Chipping Away at the "PRICE IS KING" Myth Too Many Realtors Rely On

By
Industry Observer

 I hate to break some Realtor's chips... but for many of you the belief you have, regarding the role pricing plays in real estate sales, is not cracked up to what it could be. Believe it or not there is a simple yet profound parallel lesson that can be learned from how Lay's potato chips are packaged, priced, marketed and sold and how real estate is packaged, priced, marketed and sold.

Let me be clear... when it comes to selling anything, be it real estate or potatoe chips, Price IS King. It is a fact that the seller (market) will only get the price the buyer (market) is willing to pay... that makes price "KING".  But I think that too many Realtors have collapsed the concept of "KING" down to mean it is the ONLY thing that matters when it comes to selling real estate. They don't understand the full ramifications of HOW pricing is but one factor managed and integrated into the overall real estate marketing and selling process.

So let's crunch on the pricing lesson to be learned from the potato chip...

Yesterday I saw a compelling news segment on CBS Sunday Morning. In the piece the correspondent reported on the dynamic, and well-regulated world of food labels. Intererviewed for the segment was the Product Manager at FritoLay who is responsible for marketing their "natural" potato chip product. While we all know that Classic Lay's Potato Chips (Bet'cha can't eat just one!) have been a snack "staple" for years, FritoLay knows consumer tastes change. Because markets and tastes change, FritoLay ongoingly develops new potato chip products.

Surprisingly on camera, the FritoLay's marketing manger shared a little "secret" about one of those newer products they sell... the Natural Potato Chip. She confessed that basically Lay's Natural Chips are exactly same product as the Classic Chips. BOTH, nutritionally the same product, are made using the same type of potato and cooked in the same way. The only real difference in the two is that the "natural" chips are salted with sea salt, a salt PERCEIVED to be more natural, are cut thicker and are put in bag that is earth tone in color and has a matte (paper bag like) finish. Classic Chips go into a shiny yellow and red bag.

Ok, so what! The chips are the same. What's the point?

Well... there is one major difference between Natural and Classic chips. FritoLay admitted that they put LESS chips in the Natural Chip bag AND the charge MORE for them. That's right, less product for MORE money. How could they get away with this if PRICE IS KING? Well, FritoLay's knows that buyers buy what they want...in this case what the want "natural" chips. Buyers do not perceive Classic Chips as natural... even though they really are.  If they want to sell chips to the "natural" buyer, they have to sell a product that is viewed as "natural." The packaging then becomes essential in driving home the "natural" point.

So even though these chips are basically the same, because the potato chips are packaged in a way that buyers relate to them... they buy them. FritoLay knows that buyers buy products, as simple as potato chips, when they connect to it.

Or said another way... even though homes are often the same, when homes are packaged (staged) in a way that buyers relate to them... they buy them. Stagers know that buyers buy products, as COMPLEX as a home, when they can connect to it. A stager's job is to package the chips (homes) in a way that the buyer will relate to. THAT is what staging is all about.

So, while it is important for a listing to be priced right, if as a Realtor you are not considering or have not looked into working with a home stager in your area, because you believe in the myth that "Price is King," then in my opinion you are relagating yourself to be a Real Estate Couch Potato.

Chip It Forward...

Me

PS: 2 of my past posts, originally posted and "featured" here on Active Rain, describe the importance price plays in selling a home, and to this day are still quite popular and downloaded on a regular basis. If you are interested, check out:

 

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Rainer
78,917
Linda Sticklin
Home Staging & Organizing - Berwyn, PA
Great analogy. Packaging the product (staging the house) is definitely one component of an effective marketing plan to sell a house, yet overlooked by many sellers and realtors. I was in a house yesterday that has taken multiple price reductions (total of 149 K!) over several months. A few gallons of paint would do wonders to improve the selling features of this house. If price is king, why hasn't it sold? 
Mar 31, 2008 12:15 PM #8
Rainmaker
48,891
Monica Stanciu
Staged 2 Sell Solutions Inc. - Markham, ON
Staged 2 Sell Solutions, Markham, ON

The analogy is great, Craig. Thank you!

Unfortunately, I think that most people (some Realtors included) have the perception that a staged property has something to hide and this is why it is "packaged' to sell (too many horror stories of defects covered with a lick of paint?...). I've seen Realtors embarrassed to admit that yes, the house was staged when asked the question.

We all agree that a staged house that is priced right sell faster and for more money than one that hasn't been. We just have to "spread' the word out there.

Mar 31, 2008 01:11 PM #9
Rainer
77,324
Yvonne Root
rooms b.y. root - Prescott, AZ
Home Stager - Northern Arizona
Craig, you never disappoint! Another great post with another great message. It is true that priced LOW enough anything will sell. Why go there? When a bit of thought about the packaging and the perception will take a product to the top of its class then it only makes sense to ride that pony. Hey, could you pass me some chips please, I'm not thirsty enough yet. Thanks!
Mar 31, 2008 03:41 PM #10
Rainmaker
270,923
Cathy Lee
CL Design Services Home Staging - Danville, CA
ASP, IAHSP, RESA Danville, CA

Great food for thought Craig!    

Mar 31, 2008 03:55 PM #11
Rainmaker
71,631
Gary Barnett
Home Matters - Indianapolis, IN
Home Matters Property Stylist Group, Indianapolis
Craig, what a magnificent analogy.  Packaging is indeed a form of Marketing and I am sure you know that many of us don't prescribe to the "Make it pretty" theory in home staging.  We believe that a home that is packaged (Staged) properly will increase the marketability.  Linda has always believed that while price is King, it also shares the throne with Presentation and condition when it comes to real estate.  Well my friend, you have done it once again.  When it comes to conveying a thought, you are King.  Thanks for sharing this with us.
Apr 01, 2008 01:04 AM #12
Rainmaker
638,561
Cindy Bryant
Redesign Etc. Home Staging - Houston, TX
"Houston Home Staging Pros"
Craig, I used to work for Loreal Cosmetics & Fragrance out of France.  Long story short, they are sister companies with Lancome, a much higher end line, only sold in dept. stores.  Guess what, it's the same stuff, made in the same vats, etc., but Lancome commands a much higher price point, and they get it, why...marketing, packaging, and perception.  But don't tell anyone I told you!
Apr 01, 2008 03:22 AM #13
Rainer
120,544
Fernando Rosado
West Palm Beach, FL
561-906-0050 or 561-840-8950

OOOH Craig ..picture is sexy ...I lIke

Chip.....Burger.............pepsi......chip

Apr 01, 2008 06:51 AM #14
Rainer
58,094
Patty Hill, BS, CIAS, SFR
Hill & Associates, LLC Berkshire Hathaway HomeServices Southern Coast Real Estate - Summerville, SC
Hill & Associates Real Estate Team
Craig, Great post.  My clients, for the most part, take pride in their properties and want to get the most out of their investment.  This will be a geat analogy to use to help them understand the importance of staging.  Thanks for sharing.
Apr 01, 2008 07:08 AM #15
Rainer
79,909
Kristina Leone
Lionheart Home Staging, LLC - Minneapolis, MN

Craig, once again you have clearly and eloquently defined the purpose of home staging.  Thanks for the links, I will be checking those out as well!

Kristina, KFM Staging & Design - a Minnesota Home Staging Company 

Apr 01, 2008 10:37 AM #16
Rainer
202,530
Alicia Barrington
THE ORIGINAL HOUSTON HOME STAGING - Katy, TX
Houston Home Staging Presents Alicia Barrington

In my humble opinion:

It's really about VALUE.  There's always someone who can afford your price (high or low), but to motivate them, there must be good VALUE.

May I respectfully suggest that: Price doesn't necessarily connote Value.  Sometimes even cheap old me will buy an article of clothing at full price.  Why?  Because I know that when I've worn something similar I've received compliments or felt good about myself.  I value those things highly, and as we see in the world of high fashion, so do many people. 

Home Stagers consciously or sub-consciously, trigger value-connection-points (for you HSR folks it's kind of like the emotional connection point).  We utilize visual stimulus that evokes a subconscious reaction in our guest's minds.  While they think they 'like the way it looks', it's actually a deeper reaction: "Hey, this room, house, land, is of great value to me".

We see too many examples of good house who suffer markdown after markdown,  month after month, only to find that a good staging (combined with correct pricing) sells the house in one day!

This is a really big topic, and one that I hope continues to create dialogue in the community.

 

Apr 01, 2008 11:32 AM #17
Rainmaker
223,106
Rick & Ines - Miami Beach Real Estate
Majestic Properties - Miami Beach, FL
totally irrelevant.....just wanted to let you know that I'm digging your new sexy picture! :)
Apr 01, 2008 03:29 PM #18
Ambassador
514,580
Stanton Homes
Stanton Homes - New Home Builder, with thousands of floor plans and almost unlimited customization available! - Raleigh, NC
Design/Build Custom Home Builder in North Carolina

Craig - What a lesson!  I wonder if Lay's will start selling fewer natural chips now that the secret is out?

Packaging and presentation - same product.  The same house - but if the Presentation includes new paint, scrubbed, lawn mowed, etc, the Perception is that the home is worth more.  Same idea for staging.  Great post.

Apr 01, 2008 11:51 PM #19
Rainmaker
120,843
Elaine Manes Gage
Home Staging Online Services - Denver, CO
Staging done ONLINE!
Very clever analogy...I guess if price is KING, then presentation is QUEEN? And perceived value is...DUKE? And...oh, never mind. Now, I have a craving for chips.
Apr 02, 2008 03:28 AM #20
Rainmaker
545,570
Jeremy Blanton
Myrtle Beach Homes Blog - Myrtle Beach, SC
Myrtle Beach REALTOR®- myrtlebeachhomesblog.com
Can someone please pass the kettle cooked lays?  Good Post!
Apr 02, 2008 04:07 PM #21
Rainmaker
211,233
Terrylynn Fisher
Dudum Real Estate Group - BuyStageSell.com - Walnut Creek, CA
HAFA Certified, EcoBroker, CRS, CSP Realtor, Etc.
Well, I'm a Ruffles girl myself.  Nah,,, I get the point and the point is well taken.  Simply, "It's all in the packaging" (as Kym Hough's slogan says).  Creative post.
Apr 02, 2008 09:02 PM #22
Rainer
11,398
Leslie Hoyt
Hello Home! - Greenville, SC
Hello Home!

I helped (in-store, West Palm Beach) Macy's-Burdines merchandise and sell more $250 Fendi sunglasses (that looked suspiciously like the $58 Calvin Klein ones) than all the other sunglasses.

Only difference was, I "staged" the $250 sunglasses with props. You'd find the Fendi's peeking out of Coach bag pockets (a day of window shopping), joining the Timberland travel luggage (a cruise vacation) and paired with a pair of Birkenstock's (day at the beach). Oh, some times I would even wear them while I was setting the "stages".

SO, I am NOT surprised about the Lay's potato chips! Only they better not do that to my bags of Bugles! 

Apr 06, 2008 03:43 PM #23
Rainer
70,071
Minnesota Home Staging Firm, Minnesota
Minnesota Home Staging Network~ MN's Top Home Staging Firm - Inver Grove Heights, MN
Wow...well worth the time...GREAT blog.  I'm utterly shocked the exec admitted that on national television. It is true though, buyers buy what is appealing to the eye.
Apr 06, 2008 06:21 PM #24
Rainer
280,891
Cindy Lin
Staged4more Home Staging & Designs // EcoJoe - South San Francisco, CA

We are essentially buying packaging, not the product itself. Many designer brands are produced in the same factory as no-name brands with same materials, the same workers, but designer brands charge much more because of you are basically paying for their branding.

I am a little surprised to hear the Lay's people admitting it themselves. I am sure their "natural chips" buyers won't be too happy when they heard they are essentially spending more money but buying the same less product!

Great blog as always ;)

Cheers,

Cindy 

Apr 07, 2008 11:04 AM #25
Ambassador
917,598
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate
Yep should have been a star !
Apr 08, 2008 05:53 AM #26
Rainmaker
81,154
Jill Nelson
Jill Nelson Design Services - Palmdale, CA
Interior Design

Great analgy, It a lot of comments and people thinking about staging, I wish all realtors would "get it". Onward and upward...

Nov 25, 2008 10:17 AM #28
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Craig Schiller

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