A couple of weeks ago I went camping. I haven’t camped in over 2 decades, so I needed a tent. After checking a couple of placed on line, I decided to go with the Mountain Equipment Co-op Wanderer 4. The tent was thoughtfully constructed with a full fly and lots of useful features. But it wasn’t until the last night of the camping experience when a deluge struck that I realized just how important quality was to me. Despite being stuck in a tent during an extremely heavy rainstorm, we were dry. The tent outperformed my expectations. Looking back, the other cheaper tents I saw wouldn’t have performed under those conditions.
Cheney Window and Door is another example of quality and service. When it came time to replace the windows and doors in our home, we were thrilled with the quality of their product, but more important was the service we received. The installer was second to none; he took a great deal of care and added some extra touches along the way. The owner also offered some great renovation advice, and pointed us in the direction of our next successful venture, soffit and facia.
Now this provider was a long-time installer who was preparing to retire, but because Cheney gave us the recommendation, he took our job. Again, we delighted with the entire experience.
The final exterior improvement on our list was paint. I knew that it would be tough to find someone who met my standards, having done my share of painting. A friend had recently had some work done by a painter who came highly recommended to her, so I took a chance. His work was amazing.
Pricing for Quality
Could I have paid less for these services? Yes. But I opted for quality, and in the end with a job well done, I was further ahead. Will I shout these companies’ praises from the rooftops? You bet!
In a world where all too often we are disappointed by the quality of the goods and services we purchase, it is nice to know that excellence still exists. This fact provides an opportunity for businesses: customers are willing to pay for quality and great service. But make sure that you deliver, because bad news travels fast. My neighbours thought they were buying and paying for quality and service but instead received a nightmare. I won’t be contacting that company for their services any time soon.
Here is an update to an earlier post “Real Estate Transactions: When price doesn’t equal perceived value”.
At their annual general meeting yesterday, Canadian Real Estate Association (CREA) members voted in favour of allowing agents to post listings on its MLS system on behalf of sellers for a flat fee. Melanie Aitken, Canada’s Competition Commissioner said it didn’t go far enough, as it keeps the power in CREA member’s hands, squelching innovation.
CREA has until March 25 to provide a response to the Competition Commissioner’s application to the Competition Tribunal.
See the Globe and Mail story: “No Sale: Realtors’ plan gets bad review” by Steve Ladurantaye.
With Federal Competition Bureau’s announcement of its challenge of the Canadian Real Estate Association’s (CREA) rules before the Canadian Competition Tribunal, significant changes to the pricing of realtor services may be soon to come.
Pricing of Realtor Services
Ever wonder why the cost of a realtor is tied to the cost of your home? The Competition Bureau alleges that it has a lot to do with CREA’s control over Canada’s MLS service (http://www.realtor.ca/). From the seller’s perspective, pricing realtor services based on a percentage of the seller’s home price doesn’t make a whole lot of sense. Does it cost more for the realtor to list and advertise the home if it is worth more? If not, why does the seller have to pay more? It is this decoupling of the value of the service from the price that is the root of so much discontent with the real estate experience.
To add insult to injury, when no cooperating (buyer) agent is involved, the seller’s agent is allowed to represent both buyer and seller, collecting the full fee. I would imagine it would take something akin to schizophrenia for the agent to act objectively in that situation. And what value does the seller perceive that they are receiving? It can leave a seller feeling bitter and taken advantage of.
Real Estate Lawyers: A contrast
In contrast, real estate lawyers generally charge a flat fee. The legal aspects of a residential real estate transaction are pretty standard, so the lawyer can with little risk on their part offer their services for a set price. The client knows the cost of the service and can link it to the value they are receiving, with no variability based on the value of their home.
The Future of Real Estate in Canada
If the Competition Bureau’s challenge is successful, I believe it will give many of the real estate agents who have a finger on the pulse of what their clients need the freedom to implement a little innovation in the pricing of their services. And for those clients who still want the full service option – no doubt it will be happily provided. I predict a marked increase in client satisfaction!
Just when you thought books were a dying breed, along comes something to breathe new life into the publishing industry. Digital books are an ideal example of pricing perfection!
A war over words
Since the announcement of the new Apple iPad, publishers have pitting Amazon, maker of the Kindle digital book reader against Apple. Publishing companies such as Macmillan and Harper Collins have threatened Amazon with joining the Apple store, saying that Apple is offering them more pricing flexibility. (See blog post by Ed Sutherland for more on this story.)
The Amazon Kindle’s competitors include:
Adobe Digital Editions digital book reader application which allows you to download digital books to your computer.
The margin is where it’s at
Note the differences in margin that the various formats offer. For example, the teen sensation “New Moon” is available as follows according to the Amazon site:
Amazon offers the Kindle digital edition and paperback with only a 34 cent price differential, despite the additional shipping and handling costs incurred for online paperback book sales. The cost of the same book at Barnes and Noble stores is $7.99, just $1.74 over the digital price to cover the sales staff and brick & mortar.
So given that a digital book is simply a small file uploaded by the publisher to the vendor’s web site and downloaded by customers, what do you think the profit margin will be for the publisher and the vendor? Comparatively speaking, digital vs. paperback, whether purchased in the store or online are quite significant. Cutting out the cost of postage is huge for the vendor, and the cost of printing a boon for the publisher. For the customer downloadable digital books mean instant gratification, although some miss the act of turning the pages of “a real page turner”.
Another revenue opportunity is gained from the lack of transferability. You can always share your paperback with a friend, or sell it in a book sale or to a used bookstore. Not so much with the digital version. Yet another win for the vendor and publisher.
These tantalizing profits are a good reason why Amazon wants to keep publishers away from the Apple store as much as possible, and why Amazon caved to publisher demands for pricing flexibility.
In summary, digital books provide an excellent example of how innovative marketing can lead to improved customer service and drastically higher margins and volumes for your product.
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