What do real estate agents know about pricing anyway?

If you want to seriously influence your prospect’s sense of value, and therefore his willingness to buy at a given price, then you should study the effect of “anchoring” more closely.  I introduced this topic in my newsletter this week, and today I’m going to share two more experiments to show just how powerful it is.

Gregory at Medtronic 10-2010 CroppedIf you either sell real estate or have bought a house, check this out. In a very well-known experiment real estate agents were given an opportunity to assess the value of a house that was already listed on the market.  They visited the house and were given an information booklet which included the listed price.  But half the agents were shown a price substantially higher than the real asking price.  The other half were shown a price way lower.

After the agents had toured the house and reviewed the booklet, they were asked their opinion on the best list price. They were also asked the factors that influenced their judgment, but none stated that the price shown in the booklet influenced them at all.  Of course they were wrong, as those who saw the higher price estimated 41% higher than those who were shown the lower one.  This is an excellent example of anchoring, as the agents were unconsciously influenced by the price they saw in the booklet, yet would not acknowledge it to be so.

Here’s another one, done in a lab experiment.  Psychologist Todd Thorsteinson reports this in the Journal of Applied Social Psychology. Participants in the experiment were given an applicant’s previous salary of $29,000 and were asked to come up with a new offer for the candidate. If the candidate offered a low suggestion or made no suggestion at all, the participants’ average offer was $31,000.

However, when the candidate requested a new salary of $100,000, obviously as a joke, the participants came back with an average offer of $36,000.

Dr. Thorsteinson commented that this could help you in a job interview. You are asked “What kind of salary are you looking to receive?”  If you guess too low, you’re throwing away money, but too high and you might offend.  But you might respond facetiously, “Well, a million would be nice.”  And because you’re obviously saying this in jest, your employer won’t be offended, but it will influence the salary you do receive.

Learn more about anchoring and how it can help you improve your sales techniques.  I got the real estate experiment from Daniel Kahneman’s great book, “Thinking, Fast and Slow,” and in a future post I’ll tie together how it is that the brain functions in this irrational way.

If you want to get better at selling to your customer, you have to…

Think Like Your Customer

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About Gregory LaMothe
I teach people how to sell things. I own the company ActionSystems. Visit my website at www.actionsystemstraining.com.

One Response to What do real estate agents know about pricing anyway?

  1. Very interesting, Gregory. If you’d like to learn even more about the crazy ways the brain works, you may want to see an article I came across titled, “Memes With Meaning: Why We Create and Share Cat Videos and Why It Matters to People and Brands” by Abagail Posner, from Fast Company. That link is below, or you can find it in my roundup summarizing a range of interesting articles, titled “Polar Bears are Left Handed, and Other Articles that Caught My Eye.” http://wp.me/p2EWMT-S5

    Direct link to “Memes” article: http://www.fastcocreate.com/1683025/memes-with-meaning-why-we-create-and-share-cat-videos-and-why-it-matters-to-people-and-brand#1

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