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Occasionally you will see an asking price for a home in the Phoenix MLS chock-full of random numbers like $357,863 instead of $358,000. If you are a seller, I recommend against this. No homeowner knows the precise market value of his property at this minute down to the penny.
Sellers likely do this to convey that the price is precisely considered, and is, therefore, less negotiable.
It is a distraction from the buyer’s paramount task at hand, evaluating the property for his needs.
Similar pricing confusion models are used by vendors of goods and services with low switching costs. Cable and telecom companies come to mind. In order to prevent customer attrition, these service providers obfuscate pricing and plan options with weird prices and rules in order to freeze the consumer in place.
I don’t know of a single customer who is a fan of the Cox Communications cable scaling price model. No one wants to be confused about what they are buying or the track the future date at which the deal changes.
Confusion in pricing forces us to constantly recalibrate if we are getting what we paid for. That’s uncomfortable.
That is one of the reasons why Uber, the rideshare mobile app, has exploded in popularity. In the standard yellow taxi model, you get in and watch the meter spin unrestrained. You have almost no idea what the final fare will be. As of June 2016, UberX allows you to know the final straight-forward price before you even open the car door. Need a ride from Arrowhead Lakes to Estrella? $42.
As consumers, we are naturally averse to pricing schemes that convolute the value proposition. When the dust settles and value exceeds price, we will most likely buy.
In this weird price scenario above, buyer clients have asked me before, “What in the heck is this seller thinking?” It introduces the buyer to the feeling of being manipulated and outfoxed by the seller. Defenses go up. Negotiations start off on the wrong foot. No need for the seller to posture like an expert negotiator.
Use even, round numbers and keep it simple. $358,000 is as smooth as silk.
The price of anything is the amount of life you exchange for it.
– Henry David Thoreau, an American essayist, poet, philosopher, naturalist, and surveyor
