The chief executive of Purplebricks says research into pricing strategies has suggested around a third of sellers at least consider using the agency to market their homes.
Vic Darvey, in an interview with Estate Agent Today, says the challenge for his agency is to convert a higher proportion of that 450,000 sellers who consider using Purplebricks.
It is that potential growth, beyond the agency’s current market share of 4.67 per cent, that has driven the firm to announce radical changes to its pricing structure, details of which were carried on EAT yesterday morning.
It is also that potential which has driven Darvey to repeat his claim that Purplebricks should be able to achieve 10 per cent market share. “That was a five year objective and we’ve got about three and a half years remaining” he says.
Darvey has also given more details of how the agency’s new money back guarantee will work. He says the full fee will be reimbursed if Purplebricks receives no proceedable offer within 10 per cent of valuation, which will be set out in the terms and conditions for sellers.
However, the seller will also have to wait 10 months from the initial marketing and must have agreed to every viewing in that period.
He says the money back guarantee is a “safety net” which became necessary following the results of two six week trials in the spring and summer of this year in the north west of England.
These trials showed that the agency’s conversion rate could improve by 18 per cent by the introduction of such a guarantee, along with a clearer two-tier price proposition for what are to be called Classic and Pro sales options. The agency’s current prices - £999 including VAT outside of London and £1,499 including VAT inside the capital - would remain.
Another pricing innovation to be introduced this month is that of ‘bundles’ of add-on extras.
“The idea of bundles has worked very well with the roll out of broadband and we’re doing the same - bundles of additional services, which are simpler to understand” says Darvey.
Different pricing strategies have been tested by Purplebricks for well over 18 months now - some of them delayed or hampered by lockdowns and difficulties caused by the pandemic - but Darvey says one very radical option was never considered.
Rival hybrid agency Strike has operated a free to list service in parts of the country for two years, and just last week announced it was going to extend this to other areas of the UK ahead of a complete national coverage in 2022. Strike’s market share appears to have increased in recent months, according to some analysts, but this model is of no interest to Darvey and Purplebricks.
“We don’t believe in the Freemium model, it’s not scaleable and it’s not good for establishing a brand” he adds.
Purplebricks - which yesterday announced its total fee income rising 22 per cent to £87.1m, while adjusted earnings before interest, tax, depreciation and amortisation rose to £12m from £2.9m - says it’s too early to predict what the new pricing strategy will mean in terms of the next trading year.
"The market for sales is buoyant at the moment, with fall through rates at their lowest in a long time, but with the very healthy demand currently outstripping new supply volumes" it says.
"We expect supply and demand to return to more of a balance post summer.
"As such, it is too early to quantify the benefit from the new pricing structures to the current financial year. Our current expectation is for FY22 EBITDA to be flat year-on-year, in line with market expectations, with these strategies expected to accelerate revenue growth and drive progress towards the group's medium-term targets over the next few years."
It concludes: "As a result of these strategic changes, the board expects Purplebricks to be able to deliver annual revenue growth in excess of 20 per cent in the medium-term, with confidence in the group's ability to deliver against its growth strategy."