Atenga Insights, a business consulting firm based in Los Angeles and with roots in Sweden is trying to get U.S. builders interested in taking a more scientific approach to pricing. The company’s founder, Per Sjofors, believes that both single-family and multifamily builders are losing money on a lot of deals. “If you have units that are $800,000 or $1.5 million and you’re leaving 10% of the potential sales price on the table, that’s big money,” he says.
Sjofors trained his eye on the construction business a year ago in Sweden and now claims to have signed up four of the five country’s biggest builders as clients. Although the company is attempting to usher a new approach to pricing into an industry that’s often resistant to change, Sjofors has found a mostly receptive audience.
“There’s two kinds of people – one says ‘we’ve been building houses for 70 years and we know what we’re doing’, but those people are in the minority,” he says. “The other reaction we get is people saying, ‘oh there’s finally a scientific, data-driven, method for something like this.’” (Click here for a related story on square-foot pricing.)
The method starts with comps but aims to go a step further. “Comps look at historic data, while we are looking at the future for the customer’s willingness to pay,” Sjofors says. “Comps are the basis for what we do. We use the comps as a reference, and then we adjust the prices of the house or the apartment from that comp value. In some cases we can go up a little bit, and in some cases we can go down a little bit.”
The firm uses online polling, algorithms and its own vocabulary to put a monetary value to a customer’s “willingness to pay.” Sjofors says, “Wiliness to pay can be accurately measured by a series of precisely worded questions in the poll plus our advanced analytics. The method is called ‘PDA’ or Predictive Demand Analysis.”
The fine points of how the magic actually works is a trade secret, he says, but in addition to the math and surveying, computer modeling mixes and matches desired locations and amenities that also play major roles. “The process focuses on individuals who are interested in homes of a particular type, with particular features in a particular area,” says Sjofors.
Pricing homes is typically done per unit and takes into consideration what floor a particular condominium or apartment may occupy in a building, what direction it’s facing and how far it is from the closest grocery store. The process can start before the home is built or after.
“If the measurement is done before the home is built, it is possible to assess the specific features of the home that will maximize sales velocity for just that one location where the homes are built,” Sjofors says. “So those features can be included in the build. If the measurement is complete after it is built, it becomes about adjusting the price to the audience that wants just that location and features set. Both are valid approaches.”
A typical pricing study can take six to eight weeks to complete. Sjofors says the fee for the service is based on the amount of time needed to complete the assessment and can be recouped on the sale of one to two properties. The firm can work with builders remotely but prefers to deliver their results in person. At this point there is no online app. Atenga is currently focused on cracking the market in Southern California by landing their first U.S.-based client.
