# Question about price per sqr. foot

Here are some studies to support what we already know…

Nine-ending Price and Consumer Behavior: An Evaluation in a New Context](http://www.univ-ubs.fr/gresico/gueguen/J-Applied-Sc2005.pdf) (PDF)
Price does make a difference. Should it be 99 or 00?](http://www.beesource.com/news/article/99or00.htm)
Image communicated by the use of 99 endings in advertised prices](http://www.findarticles.com/p/articles/mi_qa3694/is_200112/ai_n9011739)
*The Effect of 9 Price Endings*](http://www.abacusalliance.com/uk/news_and_events/research/abacus_uk_9_endings.pdf) (PDF)
Fine Tuning a Retail Price](http://www.retailnavigator.net/two.asp)
Get smart for just \$9.99](http://www.dangoldstein.com/dsn/archives/2005/03/get_smart_for_j.html)

In the first article, they call it the “underestimation mechanism.” I knew what it was, I just didn’t have a name for it. Think of how you tell someone the price of gas. You say that you paid \$2.19 for gas today when, in actuality, you paid \$2.19.9, being much, much closer to \$2.20 than it is to \$2.19.

The second article will help me explain to Jim, my domestic partner and a Realtor with Century 21, why I wanted him to use nines in his listing prices but not to overdo it. For example, we use a value range of \$419,900 to \$459,900 for most of his condo listing. When one is talking about hundreds of thousands of dollars for a home, it’s the quality that one wants by actually ending in zero but understanding how people say the price. For example, if you were buying a \$420,000 home, how do you say that? Usually four hundred and twenty. Now make the price \$419,900. That’s only \$100 less. It ends in the visual zeroes for quality but now say it: Four nineteen nine. See how that nine ends up there? So the good real estate agents who understand marketing will set the price so that what one sees (the ending zeroes) is not what one is left with when telling other people (the spoken nines).

In our situation in the home inspection industry, in the overall scheme of things (at least here in San Diego where a 640-sf shack goes for \$500,000), there will be no perceived quality difference due to zeroes or nines for a \$399 home inspection. However, as stated in the two articles I have read at this point, those ending nines will get you more business and fewer pricing complaints than pricing it at \$400. So keep things in perspective, as noted in the article.

The link in article #3 doesn’t work.

On to article 4, but not right now.

Excellent article.

I would avoid publishing a price list. Several reasons - its allows people to shop without ever talking to you. 2) Realtors will keep the price list long after you have changed it, creating uncomfortable situations for you when a client books with an old price. 3) Customers will lock in on a price even when it clearly doesn’t fit your pricing model 4) Realtors will avoid using you for a period of time after you have raised your prices.

I clearly describe my pricing model for realtors and encourage them to call me before they quote a customer. My partner or myself answer the phone 20 hours a day so we can provide a quote at anytime. I can alter my prices to fit the free market model without telegraphing to everyone that I am doing it. For example I recently had a client who was “high maintenance” I was alerted by both realtors that this was going to be a tough inspection and will need more time to deal with client issues. So I bump my price by \$50.00 to deal with the client issues. Yes the client was hi-maintenance and we did use the extra time. With a published price list, I wouldn’t have been able to do that and would have had to eat the time. Same goes for HUD auction homes or repos. Regardless of size there will be lots to write up. Now I bump my price because it will take more time… 'nuff said.

//Rick

All of those can easily be addressed.

1 - Differentiate yourself from your competition by something other than just pricing. And publish what you offer that your competition does not. My prices are important, but differentiating myself through the services I offer is more important. For example, I’m the only one who does CPSC recall/safety concern research. I’m the only one with a Free Appliance Package. I’m the only one with an [Interactive Report System](http://www.abouthomes.info/files/NACHI/IRS for NACHI members.pdf). I’m the only one who answers my phone 24/7. I’m the only one who will go to the boondocks when others won’t. I’m the only one who will do inspections anytime there is daylight. During the summer months it is common for us to have inspections at 5:00, 8:00 11:00, 2:00, 5:00, and 8:00. The 8:00 p.m. inspections are condos since we don’t inspect the exterior of condos. I’m one of about 10 out of 269 home inspectors here who work on weekends. I’m the only one who will work on major holidays, including Christmas (I did three inspections last Christmas–Muslims and Jews don’t celebrate Christmas per sé), Thanksgiving, and New Year’s Day. I publish those “only one’s” because they get me a lot of business.

2 - It’s good that Realtors keep the price list, and it’s good that they keep it for a long time. Two things to help here: (1) At the top of your price list, in big, bold, colored letters, put either or all of these: “Prices subject to change without notice.” “These prices effective 2/1/06.” or “Please call for a firm price for your zip code.” I use all three of them. In fact, I’m still sending out price lists dated 2/1/06. Customers call asking for a curent price. I’m busy, way busier than I want to be because the labor force here is not good.

3 - See #1 and 2 above.

4 - If that happens, then you are raising your prices wrong. Yes, if you go a whole year without raising your prices, and then raise them \$50 on January 1 (a practice which waaaaaaaaaaaaaay too many home inspectors do), then, indeed, they will quit using you. The correct way to raise prices is in small, virtually unnoticeable amounts. Plus, you will make more money if you raise your prices quarterly rather than annually. I put an example of how to make more money through quarterly price adjustments rather than annual price adjustments. I’ll see if I can find it and post the link here. I adjust my prices monthly.

I have some high maintenance Realtors, and I typically add a “nuisance” surcharge for their Clients. Because everyone knows that I adjust my prices monthly, and have for 5½ years, people call me to get a current price for their zip code and are not surprised at all at when my prices go up \$5 a month. \$5 is insignificant. However, if you have a Client that has a home inspection done on December 19 for \$349 and backs out of the deal, and then calls you for another home inspection on the same square footage, but on January 19, yes, they’re going to be a little upset. However, if your new quote is only \$5 higher, they won’t say a word.

Publish a partial list. I believe Russel does this… and it works for me. I don’t have to explain any of my pricing. My clients (as would I) are hoping for something close to the starting price (which I already know from researching your web site) and happy happy happy when they get it within 25 or 50 of starting at price. And even happier when I extend a discount.

Home Inspections starting at \$\$\$…
Partial Inspections starting at \$\$\$
Seller inspections starting at \$\$\$…

You get the picture. Leaves room for growth and gets them to call you for an exact quote when you tell them to “call for an exact quote”.

I have a Wal-Mart a mile down the road, and after reading the article that talked about Wal-Mart pricing, I decided to sneak over there and look at their pricing. All of their pricing ended with 9, 8, 7, 6, 5, and 4. None of them ended with 0, 1, 2, or 3. The research I’ve read, and my own experience in pricing, indicates that the best numbers, in order, are 9, 8, 5, 7, 6, 4. So Wal-Mart is not totally getting away from psychological pricing. And with the significantly large number of products they carry, I can see how a consumer in there really might think about why the numbers are so strange and then deduce that Wal-Mart is not rounding up to 9 and, therefore, actually giving you the lowest price they can. They obviously are successful with their pricing, that’s for sure.

When I managed the IHOP in College Station, Texas, I had flexibility over local pricing, and I tried a true 50% markup over my costs, ending in quite a few numbers other than the 9, 8, and 5 that you usually see on restaurant menus. I only stayed with that pricing for one quarter because I saw a dip in our revenue, and I also thought that it was having a mental effect on my employees. I couldn’t prove the latter, but my gut feelings quite often are correct.

Yes, I do. I started doing that when I started offering so many inspections:

FLYBY - Starting at \$29
DRIVEBY- Starting at \$39
WALK - Starting at \$49
CARRY - Starting at \$49
VOICE - Starting at \$99
LIST - Starting at \$99
BASIC - Starting at \$179
STANDARD - Starting at \$179
TECH - Starting at \$879

You’d be surprised at how many phone calls I get each day from Realtors (where I do 90% of my marketing and advertising through my email newsletter) asking about the various inspections. And I’m busier than I want to be (due to a poor labor force here–growing as rapidly as I could with a better work force is just not possible, and I haven’t found a solution yet).

Now notice what can, and does, happen when you market like that. You’ve given your Clients a choice, and I’ve never met anyone who doesn’t like to be given a choice, to make the decision for himself. Indeed, if you think about it, even if you only offer one inspection, and your two major competitors only offer one inspection, you are giving your prospective Clients a choice, a choice between your one inspection at \$399 and your competitions’ one inspection at either \$389 or \$409. So the way to get market share from your competition is to differentiate yourself on something other than price. However, we are in a price-sensitive industry, so you can also differentiate yourself by price. Will lowering your price to \$379 still make you enough money to pay the bills? I submit that it will. In fact, I will submit that it would make you more money beccause you’ll pick up the people shopping for the lowest price.

Ooooooooops. I’m getting some angry emails. I promised NACHI members long ago that I would not put marketing tips in an area accessible to the general public since we know that ASHI, CREIA, and NAHI members like to come over here, get what they can, and then go back home and bash us. I won’t delete my posts here, but I will not make any more in this thread. I did not notice that this forum was accessible to the general public. Sorry folks. I’ll pay more attention next time. If anyone has any questions about marketing, specifically Guerrilla Marketing for small businesses, catch me in the Marketing Form in the Members Only Area. I’m on my way over there now to update the Guerrilla Marketing thread in the Marketing Forum.

I look at it from exactly the opposite perspective.

I have my prices posted intentionally so that people call me to schedule immediately. When I am on the internet looking for a service or tradesperson, I want to see rates and other information. If they are not there - I am off of your site and on to another one that does provide such info.

A “Call me for a quote” means (to me) “call me so I can give you the song and dance sales pitch” which I don’t want - this is the entire reason I am surfing the web (instant info) and not flipping through the phone book.

My prices are set aggressively to be attractive so that people can comarision shop.

I intend to close internet shoppers. I market to price shoppers.

I am not concerned about the impact of raising prices, as people expect tht they will change from year to year or more frequently (plus, I don’t mind giving them a discount the first time - a break for them and the client that makes me look good in the end). I have yet to employ RR’s gradual rise theory, but it also sounds like it will work without incident.

This strategy is not for everyone, as no strategy is. If you charge a high price relative to your competition, this will not work for you. If your website is basic or needs work, it will not work for you. There are many reasons…all I know is it works for me.

I had this dilemma and decided that I really wanted to charge a fair price for me as much as for the client. It’s a win-win then. I thought there where a number of things that would impact my price for a particular house;

Floor area
Crawl space
Pool
Septic
Miles driven
Time driving

To have a price ready at hand I needed a quick and easy method to calculate the price. To do this I created a spreadsheet. It’s called “Miles from Celina” Email me at mark.elliott@yellowhatinspections.com if you want a copy.

If you want to adapt it you will need to build a list of time and distance for each city you work in and then replace my time and distance constants. You will also have to input your chare for a Pool, Crawl space and septic. The SS will then give you a price in less than a second.

PS, I have a minimum charge of \$250.

Maybe another trick to the appeal of my pricing on line is that it is uncomplicated. I don’t add on for crawls, detached garages, etc. Anciallary inspections are listed separately and can be added as needed.

Regarding travel chrages - If I was calling a plumber and he wanted to upcharge me because he lives 20 minutes further from my home than his competitor - guess who I am calling? The competitor.

I know I am more agressive than most in pricing strategy - but I want to be as busy as possible, and the strategy has proven effective for me (our milage may vary).

It is very important to establish a base minimum fee. Remember, the actual inspection time is only about half of the total time dedicated to each inspection. If you charge something like 150.00 - 200.00, there is truly not enough profit to make it worth while. Don’t cut yourself short, add all of the expenses involved in this business. Our base fee is 289.00 for a town home located within 25 miles.

John Evans:)

Oh, I was so with you until I got to that last line. Darn.

That is an area where it is very useful to know exactly what your competitors are doing. For example, my competitors won’t travel to the boondocks. I do. Therefore, I can charge virtually what I want to go to the boondocks. And I do. I’ve never had anyone turn me down because if they question the price, I simply tell them, “Well, if I stay close to home, I can do three inspections at an average price of \$325, or \$975. By going to the boondocks, I’m not here to do those three inspections, so I really should charge you \$975. However, I enjoy going to the boondocks, so I’m only charging you \$775.” I book them every time because they are afraid that if they hang up and call back, I’ll charge them \$975. :mrgreen:

When I shop my major competition each quarter, yeah, I check to see if they will go to the boondocks. They never do.

Mine is very complicated, which is why I went to the “starts at” marketing technique:

I have an Excel spreadsheet that is predicated on the lowest inspection price, so all I have to do is change one price in the spreadsheet and all the prices for everything else changes. I only add travel charges for the boondocks, so I only have to compute travel charges about once a week.

Ultimately, I intend to put my prices back on my web site with a database so that one can enter the square feet, the city or zip code, and the type of inspection and get a price quote that is good for 14 days. It will be similar to the search function at About Homes.

For the most part, that is true. However, one can very easily take on volume with little additional work and make more money. For example, I would love to do 10 WALK inspections a day since they average \$149 and have no report associated with them and typically are done for the same Client. \$1,490 for about four hours work with no written report is far, far better (in my mind), than doing a 15,000-SF mansion for \$1,490 using seven inspectors (taking 21 person hours) and taking another 2-3 hours writing the report.

One only needs to think outside the box, find niche markets, do what no one else is doing. Once you find your niche, especially if it is a unique niche, one can virtually do whatever one wants, and make a significant amount of money doing it.

Can you drive to 10 different houses in CA traffic, do your “walk” AND educate your client at each of the 10 houses all in 4 hours?

(I bet RR says “yes” LOL

Yes.

Why?

Because my WALK inspections are for investors. They typically are looking at specific neighborhoods, for whatever reason, so it’s not uncommon, especially in a buyer’s market to find 10-30 houses for sale in, say, a 20-square block area. So once one gets to the neighborhood, there is no more traffic involved. So, yes, absolutely, it’s possible. In fact, it normally takes 15-30 minutes to do a WALK inspection on a 1500-2000-SF house, which is the size that is most popular with investors. So, let’s say that we average 20 minutes per house, times 10 houses, equals 200 minutes, or 3 hours 20 minutes. Yes, very possible. In fact, I’ve already done it. My WALK inspections are booming and I have more time to spend with Ms Margarita and Dr Cuervo.

There’s very little education in the WALK inspections because that’s not what an investor is looking for. He doesn’t care about the fact that it is a stucco house built on a slab with a gable roof, and all the other descriptive carp that we’re supposed to put in our written reports.