Pricing Model



Project pricing is based on in-depth market data organized to facilitate a collaborative pricing process that effectively identifies the highest first release prices and establishes critical launch sales momentum.

Far too many condominium projects rely on the initial sales launch to find the delta between price and sales velocity.  Unfortunately this approach can result in a significant loss of sales revenue as a result of pricing the initial release of units too low.  Applying proven test marketing utilizing a multi-faceted price model will provide the development team necessary feedback to achieve optimum sales prices starting with the very first sale.  Continual competitive market analysis and internal analytics that proactively spots buyer tendencies are the basis of price monitoring and strategic upward price adjustments.

The competitive market analysis is the foundation to establish project pricing.  (The best practices to develop the competitive market analysis are described in another post.)  Comprehensive data from the competitive market analysis is incorporated into initial pricing exercises to establish baseline parameters for price per square foot; price point thresholds; assigning value to various attributes, like view or large decks; identifying specific comparables for a cross-section of the project’s units; and creating spatial arrays and regression analysis.

The data gathering process above works when true product comparables are available, but when the project does not have comparables other methods are required to build parameters for the project in addition to limited data collected from various comparable sources.  When the developer is introducing a new product category to the market or an established category that does not have comparables within its geographic market, methods of primary research are recommended in conjunction with extrapolation of available data weighted to the new product offering.

Once the market data is collected and organized it is used as the initial baseline in the comprehensive pricing model Workbook.  When properly designed the pricing model workbook is the best method for all stakeholders participating in the pricing exercises to identify how the preliminary price for each unit is established.  Too often the process of establishing a price for each unit may be in the minds of one or two principal people, which diminishes the ability of other key project stakeholders to offer valuable input, plus normally  those who priced the units can’t offer supporting documentation to support their price recommendations.  The pricing model is driven by a number of quantifiable data fields such as base price per square foot with value adjustments calculated on all attributes of each unit such as view, floor, ceiling height, orientation, plan desirability, and others deemed relevant to each specific project.  When all key pricing stakeholders can literally see every element that affects the price of a unit, including market comparables, the entire team is empowered to optimize unit prices from the very first sale.

A well constructed pricing model is also key to making real-time price adjustments throughout the sales life of the project.  The pricing model will organize information for units sold and available units.  Breaking out data into a number of comparative tables tracking sales values by unit type, floorplan, floor level, orientation, view and other pre-determined unit attributes.  With the data organized in real-time the primary managers can more readily identify where price adjustments can be made to achieve sales velocity and profitability objectives.  Quickly identifying trends such as unit scarcity or lack of activity can translate into optimizing prices for remaining units or collaborating with the marketing team to stimulate sales in underperforming units.  The pricing model holds the keys to launching at optimum price points and achieving project proforma sales objectives.