One way to look at negotiation is as a struggle, the other is as a co-operative way to discover and satisfy the needs of both parties while looking for additional values.
Let’s illustrate it with a game with some simple rules. We both have two playing cards, one red and one black, which we keep hidden. At a given time we show one card that we have selected. Depending on what card we show, the following happens:
Both show red: Both get +$10
Both show different: Black gets +$20, red gets -$20
Both show black: Both get +$1
What is the optimal strategy? How does this change if we decide to play several rounds rather than one?
This I agree with. The win/win is when both parties needs are satisfied.
This I don’t get. It might have been more helpful to use an actual haggling example instead of a card game. There is no +$10 for the merchant. He starts at a price and goes down.
For the merchant it’s a sale with some profit vs no sale and no profit. That’s fine and it can still be a win/win.
When I first worked at Circuit City they shopped the competition and entered it into a computer. If someone was running a sale the home office would download their sale price and we would print new tags so our price matched theirs. We could show a customer what the competition was selling the merchandise at.
The theory was that if customer could come to us and get the lowest price and we could show them that was true people would become regular customers and come to us rather than run around town. I thought it was a neat idea because I didn’t like haggling.
Turns out it didn’t work and it cost too much to maintain so they dumped it. I notice Sears is advertising something like that now. Maybe it was timing and maybe it was the lack of proper promotion by CC.
WalMart has successfully planted the idea in people’s heads that their prices are low and often the lowest. When CC and Best Buy were in competition Best Buy very aggressively campaigned against commissioned salespeople and planted the seed that Best Buys prices were lower because they didn’t have commission. It wasn’t true but a lot of people believed it.
Once in a while you’ll see the magazine/newspaper/internet article that shows “10 ways to save money every day!” I always groan when see one of the tips stating something like “Always ask for a better price where ever you shop. Grocery store, department store, hardware store, etc. Ask an employee if they will take a lesser price for an item. If they say no ask to speak to a manager.” :smack::smack::smack:
All this will get you is a bunch of dirty looks from the staff. If you’re one of those people who would like to attempt to save $1 in trade for people thinking you’re a cheapskate loon then by all means have at it.
I prefer not to piss off others around me in order to save a buck.
The game example is actually a quite good basic model of negotiations which also illustrates some essential points very well. It’s basically a variation of the prisoner dilemma.
Yes and negotiation is the proccess to achieve this AND to find additional benefits.
But you get this so I’m not really sure what we’re discussing right now
If you get familiar with who you shop with you know who accepts a little haggling and who doesn’t Grocery stores? Not likely. Lots of major retailers have set prices and a company policy of not negotiating but you might be surprised on a big ticket item. You might get a free something simply by asking.
Lots of people are so determined to get a better deal than the ticket that they loose touch with reality. It’s on sale for 50% off and they still offer less.
One guy offered less on a clearence item and when I pointed that out he protested “I never pay the ticket price when you come in here” to which I replied “then I guess you’re not buying that” Nothing wrong with basic friendly haggling but some people are downright compulsive about it.
I was interested in your perspective because my experience is that customers and merchants have different perspectives on what a win is. It isn’t just a sale. It’s profit margin. MArk up varies a lot from one product to another so haggling changes.
btw, the haggling scene in Life of Brian was just playing. What a hoot.
As best I can tell that is the prisoner’s dillema. But the thing is, the prisoner’s dillemma models the question of “to backstab, or not to backstab”, and I don’t really see how that fits the scenario of haggling. I mean, what part of haggling analogizes to cooperating(red)? Which part of it analogizes to being selfish(black)?
I mean, I (and many others, including your average department store) would define a customer (or seller) trying to haggle at all as ‘black’ behavior; you’re trying to get the seller/customer to spend extra time and come away with less money as a result. I doubt that that’s how you wish to define the colors, though, so what do you want us to take away from the analogy?
Well, I don’t get it. What part of haggling is an attempt to mutually benefit the parties?
I mean, as best I can tell, here’s the model. There are two parties, and each wants to engage in the transaction. Also, the seller wants to retain/obtain the most benefits, and the buyer also wants to retain/obtain the most benefits. Also, in most cases, the seller wants to maintain a good relationship with their customer base - with the possible exception of businesses where repeat business with a customer is perhaps somewhat unlikely, like with car and house sales.
Okay. So, the two parties come together, and one of them has to propose a ‘starting price’ (or things will never get started). In most venues the seller does this. Then the other party has the option to accept that price, or make a counteroffer. If they make one, then the first party can make a counter-counter-offer, and so it goes until somebody accepts the other person’s offer or somebody gets fed up and leaves.
Have I missed anything?
So - at what point in here is either party seeking to do anything but find the worst price for the other person that will make them accept the deal?
Both parties are benefited and satisfied when;
The merchant makes a sale at decent profit and possibly gains a repeat customer
The customer gets the product he desired at a lower price through his own initiative.
I will take the liberty of replacing ‘haggling’ with ‘negotiation’ for pedagogical reasons. I also re-arranged the order in which your quotes appear for the same reason:
If you’re using a win/lose strategy, no part.
You did not miss anything if you were trying to describe a win/lose strategy.
This is the essence of the win/lose strategy.
If you’re using a win/win strategy the “good relationship” part is more important than maximizing benefit. Because it performs much better over time, and can often perform better in the short run as well. Although you can do it just because you’re a nice guy, you could also do it for purely economical reasons. The drawback to the win/win strategy is that it is more time consuming and that it requires more competence.
It would be helpful if you could describe what you believe is the optimal strategy for the red/black game.
Okay, but this can only happen if the item was explicitly and deliberately overpriced to start with - and I would suggest, with the deliberate expectation of the price being haggled down. Right? Because otherwise the salesman will be of the opinion that the profit was already decent, and when lowered, less so.
Now, obviously, this depends on the percentages involved. If you’re selling a $3000 tv, and the customer absolutely will not sign unless you throw in a $2 cable, then odds are good you’re still making a comparable profit overall and it’s worth it just to get them to shut up and walk away smiling triumphantly with their $2998 in your pocket. Though of course it works the other way too - if you’re blowing $3000 on a tv, then who gives a crap about another $2 for a cable? The benefit for the customer is (necessarily) comparable to the pain the seller suffers. Well, unless you consider the “trumphant jerk” factor anyway: the feeling that he squeezed something extra out of them ‘through his own initiative’.
Separate question: do people find that bargainers are repeat customers? I’m curious from both buyer and seller persepectives; do sellers see these guys coming back a lot, and for you bargaining buyers, do you make efforts to favor sellers who have let you squeeze them, perferentially over those who simply pointed at the price sticker?
Bargainers are much more likely to become repeat customers if you use a win/win strategy than if you don’t. And on the flip side, they’re less likely to become repeat customers if you use a win/lose strategy.
A person who does not bargain doesn’t give you the opportunity to make them a repeat customer.
Where did you describe what the “win-win” strategy is again? You seem to be presuming I know the difference between it and ‘normal’ haggling, when I’m actually trying to find out what you think it is.
My personal answer to the prisoners’ dillema comes from Peirs Anthony: play reds against a person until they play black against you, and then play blacks forevermore after. This way you get punked only once per person, but can maintain the beneficial ‘red’ relationship with people who use it consistently. There are other models that involve varying strategies of ‘forgiveness’ that may work better, of course; you can check the wiki for details on them. For myself though I’m too simpleminded to track and remember all that, so I will simply stick with the strategy of slapping people with the “bad interactor” label on first offense and leaving it there forevermore.
So, er, what does this have to do with haggling again? Other than the fact that obviously the act of trying to jerk my chain with some haggling nonsense is likely to ensure I never return to your store, anyway.
Here’s the rub though. Bargainers aren’t the kind of repeat customer you want.
Why would I want repeat business of someone who’s constantly buying my goods cheaper than what I price them for? They become a liability.
I prefer to focus on gaining repeat cusotmers who are profitable to me.
…as a co-operative [process] to discover and satisfy the needs of both parties while looking for additional values.
That is a good strategy. The optimal strategy for playing multiple rounds is summarized as:
Play red the first two times. After that play whatever card your opponent played last.
It translates to this:
I will attempt to co-operate (red). If you co-operate I will continue to do so (red). If you don’t co-operate I will make one more attempt to co-operate (red). If you still don’t, I will cease co-operating (black) until you show that you want to start co-operating (you play red).
But what does that mean? Both parties need to make the transaction and both parties need to come away with the most value - and that value must be at the expense of the other party. And where do these “additional” values come from, and what are they in addition to? Not in addition to what the other guy is offering, surely.
If’n you say so.
But what is co-operation? Me, I think that cooperation is when you put a fair price on your thingy, and I give you the price you asked, and you give me your thingy. Cooperation!
I went to an Antique Flea Market just last weekend. I heard lots of “How much / will you take…?” conversations going on. I’m not really a bargainer, though, I’ll pay whatever the vendor asks if it seems like a fair price. I ended up buying a like-new Brabantia stainless steel bread box; they go for $50, and I would’ve paid $15, but the woman only wanted $10. I guess we both went home happy with the transaction.
This is incorrect and what I was trying to express before. What price is fair, what an item is worth, has a lot of variables and very much a part of perception for both parties. A lot of things affect that. The asking price needn’t be deliberately overpriced. Nothing compels the merchant to sell everything at the absolute lowest price he will possibly accept, and what that price is varies on the same merchandise on a regular basis.
In fact what is acceptable varies from day to day depending on a lot of details.
There may be a window of acceptable prices that are all fair. There is no dishonesty or price gouging involved. If a customer doesn’t want to haggle, sees the price as reasonable and pays the ticketed price then both parties are satisfied. If the next customer buys the very same item and negotiates a lower price or some freebie thrown in that’s also fair to both parties. Each is a separate interaction where two parties willingly entered into an agreement with each other. Nothing is made unfair or dishonest by comparing the two.
In merchandise where haggling is anticipated the price is often marked up in anticipation but there’s nothing dishonest or unfair about that either. Most customers are aware that the sticker price is the starting point. Most of the time the sticker price also has to be fairly reasonable even if haggling is expected.
The salesman’s job is to know how much profit is acceptable on a certain item and to try and maximize it. Nobody got cheated if he made an acceptable profit rather than the maximum one.
Regardless of numbers and the jerk factor haggling is a time honored , valid, and respectable way of doing business. I say that even though I don’t prefer it on a personal level. I’ve done it enough to understand it. The last place I worked had developed a reputation for price negotiating and it happened almost daily. Why should a merchant take less than they have to for any item? Why should a customer pay more than they have to? There’s nothing dishonest about the merchants desire to make more and the customers desire to pay less. Based on the wants and needs of both parties they enter a negotiation. If they reach an agreement great.
Bargainers are repeat customers and regular profit margin is often better than more profit margin less often. That’s why stores have bonus programs that offer discounts for regular customers and places have punch cards to keep you coming back.
