Monday, Apr 30, 2007
Would a different pricing model for housing make a difference?
Businessweek: Pricing software could reshape retail
This article is worth reading because it calls into question some long held beliefs about price elasticity.
What if you could make more houses be bought and sold WITHOUT having to inflate the money supply. After all retailers have to learn how to shift merchandise, why not estate agents?
It is clear that the problem lies in a very far from Free Market applied to housing. Complete transparency a la Walmart could be a solution to overpricing (after we restore monetary equilibrium and educate people)?
Posted by lvmreader @ 03:38 AM (32 views) Add Comment
2 Comments
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1. lvmreader said...
A large retail chain had a problem. It sold three similar power drills: one for about $90, a purportedly better one at $120 and a top-tier one at $130. The higher the price, the more the store profited. But while drill know-it-alls flocked to the $130 model and price-fretters grabbed its $90 cousin, shoppers often ignored the middle one. So the store sought advice from a new breed of "price-optimization" software from DemandTec Inc. What followed offers us a clue about important shifts that technology is bringing to retail shopping.
After analyzing an array of variables, including sales history and competitors' prices, the software suggested cutting the middle drill to $110.
That might have made the top drill seem more expensive. But drill aficionados still were fine shelling out $130. Sales of that drill didn't change. However, now that the $90 version seemed less of a bargain, the store sold 4 percent fewer low-end drills -- and 11 percent more of the mid-range model. Profits rose.
Because of insights like this, price-optimization software is often credited with boosting retail profits by a few percentage points -- a huge leap in an industry that lives on margins slimmer than a 25-cent pack of gum.
2. paul said...
The state has let this fraud go on for long enough I feel. Even expose in the media last year (Dispatches and Foxtons) didn't prompt any action from the government.
Which doesn't help erase the steretypical image of the estate agent as a gap-toothed ex-con in a shiny suit and second hand BMW.