I agree with you completely about price marketing. All it does is make you work twice as hard for the same money or just make less. Speaking of real estate, my appraisal business is facing similar problems now with banks and appraisal management companies cutting fees to the bone. We continue to get a $350 fee for an appraisal of a modest house. However, work from the management companies is now offered at a miniscule rate of $225. Some appraisers are even doing the same for $175. These kinds of customers don’t seem to want value added services at a higher fee. We are continuing to look for other than bank work to maintain fees at a reasonable rate. What do you think?

Eventually, you end up working for peanuts — a terrible way to live — for customers that don’t value your service, experience, or knowledge.

Also, if low price is your only selling point, what happens when the guy across the street undercuts you in a price war?

Low-priced vendors and their employees resent working for so little, which translates into crappy service for the customer.

Going to put this on my blog.

Right now, the real estate market is undergoing a fundamental sea-change. I agree with you that price discounters don’t always win in the long run, but the one example you state, Foxtons, will not be the only realtor going out of business in the near future. I expect many, if not the majority, to go out of business. And that includes the high-priced ‘value-added’ realtors as well as the discounters.

For what it’s worth, I haven’t met many real estate agents worth what they charge in commissions, especially when it was a hot sellers market. I would hazard a guess that when it comes to real estate salespeople, Pareto’s Rule has to be modified. Only about 5% of the agents are worth their salt. This comes from personal experience - I ended up selling my last three properties myself in San Diego when I found the agents to be lacking. (I use that term charitably.)

When a neighbor of ours, who was a real estate agent (and every other person in San Diego had that title it seemed), learned we were considering selling our condo, she rushed home to her computer. 10 or 15 minutes later she was at our door with a printout of recent comps. That was nice & I thanked her. Later, when she learned that we were going to sell the place ourselves, she was more than miffed, she was downright angry. How dare we, after all the work she did for us already!

That was one example of many.

As to the low average pay, much of that can be contributed to the wild over-abundance of agents, especially here in California. The industry has a very low bar to climb over to become an agent; basically if you’re breathing, they’ll hire you!

But the market is rapidly changing, and that will change everything.

Your point is well taken. I totally agree with you. While we expect sales (discounts) on things like books and software and items of that nature, services should never be discounted.

If professionals don’t charge and earn what they’re worth, they won’t do nearly as good a job for their clients. I know that when I’m well paid, I work harder for a client. I go the extra mile. I stopped underpricing my services a long time ago and am glad I did.

Professionals can’t afford to discount their services and they deserve to go bankrupt if they do. If all people in our profession charged what they should charge, we’d all be better off and the clients would be better served.

Susanna

It’s better to work for $200/hour for 50 hours a month than 200 hours for $50/hour. At the lower price, all you can do is go down.

Frankly, it is far better to learn how to price a a job for a flat fee and forget about the hourly rate bit.

I’ve been an independent direct marketing consultant off and on since 1985. If I’ve learned nothing else, pricing by the job is the best and most profitable way to go.

How can you go from $50 to $150 an hour when the client was only willing to pay $50? Qualify your clients by selecting those who are worth your time. The cheap clients won’t listen to your advice or respect it anyway.

I guess this real estate company, Foxtons, sunk below the survival level–and drowned.

About discounts: I am about to move into a specialty niche and will offer a crazy discount to the first 3 takers—just to get my foot in the door. Short term and a carefully strategized discount. Otherwise…pffft…wouldn’t consider it.