Stop doing Coke!
At one of our Mastermind Groups last week, speaker and negotiation expert Malcolm Smith told a true story about Coca-Cola.
In 1886, the original price for a 6.5 oz bottle was 5 cents. And it was still 5 cents in 1906, and in 1936, fifty years later. In fact 70 years after the first bottle was sold you could still buy one for 5 cents in many parts of the United States. It provoked our Group to ask “Why, why on earth didn’t Coca-Cola increase the price for all this time?” And the answer could be insightful for those of you who haven’t raised your fees in a while.
If you google “Coca-Cola 5 cents” you’ll find several stories including how the original bottlers, two lawyers, negotiated a fixed price for the supply of the syrup in perpetuity and hence why the manufacturer advertised the price everywhere to force them back to the negotiation table. Whether there’s any truth in this is for debate but what is a fact is that the vast majority of Coke was originally sold via vending machines and the nickel, five cents, was the standard price and coin used to purchase all beverages. The next value coin, the dime, is worth 10 cents, double the price, and for the best part of 70 years, the company couldn’t bring itself to raise the price by 100%. Apparently, on a hunting trip, the head of Coca-Cola even asked President Eisenhower to instruct the U.S. Treasury to create a 7.5 cent coin but clearly failed.
What this story illustrates is how hard people often find it to increase prices. Yes the vending machines were a barrier but surely it wan’t beyond the resources of Coca-Cola to redesign them to accept a nickel and one, two or more pennies? I think it was more to do with the mindset, in this case a fixed (price) one. And reviewing our recent Home Moving Trends survey and also our Landlord & Tenants surveys it’s clear that many estate agents have the same issue. Actually that’s not the complete picture, many have a bigger problem, they can’t hold the fee they used to charge and are discounting. As I told the audience at the EA Masters, the average sales fee has now fallen to 1% and the average for lettings with full management is just 10%. With inflation and additional increased costs plus the removal of tenant fees sometime soon this situation must be reversed for many estate agents to survive.
Hayden Rowe, another of our excellent speakers, told one of our Groups – “When you discount you never sell as much as you hoped to. And when you raise your prices you never lose as many customers as you fear.” I think he’s right, and that’s certainly been my personal experience. This view is supported by our research which has consistently highlighted over 10 years that the majority of customers don’t select the cheapest estate agent. They choose you for other reasons, principally that you’re trustworthy, and then wish to pay as little as possible but will pay more to get you – it’s your mindset that’s the principle issue. That and also a mistaken belief that listing everything is the only way to be successful in this industry, when in fact, as John McGrath put it so well, “a listing is a liability until it’s sold, then it becomes an asset.”
The prescription I’m offering to our Group Members is to be selective about what what you list and which clients you work for, charge an appropriate fee for a “white glove” service and stand out for being the agent that gets the results the consumer really wants – their property marketed effectively, sold or let quickly and efficiently. And that hasn’t changed since 1886 either.
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