by Sean McAlister

Why are most products that I see priced with the number 7 in them?
(especially in INternet Marketing)

$7
$37
$47
$197

I know that there are psychologies with various pricing methods but where and when did the number 7 replace the number 9 for instance.

I also know that there are a number of urban legends have grown up around the number 7±2. Could this be why?

In general, memory span for verbal contents (digits, letters, words, etc.) strongly depends on the time it takes to speak the contents aloud, and on the lexical status of the contents (i.e., whether the contents are words known to the person or not. Seven is the smallest positive integer requiring more than one syllable in English.

Now I realize that this report is a bit dated it still spurs further
curiosity...

According to a 1997 study published in the Marketing Bulletin, approximately 60% of prices in advertising material ended in the digit 9, 30% ended in the digit 5, 7% ended in the digit 0 and the remaining seven digits combined accounted for only slightly over 3% of prices evaluated.

Which mix was the number 7 in?

In a traditional cash transaction, fractional pricing imposes intangible costs on the vendor (printing fractional prices), the cashier (producing awkward change) and the customer (stowing the change). These factors have become less relevant with the increased use of checks, credit and debit cards and other forms of currency-free exchange.

Now that many customers are used to odd pricing, high-end retailers such as Nordstrom psychologically-price in even numbers in an attempt to reinforce their brand image of quality and sophistication.

So are most of the products at the xx7 price tag perceived as a lesser value?

Kenneth Wisniewski and Robert Blattberg at the University of Chicago's Center for Research in Marketing showed that when the price of margarine was lowered from 89 cents to 71 cents, sales volume increased a mere 65%, but when it was lowered from 89 to 69 cents, sales volume increased by 222%. In another study, the perceived value of all the numbers between 1 and 100 were studied, and 77 was shown to have the lowest perceived value relative to its actual value

Schindler & Kibarian (1996) tested odd pricing using three versions of a direct mail catalog for women's clothing. The catalogs were identical except for the prices, which ended with 00, 99, or 88. The version with prices ending in 99 generated 8% more sales volume and had more purchasers than the 00-ending version. The 88-ending catalog produced a similar sales volume and number of purchasers to the 00-ending version.

Pricing involves asking questions like:

How much to charge for a product or service? This question is a typical starting point for discussions about pricing, however, a better question for a vendor to ask is

- How much do customers value the products, services, and other intangibles that the vendor provides.

What are the pricing objectives?

Do we use profit maximization pricing?

How to set the price?:
(cost-plus pricing, demand based or value-based pricing, rate of return pricing, or competitor indexing)

Should there be a single price or multiple pricing?

Should prices change in various geographical areas, referred to as zone pricing?

Should there be quantity discounts?

What prices are competitors charging?

Do you use a price skimming strategy or a penetration pricing strategy?

What image do you want the price to convey?

Do you use psychological pricing?

How important are customer price sensitivity (e.g. "sticker shock") and elasticity issues?

Can real-time pricing be used?

Is price discrimination or yield management appropriate?

Are there legal restrictions on retail price maintenance, price collusion, or price discrimination?

Do price points already exist for the product category?

How flexible can we be in pricing? :

The more competitive the industry, the less flexibility we have. The price floor is determined by production factors like costs (often only variable costs are taken into account), economies of scale, marginal cost, and degree of operating leverage.

The price ceiling is determined by demand factors like price elasticity and price points.

Are there transfer pricing considerations?

What is the chance of getting involved in a price war?

How visible should the price be?
- Should the price be neutral? (ie.: not an important differentiating factor), should it be highly visible? (to help promote a low priced economy product, or to reinforce the prestige image of a quality product), or should it be hidden? (so as to allow marketers to generate interest in the product unhindered by price considerations).

Are there joint product pricing considerations?
What are the non-price costs of purchasing the product? (eg.: travel time to the store, wait time in the store, dissagreeable elements associated with the product purchase - dentist -> pain, fishmarket -> smells)

What sort of payments should be accepted? (cash, check, credit card, barter) Pricing Process of determining what a company will receive in exchange for its products.

A well chosen price should do three things :

1. Achieve the financial goals of the firm (eg.: profitability)

2. Fit the realities of the marketplace (will customers buy at that price?)

3. Support a product's positioning and be consistent with the other
variables in the marketing mix.

-Price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product price will usually need to be relatively high if manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns.
-A low price can be a viable substitute for product quality, effective promotions, or an energetic selling effort by distributors

-From the marketers point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay.

-In economic terms, it is a price that shifts most of the consumer surplus to the producer.

I am unsure as to what the difference between 37 and 36 dollars for a product is but if you are offering a good quality product wouldn't $39.00 be a better price?



Sean McAlister

by: Sean McAlister

Here some tips if you are wanting to Flip Houses (Buy a house fix it up and then Resell it for profit)

If you are into real estate investing then you more than likely have been thinking about the idea of buying and selling houses. I have been doing it for quite some time and here are some tips for you.

1. If you know nothing about construction then I HIGHLY recommend you hire a General Contractor ( GC ). A reputable contractor will meet you onsite and look at the subject property. You should be able to get some estimates of repair. Make sure he/she is licensed and insured. Get a copy of his contractors license. Absolutly DO NOT try to go into it thinking you get everything done yourself in 4 weeks on a budget of $10,000.00

2. When arranging your financing with a lender ask for an interest only loan for 1 year. Your payments will be lower. If for some reason it takes longer than a year to sell the house you can sign for another year. Make sure you confirm this with your bank.

3. Make sure that you figure your carrying costs into your loan. By doing this you will have financed the payments and be able to draw from the bank when a payment is due. The amount of payments you can include will vary depending on the Loan to Value (LTV)

This will keep you from going out of pocket for a few months. Hopefully the property will sell.

3. When you have received the estimate from the contractor add about 3-5% to it. I am not suggesting that your contractor is trying to scam you. The fact is all budgets (when flipping houses) run over. So count on it up front so you are not surprised in the end.

4. Call your insurance company get the premium amount and add those numbers into your loan. When the payment is due draw from the loan.

5. Make sure you figure in utility expenses. Take into consideration the season and the type of utilities the property has. You may need to add more or less depending.

6. Strongly evaluate the market in which you are investing. Do your homework and see what other properties are selling for. Too many times I see people get into this business, not figure in all that there is and then try to sell for more because they are over budget. Have all your numbers together.

7. Go to the job EVERYDAY or at least every other day. If you do not have time to do this ...then do not flip houses. Whether you are doing the work or a GC, the project will go more smoothly, closer to budget and be completed on time. If you are using a GC this is imperative. He or she will need your opinion daily.

8. Always install new appliances.

9. Pick out all of your colors out before you start. Write them all down and make sure your GC has a copy. This is crucial to getting the job done on time. If anything needs special ordered you will know it upfront. Not to mention if you have to be unavailable for some sort of emergency...everyone can still keep working.

10. Allow a reasonable time frame. Take into consideration holidays and weather. Do not kid yourself. Be realistic. Don't expect anyone to work on Christmas day unless you are.

I have had good flips and bad ones. Every flip has had a surprise. With my most recent one I encountered over 200 bats in the roof. It cost me $1,800 to have them removed and I did not have that expense figured into the budget.

Have you ever flipped a house. If so please share.

To your success,
Sean

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Mortgage points are often a confusing aspect of home lending. Getting a first-time mortgage or even a refinance just by itself can be a major undertaking. There is a lot of financial information to grasp and very few places to turn for help in doing so. Sometimes it's hard for many home buyers to work out what is the best option to take.

Many potential borrowers find themselves wondering "what are points on a mortgage," how do they work and why they should be considered. Let's take a look at points and their pros and cons.

First off, a mortgage point, or discount point, is nothing more than one percent of the loan amount. When "points are paid" upfront, it means that a fee is being paid to the lender in advance of the loan. Generally, this maneuver results in a lower interest rate being charged, since the lender is getting part of its interest payment in advance. This payment does not reduce the principle amount of the loan.

For example, if a mortgage is set for $100,000 at 5 percent and 2 points, the borrower will need to pay $2,000 to the lender at the time of closing to enjoy that 5 percent rate. Most lenders offer borrowers the ability to choose a higher interest rate instead of points, which makes it easier to obtain a loan with little or no money down.

The pros and cons of going with points will depend on the individual loan and the personal financial and credit situation of the buyer, but there are some generalizations that can be made in most cases. They include:

Pros

Can result in a tax deduction. The IRS sees points, in many cases, as an advanced interest payment. This means these fees might be deductible from income taxes. The rules about how much or how little can be claimed and in what years should be reviewed carefully. On mortgage refinances, for example, the deduction might not be allowed in the year the points are paid.
Can result in a lower end price. If a mortgage is going to be kept for the duration, the end result of buying points on the front end can be great on the back end. When all is said and done, there can be some substantial money savings. It is wise to ask and see a truth in lending statement workup for both scenarios, with points paid and without. This will help show the true bottom line.

Cons
The upfront costs for buying a home are often greater when points are included in the mix. On the converse, if points are excluded, a person might have to pay later, but they can enjoy the home in the meantime.
Lost money on resale. If the intent is to keep the home and mortgage for only a short period of time, paying points probably isn't the wisest choice. The few dollars saved in monthly fees likely won't add up to cover the costs in points if a mortgage is closed out within a year or two of origination.
Making the choice between points or no points can be a little confusing. It's best to ask your lender to see a full breakdown of both options before moving forward.