One of life’s truisms is that about January time many of us decide that we’ll join a gym to shift that weight that we’ve piled on during the festive season. 99% of the time the membership card quickly hides itself amongst some old receipts and a randomly scrawled phone number in your wallet never to be seen again.
The same applies to exercise equipment such as rowers and static bikes. They’re bought in good faith but the only pounds they lose are in the massive depreciation they achieve when listed on Ebay a few months later.
So, mindful of this, new entrants to the sector have latched onto ways of convincing punters to take the plunge and to commit to buying something that they might fear will otherwise soon prove useless. Peloton, for example, offer a no quibble 30-day money back guarantee. Take delivery, saddle up and enjoy the ride and no doubt after a month of careering through the screen-based world of alpine backdrops and virtual instructors, you’ll be rivalling Sir Bradley Wiggins as an ardent cycling aficionado.
A money back guarantee is a very helpful sales tool indeed. Research suggests that providing such an incentive increases sales conversion by between 20% and 25%.
And so, why not apply this comforting principle to online estate agency, a sector famous for ‘charging regardless’ of whether your home sells?
As you may have seen, PurpleBricks in their struggle to gain sufficient market share growth to please the City enough to break back through their IPO price, have launched such a ploy.
Let’s be frank, Purplebricks are struggling. This week they wheeled out their financial results with the usual lip-gloss around some of their metrics, but the telling one was that which showed their market share has slipped to 4.67% from 5.1% last year. This is a grave number in the context of the pledge to reach 10% that CEO Vic Darvey made to investors two years ago and which no doubt has fuelled his remuneration package since.
Listings relative to their traditional competitors is on the wane and has led to a desperate need to reverse the decline by stoking conversion rates. Why conversion? Because PurpleBricks topped out their marketing spend a long time ago and can’t squeeze any more business from ad spend alone and therefore must look to mechanisms that entice more members of the public to sign-up instead.
And this is where the need for a ‘convincer’ emanates from and in the form of the Money Back Guarantee (MBG).
Commercially, the initiative looks good at first glance. PurpleBricks’ long, long trial period resulted in listings increasing by 14% when an MBG was introduced.
Now, apply that to their total listings last year and this would mean 66,100 transactions instead of 58,000. To put this in cash terms, at their average revenue per listing of £1501, this would add £12.1m to their top line. Andy Botha must have been doing cartwheels through Solihull when he saw the potential uplift.
But there’s a flaw.
An MBG may well lift conversion but the danger is that the refunds end up outweighing the increase. Let’s explore that quickly:
Even if only 20% of PurpleBricks stock fails to sell (I suspect in truth it’s much, much higher than that) then they’ll be on the hook to return 20% of their total revenue back to their customers – that’s £19.8m. And £19.8m is quite a bit more than £12.1m and therefore Andy Botha will have quickly realised that this gimmick could leave them almost £8m WORSE off. Ouch.
So, what to do?
The answer appears to be to ensure that to qualify for the PurpleBricks MBG you’ll have to be as agile as one of their GB Olympic Team gymnasts. A contortionist in fact. Because there’s more holes in this thing than in an Olympic logo.
Vic Darvey’s press release comments simply say that he is delighted to ‘offer a reimbursement of the upfront fee if the home is not sold’. But it’s not quite that straightforward – not at all in fact.
To qualify the seller must first wait for 10 months and the property must be marketed continuously – no breaks. A request for a refund can only be made in a 28 day window from the expiry of the initial 10 months’ marketing. You’ll also have to have sought a valuation from a separate ‘local property company’* before instructing Purplebricks in the first instance – your initial asking price must be at or below that figure. And if you refuse any viewers in that ten-month period and for any reason, the MBG is void. If a buyer is introduced that then withdraws, the MBG is also invalid.
In other words, PurpleBricks have made the qualifying criteria about as difficult to achieve as me out-pomelling Max Whitlock. Why? In order to significantly mitigate the number of refunds that they will have to make – to lessen the likelihood of the MBG costing more than the revenue increase that it may bring.
Is this fair? Is it in the spirit of a money back guarantee? Will it catch the consumer out? Or is it somewhat reminiscent of Romford double-glazing companies that offer ‘lifetime guarantees on all uPVC windows’ only to bang the company into liquidation, starting again as a fresh and contractually unimpaired entity?
The Advertising Standards Authority have become intimate with PurpleBricks over the years. And I suspect this ruse might just bring the two even closer together in the coming months.
Russell Quirk is Co-founder of Proper PR, a veteran estate agent and a prolific media commentator on the housing market.
* Purplebricks has asked us to make clear that the ‘local property company’ referred to in the T&C means their “local self-employed estate agents i.e. the LPE”.
Comments (14)
Ironic this comes from a guy that gave projections to investors that lost money,
Glasshouse / Stones
I think RQ was projecting a 50% market share for onliners by 2020 when he was seeking finance from investors for eMoov – how did that end up !!!!
A mere 43% percent out.
PB have found their niche which is the FSBO market.
They have steadily increased pricing and cut out the BB’s costly overseas operations to reach profitability.
Comparing current stats with previous years is nonsense, because most of us know that previous years’ numbers are bollox.
With £74 million in the bank, which we can only assume Axel Springer would not let them spend until they had cleaned out the stables, they are in a very strong position going forward.
I am no fan of PB, but I would suggest the RQ is wrong here.
Declining market share but they still have £74 Million in the bank.
Expecting to see further sweeping changes a foot from Purplebricks.
well backed and well funded,
Sadly I wouldn’t write them off yet.
Agents who don’t like PB? should definitely not be marketing on Boomin as it the same business culture being repackaged.
When a PB instruction comes on the market. All local EA’s should have a WARNING Letter which they send to the vendor pointing out this underhand practice and remind the vendor of the 14 day cooling off period they can exercise.
I think that as soon as the property is set to on the market, the cooling off period ends due to provision of service.
Are you saying you’d take a vendor on who has chosen to go down the PB route but you change their mind?
What an utterly disgraceful business this is. They said they would disrupt but when they’ve gone (hopefully soon) history will define them as disreputable.
I mean no ill to any of the decent, honest individual employees but this sad excuse for an ‘estate agency’ (closer to a FSBO platform) wasn’t ever set up to properly serve those that wish to move home.
[Sentence removed as it breached posting rules]
Not that there’s anything wrong with making money of course but the path to success and rewards in the long term will always be graced with businesses that distinguish themselves by the upstanding manner in which they conduct themselves and without exception place their client’s best interests above all others.
Strangely enough, when the people in a business subscribe to this culture and apply it to all they do then the money tends to look after itself.
There is clear divide between duty of care and skill estate agency and internet listing agency. Other than underwear there very few things as personal as a home, understanding the difference between selling someone’s home and someone’s property is the key to understanding why estate agency as a service industry cannot be disrupted by price.
For a while there was a huge group-think that thought everything could be ubered, netflixed or amazoned. While it is possible to amazon most retail products or uber high volume, low value services estate agency is a low volume, high value service that gets expensive quickly when you get it wrong, whether that’s not achieving a price, not securing a property you want to buy or not achieving a timely sale.
There is a place for internet listing agency but what ought to be recognised is how non geographic listing agents are the means for portals to maintain stock and presence as aggregated property listing starts to become old hat, a phase that’s passing
Let’s face it, the demand for the various derivatives of DIY home sales are typically born out of previous bad experiences, naivety or plain ignorance of the significant added value over cost that a highly skilled, well intentioned estate agent provides.
My eternal hope is that as both professional and client care standards improve (and fees increase as a result) agents will learn to better explain the many advantages they provide (as opposed to concentrating on the typical boring sales ‘vomit’) and the parasites will disappear.
OMG. Actually agree with Quirk! I’m off for a rest.
This isn’t a money back guarantee if you read the terms and conditions. Given PBs history they are hoping many customers don’t read them. Looking forward to the BBC Watchdog appearance again before Christmas.