Economic principles will tell you that products are priced on the level of supply and demand as well as the cost of production.
It’s true that good businesses will always ensure they make more than they spend but that’s not all.
William Poundstone’s Priceless seeks to explain the dark art of selling and how to increase the selling price by psychological tricks. It provides insight into the underhand techniques that used-car salesmen and market dealers have been using for years.
These Jedi mind techniques will come in handy for mortgage brokers after one large firm recently revealed it has a 100% target for protection sales.
Cross-selling protection is crucial now and Priceless offers guidance to help you sell more and earn more. One technique is explained through a simple behavioural trick renowned in economics circles.
The book poses two questions. First, is the number of African countries in the United Nations higher or lower than 65?
Second, is the number of African countries in the United Nations higher or lower than 10?
The average guess of those asked the first question was 45 whereas the average answer to the second question was 25.
The reason the second answer is almost half the first is that the number in the question is used as a reference point. The technique is called anchoring and is often used in sales.
Poundstone cites the example of a canny Broadway producer pricing tickets.
“Cheap seats don’t sell, wanna know why?” he says. “If you price orchestra level or mezzanine seats cheap, people think there is something wrong with them.”
Brokers can use this technique effectively. If they set fees too low clients will consider them worthless so the Stella Artois catchphrase ’Reassuringly expensive’ is one brokers could adopt.
Anchoring can also be used to influence clients. For instance, would you like to pay more or less than £1,000 for your broker fees? Some people will ignore the anchor and think logically but most will be swayed to a higher or lower assumption than they originally thought.
There are other fascinating pricing strategies in the form of bundling of products. For example, when selling a blender it would be acceptable to tell the customer they are buying a blender and that’s all. But Poundstone highlights a salesman who marketed his product as a glass canister, blades, holding pod, electric wire and rotation tools.
Despite being identical, the second description gives the impression that buyers get more bang for their buck. The blender salesman charged more but went on to outsell his competitors.
It is worth remembering that when charging fees brokers should talk themselves up and highlight all aspects of their service. That could include offering quality advice, getting the best mortgage deals, a guide for buying a house and a hassle-free experience.
Poundstone also explains the theory behind techniques such as that used on the popular quiz show, Goldenballs. In the final section where contestants can share or steal a pot of money, Poundstone explains why some choose to steal while others share.
Priceless explains that pricing is never fixed and everything is negotiable. The examples are interesting and there is much to take away from this useful read.
Review by Stuart Hosie
This book discusses the art of what makes for good negotiating and price determination. By examining a series of sales and marketing techniques the book highlights principles which apply to the psyche of the consumer.
A very interesting book review; and recommended for any broker, or any professional who negotiates and interacts with people on a daily basis to have a read.
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