A University of Florida marketing professors’ study of buyer behavior indicated that you will likely net more money if you price a home at a precise amount– $498,550 (or 501,350) vs. a round number like $500,000. Apparently, the brain discounts the value more when it’s a round number and discounts to another round number.
The experiment went like this:
There were three scenarios involving different retail prices: one group of buyers was given a price of $5,000, another was given a price of $4,988, and the third was told $5,012. When all the buyers were asked to estimate the wholesale price, those with the $5,000 price tag in their head guessed much lower than those contemplating the more precise retail prices. That is, they moved farther away from the mental anchor. What is more, those who started with the round number as their mental anchor were much more likely to guess a wholesale price that was also in round numbers. The scientists ran this experiment again and again with different scenarios and always got the same result. (emphasis added)
Why?
According to the reseachers:
….[P]eople appear to create mental measuring sticks that run in increments away from any opening bid, and the size of the increments depends on the opening bid. That is, if we see a $20 toaster, we might wonder whether it is worth $19 or $18 or $21; we are thinking in round numbers. But if the starting point is $19.95, the mental measuring stick would look different. We might still think it is wrongly priced, but in our minds we are thinking about nickels and dimes instead of dollars, so a fair comeback might be $19.75 or $19.50.
Has anyone had an experience to corroborate this theory?
Source: Scientific American. (h/t Neurosciencemarketing)
