What is a ‘Veblen’ product?

I was introduced to the concept of a Veblen product by fellow contributor to Premium Estate Agency News, Simon Leadbetter (and being a marketer he would probably know these subjects best!)

A Veblen product is something that works the opposite to the way you would expect it to – customers want it more, as its price increases. 

So this is counter-intuitive to everything we think we know and pricing good and services to sell, but once you know about them, they start to pop up more than you think. 

Luxury cars, designer handbags, watches, even property itself, are more desirable because they are expensive and act as status symbols for those that buy them. 

Alright, so whats that got to do with fees, no one is paying a high estate agency fee because it’s a status symbol! 

No, theyre not. 

But. 

Elaine Penhaul told me something incredibly profound this week (we recorded a special podcast, out soon, so you can hear her herself). She said: 

‘So many agents working in the luxury space, don’t live in the luxury space’. She doesn’t mean living luxury houses, per se, but they don't live in the world their clients live in, and therefore their perception of cost vs value is completely different to their clients. 

What is expensive to one person is a rounding error to another, and, speaking (very) generally across the industry, luxury agents are less wealthy than the luxury vendors (of course, at By Design we are doing what we can to change that!!!) so it is crucial to not compare the ‘cost’ of a fee to us as it is to our vendors. 

Put in practical terms, Marie Fritz, an amazing agent and a colleague of mine in By Design, used this principal and Veblen products in a fee negotiation with a client, who challenged her on being significantly more expensive than other agents. 

She referenced car in the vendor’s driveway being a Range Rover, not a (for example) Honda – functionally almost identical, but one is double, treble, quadruple or even more expensive, for minimal marginal improvement other than branding and status and, to a degree, service levels. 

After explaining her proposition, and building some rapport, she joked with the client, asking if they bought the Range Rover at the Honda garage, they of course said ‘no…’. She said ‘exactly, the other agent is the Honda, I am the Range Rover!’ It makes clients laugh, and reframes the perception of cost vs value, for clients who do not want to purchase the ‘cheap’ version of anything. 

Simon Gates commented that he sees many agents make the mistake of dropping their fee %’s significantly when they win a premium listing, because their perception of their own value vs cost, when for the vast majority of sellers that’s not their mindset, and it actually puts them off instructing the cheap agent. 

One of the many reasons why the premium market is so attractive – higher valued properties, at higher fee %’s, means significantly more income! 

Vendors don’t want to pay ‘business class prices for an economy service’, so you have to reinforce what you are doing with something significantly different to the rest, but they key is to not let your mindset get in the way of the sellers mindset… 

This conversation is out very soon, part of the ‘Prime Cut’ of the Voice of the Agent survey, conducted by Unchained Marketing. You can participate and add your voice to the next leg of the survey at this link https://www.surveymonkey.com/r/TVOTApt3Meta