 239,385. I then tell the listing agent that my buyers got out their sharpened pencils and squeezed every last nickel, dime and dollar out of their checkbook, and sweat blood to come back with this... "precise counter" of 239,385.
Because it looks painstakingly precise, more often than not, my buyers precise counter has been accepted.
Posted by: Karen Anne Stone | 29 March 2008 at 10:46 PM
Excellent advice, Karen Anne, and an interesting use of the "precise pricing" principle. Thanks.
Posted by: Skip Anderson | 30 March 2008 at 04:06 AM