Recently we reported on an announcement that fees would not be rising in 2009 for major UK portals primelocation.com and findaproperty.com operated by The Digital Property Group. But all is not as it first seems.
We quoted Milner as saying to The Negotiator –“Whether we’re talking about 2008 or 2009, there are no price increases. Our [pricing] strategy is new and is being rolled out as we speak.”
Today The Digital Property Group’s PR company provided us with this more enlightening quote:
On the issue of pricing for the group’s services in 2009, Mark Milner, Chief Executive of The Digital Property Group comments: “We have recently introduced a new pricing structure for our services in order to provide our customers with a value for money marketing solution. The service is be priced individually for each estate agency and utilises a value based model, which takes into account the agent’s location as well as the number of properties listed and their average value, to calculate a fair and competitive price. As a result there will be no blanket price increases in 2009, but rather a review of fees based on the value that our service can offer.”
So lets look at this statement starting with “The service is to be priced individually for each estate agency and utilises a value based model“. Having run a property portal for a number of years, the key problem with the flat fee for all you can eat is that some people are charged over the top (e.g. the small operator with a small number of listings) while the top end agents get a true bargain paying only a fraction of the value online advertising delivers them.
Therefore the way TDPG is likely to role this out is to work out, through a formula, the relative value one office receives from their service versus another office. The end result is that you basically get a ranking of agents from those that receive the greatest value to those that receive the least. Now there are a number of potential outcomes.
Firstly, they could take the current price and peg the the agents who get most value to this price and then give all other agents a proportional reduction. This is highly unlikely as it would just lead to overall reduction in revenues. So it is safe to rule this out.
Secondly, they could peg one of the middle agents to the current rate, and therefore provide some agents with a relative reduction while increasing other agents proportionally. Now i am not sure why you would do this unless the agents receiving lower value for money were going to leave the site.
Thirdly, they could peg the agents receiving the lowest value to the existing prices (assuming they continue to pay it) and then ramp up the fees of the other agents who receive greater value for money. Of course this could mean substantial increases for these agents. This is also unlikely as it could be very hard to implement and those agents who dont get an increase may come to the conclusion that they are not receiving great value for money.
Therefore i think the likely outcome is that a mid point will be selected and all agents below this will not be touched (ie their rates will be kept flat unless they threaten to leave and negotiate a lower rate). Those agents above the mid point are likely to have their rates increased however this will be through tough negotiations and i expect that those with a bit of muscle will gain discounted rates.
Any which way you look at it, agents are either going to have no increase or some increase, but are highly unlikely to have a decrease otherwise why would they implement it. Value based pricing will increase the transparancy of how effective these portal sites really are.