Fair pricing gets the sales
Many business coaches erroneously teach that you must purposefully choose high prices for your products and services in order to attract high quality buyers, and that is false.
Different markets have different pricing etiquettes. Nonetheless, when it comes to pricing, there are two conditions that must be met if you want to make good money and feel fulfilled: fairness and confidence. A fair price, one that’s a win-win for both you and your buyers, will help you make the most money, and also feel fulfilled. A fair price isn’t abnormally high and it also isn’t abnormally low. A fair price is just right, for your market. Buyers don’t like unfair prices.
In addition, you must also choose a price that allows you to sell your products or services with confidence. You must truly believe that your prospects are getting a good deal, given your pricing and your product’s quality.
I recently became reminded of how fair pricing gets the most sales, while looking to buy a new home and move away from NYC.
Two years ago, we drove through a little town in Connecticut, and we immediately felt a sense of peace. I don’t know if it was the tall, green trees that lined up every street, the abundance of nature, the community, or just our intuition, but either way, we decided to move to that area when the timing was right.
The timing felt right this past summer. But right about then, the timing also felt right for an ocean of people looking to leave NYC. So, this little town that nobody wanted to move to before suddenly received a big influx of visitors eager to move there. In the past, when a house was listed for sale in this little town, it would sit on the market for a while before a buyer would make the leap to buy. Often, the seller would reduce the price, in an effort to sell the house.
But this past summer, houses were flooded with offers from buyers within 24 hours of being listed.
Houses didn’t just get sold fast, within a matter of days, but they also got sold for a price higher than the price the seller was asking for. At the beginning of the summer, the price buyers would offer was only a little bit higher than the price the house was listed for. But by the end of the summer, buyers were offering a price 10-20% higher than the price the seller was asking. Sellers were happy. Prospective buyers were frustrated.
The reason why prices jumped higher overnight is because there were more buyers than there were products (houses). In other words, the demand was higher than the inventory available. This caused competition among buyers. As a result, buyers offered more money. The one who offered the most money got to walk away with the product.
Word got around that a big influx of New Yorkers were desperate to buy homes in that town, and two groups of sellers started to emerge. One group priced their house abnormally high, and the other group priced their house just right.
The first group consisted of sellers who wanted to take advantage of the big increase in demand and make a hefty profit. They knew they had something that everyone wanted. They thought they could get away with any price. So, they listed their house for sale with a price much higher than that of other comparable houses on the market. Let’s call this group of sellers “the advantagers.”
The second group consisted of sellers who listed their house for a price reasonably higher than they would have listed it at under normal market conditions. Let’s call this next group of sellers “the modesters.”
When the modesters posted their house for sale, they immediately got flooded with requests to see the house. By the end of the first day, they already had many offers from buyers on the table. Their fair price attracted many potential buyers, who offered to buy the house at a price much higher than the “modest” price it was listed at. They wanted to “win” the house, and they were willing to offer a higher price in order to win.
But when the advantagers listed their house? People felt like they were being taken advantage of, so they felt reluctant and doubtful to buy fast. The high price only attracted a small number of prospective buyers. Because of the lack of competition for the advantagers’ houses, buyers didn’t rush to make an offer. Eventually, the advantagers reduced the price a bit and got an offer from a buyer for that lower price, or, in the best cases, they got an offer for their asking price.
In the end, the modesters got to walk away with more money than they thought they would. Not only that, but they felt a sense of joy and pride, seeing that their house was valued by so many. The advantagers walked away with a good price too, but their process of selling wasn’t as fulfilling as the modesters’.
What I found the most interesting was the buyers’ psychological decision process in these two types of situations. When a house was listed for a modest price, buyers rushed to offer a much higher price. But when a house was listed for a high price to begin with, buyers didn’t rush to make an offer. They felt apprehensive. When they felt the price was fair, they were more eager to throw their money in the deal. They felt like the power was in their hands. They trusted the seller. But when they felt the price wasn’t fair, they felt as if power was stolen from them and they didn’t feel trust.
A hallmark of conscious businesses, fairness creates a clean slate. It brings balance between sellers and buyers and helps all those involved to become winners.