In case you haven’t heard, JCPenney’s “fair and square” pricing strategy that rolled out in January has been a complete disaster. The plan was to rid all stores of coupons and sales by offering products at the lowest price without gimmicks and discounts. Yet the strategy backfired and within 4 months sales had dropped 20%.
But why? This approach seemed to be one that most consumers would understand and appreciate. However, by not studying the customer, JCPenney failed to recognize key components of buying behavior. And however unrelated retail and leasing may seem to be, consumer buying behavior is a universal language and something the leasing community desperately needs to focus on.
- Importance of price framing
Prospects are nowhere near as educated about your product as you are and, because of this, it is imperative that you convey the value of your community. One way this can be accomplished is by “price framing.” Price framing in leasing can refer to only giving prospects your market rents–known as anchor prices. By telling prospects right off the bat that a 2 bedroom apartment rents for $1,300 a month, they automatically begin to perceive a high value in your product. Then when you close them with a concession and the rent drops a couple hundred dollars, they reference the anchor price (market rent) and believe that they’re receiving a highly valued product at a discount.
- Need for urgency
Another flaw in JCPenney’s marketing scheme was the lack of urgency. Three-day sales and other promotions run by department stores are much more effective at pushing urgency than an open-ended “lowest price always” campaign. Consumers are far more likely to rush out on a Saturday for a bargain they think will only last the weekend. The same can be said for leasing. If you’re attempting to close a prospect, but say that the rent and concession will stay the same for an indefinite amount of time, nothing is compelling them to lease same day– or even same week for that matter. On the other hand, telling prospects the rental rate and concession are only good for 24-48 hours almost forces them into a type of impulse buy because they fear losing the apartment.
- Prospects love to “win”
The biggest mistake made by JCPenney was forgetting that consumers have a need to win. Consumers love bringing coupons up to the register and watching as the price drops because it gives them a sense of accomplishment. Your prospects are no different. They want to feel as though they are negotiating for a lower price and ultimately coming out on top. Your prospect doesn’t need to know that everyone coming through the door is getting the lower rent.