In Freakonomics, Stephen Dubner and Steven Levitt analyze how experts use their position to their advantage. The two focus on Real Estate agents and how they, like all experts thrive on fear. The fear in this situation would be better called Need recognition, but the terminology in the book should be used.
The fear created by real estate agents is fear of selling a a house for less than it is worth and that it is not able to sell at all. The agent has all the information on trends, all the knowledge and information, a good ally. The agent however probably sees you as a mark.
Real estate agents keep their houses on the market longer, and sell for around 3% more than they sell your house because they know a better deal can come along. in a $300,000 deal that is a $10,000 difference. If she waits longer to sell your house the agent only gains $150 more for a lot of extra work.
The threat of experts can be that they convert information into fear. A real estate agent can use information to convince you that if you wait to sell the house will stay on the market. This leads to the issue of honesty. Freakonomics gives an example of a Stanford professor who was moving closer to the University. When he sold his house, the market was booming. When he told the agent he was going to sell by himself, the agent told him the market was tanking, that was the amount of time between him signing the contract in a booming market, and saying he was going to sell the home by himself in a tanking market.
That not only makes the agent look bad, but hurts the seller’s faith and hurts trust, all of which are bad for business in any market. Basically, be honest, be fair, be real, and expect your customer to be almost as much an expert as you are.
testacr22
In the world today many people definitely take this route. For some reason many salespeople believe their average customer is not educated on what they are selling. With technology today everyone can easily educate themselves on a variety of different topics and lying to the customer will almost always come back to bite you. Great post!
Telling a customer to sell early because it would be unprofitable to try and help them get the extra 5 grand in one thing. Lying to them to try and get money from them is not only unethical but like you said, if they are knowledgeable it will damage your reputation.
The study that determined that agents keep their house on longer is one thing, one of the two authors knows a real estate agent that did something more outrageous. Apparently this agent was trying to buy a house and was going to offer $450,000, he called the agent who was making the sell. After the agent got mad at him, they talked for a while and she eventually told him they would accept less than $450,000, and he was able to buy the house for $430,000. If the other agent hadn’t said anything the other family would have gotten a much fairer price.
Even with increased levels of knowledge from consumers, certain markets are complicated enough that online research is either too difficult or too time intensive for many customers. I would imagine many financial areas, as well as many service related industries, could result in a similar problem without easy access to competition.