Anyone who is savvy enough to shop around knows that the old adage “you get what you pay for” is simply not true. The fact that many people still believe it to be true creates job security for the marketing gurus since the whole purpose of marketing is to create perceived value that is substantially greater than the actual cost of producing the product. I remember when I was a Booz, Allen consultant and we did a study for Heileman Brewing. As I had always expected, the same beer was sold under different names with drastically different prices. More telling was the fact that around 60 – 70% of the cost of a beer was in the packaging and the marketing. The beer itself was a minuscule portion of the cost, with transportation taking up the another big chunk. Marketers understood that it was better business to spend the money on marketing than the underlying product.
Continuing with the alcohol analogy a bit further, my attention was grabbed a while back when I read an April 28, 2008 BusinessWeek article about how the advertised price of a wine influenced people’s perception of the taste. In an absolutely brilliant experiment by the Standford business school and Caltech, which was published in the Proceedings of the National Academy of Sciences, researchers showed that when tasting the exact same wine under two different price tags subjects liked the wine with the higher price tag. Go figure!
Not only was this their stated preference but MRI scans on these subjects actually confirmed increased activity in their prefontal cortexes as shown in the graph below:
So the connection with real estate should be obvious at this point. If a real estate brokerage spends a lot of money on advertising an upscale image and charges a high commission, chances are that people will believe that the service they receive from such a brokerage is better. However, that isn’t necessarily the case – the wine or the beer may be exactly the same.
Now, if you think you may be susceptible to the marketing ploy of the traditional brokers we would be more than happy to provide you with our Platinum Premium Exclusive Diamond Plus service and charge you accordingly.