I’d like to point out what I think is a very significant difference between haggling and the prisoner’s dilemma. One that I think may disqualify the comparison of the two.
In haggling it’s normally over something you don’t have to have. Both parties have the option of walking away with no harm or benifit for either party. Also there is the option of the win/win even though they are not working toward the same goal. The merchant may not get all the profit he wants and the buyer may not get the lowest but they both get some compromise between the two and both can be satisfied with that.
As a seller. Almost daily.
If you understand how a punch card works or other repeat customer promotions then you should see haggling as similar only more spontateous.
You say this based on what experience? It’s incorrect.
I would concede that some bargainers are a royal pain in the ass and are the ones you don’t want, but they can be handled.
I shut down those who were too unreasonable by offering them a take it or leave it price and not allowing them to waste my time.
As I said in another post , less profit on a regular basis is often better than more profit less often.
I say this with years of experience in stores that haggled and stores that didn’t.
Sure that’s cooperation. It’s also cooperation if you make a reasonable offer and I accept it. Both parties made willing decisions concerning their persepective positions of profit for one and value for the other.
I agree that haggling seems to be a poor analogue to the prisoners’ dillema, except in the sense that the mere act of trying to haggle could easily be seen as being ‘black’ in the prisoner’s dillema model. Of course, that’s presuming that there’s no such thing as red-card haggling; if there is, then that would different; one could red-card haggle without black-card effects.
Personally I suspect that this ‘red-card haggling’ stuff isn’t what I would call haggling at all - I bet it’s where the seller argues against himself (or acts like it), offering deals or bonuses without the customer having to do any selfish demanding or dickering at all, in an attempt to entice a sale they might otherwise not have gotten, or to earn a bit of customer happiness or rememberance that they otherwise might not have.
Which is all well and good, but not really what this thread is about in my opinion.
I see them as completely different - punch cards are established prices for bulk deals, whereas haggling is a battel of wits with the explicit intent on one or both parties to get something from the other that they did not want to give. You can tell the difference from the lack of that triumphant victorious “I owned joo” feeling after using a punch card.
The prisoner dilemma is not a very good game for illustrating the process, which is why I presented another model which I believe captures the idea. And which I was introduced to by what I consider to be the best negotiation I’ve met.
I feel I am not communicating what I am trying to say successfully to you, begbert. Is there anything that I can do to be more effective?
It also doesn’t work with prisoner’s dilemma because there is no opportunity for betrayal. No one need be the sucker. Each is responsible only for their own choice of what price is acceptable , one from a profit perspective and one from a value.
Each makes an singular offer that the other knows rather than doesn’t know, and the other may reject or accept. Neither is punished in any way by the other’s choice{offer} because they have the option to accept or reject. It’s a bad analogy
I base it on years of experience working with BestBuy (the ones who put CircuitCity out of business:dubious:) through it’s growing pains 88’-02’. It was common knowledge and common practice to break off relations with unprofitable customers. It’s even a common theme in business management books. typical theory
I was speaking in principle concerning repeat customers. If you’re offered a free coffee or sandwich or whatever with a punch card it’s perceived as a better value for you the customer and encourages you to be a repeat customer. Repeat customers often buy things other than just the sale item. A customer that negotiates with me on a big screen TV may also buy other items. Often the negotiation is based on a bulk sale.
You seem to prefer to see the negative side, perhaps because you don’t like it. It was something I had to do almost daily so even though I don’t prefer it I learned to understand the basic principles.
Neither party is required to give up anything they choose not to. They both start out wanting something. Merchant wants profit. Customer wants to save money and get a better value. If in the end both have achieved that they both walk away happy. If I make the choice to sell at a certain price that’s my choice and nobody owned me, or screwed me. If the customer makes the choice to buy at a certain price nobody screwed them. If they think the sticker price is reasonable then great. They got the value they wanted. If they negotiate down a bit it’s perceived as an even better value. If they set their maximum price below my minimum we don’t do business and no real harm done. I haven’t made a sale but why would I want to if the profit is unacceptable. Better to wait for another customer. Same for them. Perceptions of worth change quickly too. A customer may start out thinking he can get X for $5 and find out if he really wants X the $8 I offered to sell mine for is the best price available.
Even if the customer knows the initial price is high, I think this strategy works because of anchoring. - Warning - a slide show. People judge the price they pay against the initial price, even if that initial price is unreasonable. Starting with the highest price which won’t drive a customer away immediately would seem to be a good strategy, even if you cut quickly right away. Does that sound reasonable.
Information imbalance is another reason it works. I’ve had reason to negotiate with sellers from whom I had no intention of buying anything - one for a vacuum cleaner, and another for vacation property. (They came to me.) I was very surprised at how much lower the bottom was than I would have expected given the starting price - and I can’t say for sure I had actually reached the bottom when I walked out.
The thing about cars and houses nowadays is that you can get a lot more information about actual pricing than you could even 10 years ago.
I also think there is a psychological aspect, in that a buyer may get value from a deal if he thinks he is getting a steal, even if he isn’t. That is part of a deal being a win-win. If you get him to set his value for something high through anchoring, and let him buy it below that value, he thinks he wins even if the actual minimum price is below that.
I got my start bargaining at 10 in the Ivory Market in the Congo. I don’t like to do it, but when I got what I still think is a good price for my car, I felt good.
I remember Best Buy. They’re the ones that got sued for lying to customers about extended warranties. ;)Circuit City drove themselves out of business with a series of bad decisions but that’s another discussion.
Working in what capacity? Your theory is correct but you are applying it incorrectly. You made a blanket statement that does not apply to every business model.
If Best Buy and stores like them maintain low prices and low profit margins then haggling tends to not be a part of that model although throwing something in on a high dollar ticket is not unheard of.
If a business has a different profit margin structure then haggling is more acceptable and those repeat customers still represent a profitable customer. You’d agree that profitable customers is what businesses want right?
I reached that understanding because of my experience and by ignoring your model. I’ve haggled a bunch so I have a good idea what a win/win is. I just wanted to see if your odea matched mine, especially if you see it as buyer and I as merchant.
Well, I agree that only in a perfect world will you get evey customer to pay full retail and buy all the extra accessories and warranties you want them to. So retailers do often have to “sweeten the deal” to entice buyers. But I think they like to be in control of the sweetening. Running controlled sales, add-ons, and repeat cusomer discounts fits that model. It’s more predictable. I’d think the accountants upstairs at bigger operations (BBY & CC) would shudder at putting the margins in the hands of hagglers.
He’s not the only guy in the thread, though. Was I correct that your model of a win-win debate is likely to involve the seller offering lower prices and deal-sweeteners on his own initiative, rather than based on customer suggestion/demands?
I’m sure they would but, other business models put a lot more into the hands of thier sales staff and allow haggling and still make money. Your original statement made a general point indicating that businesses did not want hagglers as repeat customers. That’s inaccurate. Some, even most businesses will welcome hagglers if they make money off them. If they don’t then your profit principle certainly is true.
That’s definitely been my experience working in retail too. I’ve had people with those black metal Amex cards haggling seriously over the price of $499 laptops and $10 antenna cables.
The place I currently work has a cast-iron “No Haggling” policy, and the number of people who say they appreciate the fact that there’s no bullshit and they know they’re getting a good deal from us anyway without having to spend ages haggling over it is just astonishing. It also makes my job so much easier, and the customers feel good about buying from us because they don’t go home and think “If only I’d held out a bit longer, I could have got even more stuff thrown in…” or whatever.
I enjoy haggling sometimes, for example on “Big Ticket” items where there’s a bit of wiggle room, or on second hand items, or when on holiday in a foreign country where “discussing the price” is par for the course. But generally I like seeing a posted price and being able to decide if that item is worth the posted price to me, based on its benefits and features.
I used to work in sales and at the time I saw it as a merchant (I was a good salesman but a horrible buyer, which is often the case).
Now I mainly negotiate in the political arena and no longer se it as a “buyer/seller” process.
The reason I declined to respond to specifically his question was that I felt that by adapting my response to him, my response would be less helpful to you. That’s also why I asked You specifically to help me explain it to you.
Right now I feel that one obstacle is that the ‘normal’ process of win/lose is ingrained to the extent that you will try to fit what I say into your pre-existing internal view of what it is. That won’t work. It’s like trying to teach tango to a boxer. You can’t do it if the boxer thinks it is a version of boxing. One is a struggle, the other is a mutual process of trying to identify and satisfy both parties needs while looking for additional values.
Another obstacle is my (relatively) poor grasp of the language and the inherent properties of communicating via text messages. If I could sit down with you and talk about it in swedish (assuming you were fluent of course) it would be relatively easy. Right now I feel like I am trying to dance with someone while wearing concrete shoes, in a pitch black room.
Since I am being a poor source, I will instead offer an great source: http://www.pon.harvard.edu/?floater=99 . That is probably the best online source there is for this. I highly recommend you look at it.
Very reasonable. It depends on the image you are trying to create for your company.
That changes daily depending on how many you have, how long you’ve had it, what you paid for it etc. My boss really hated to sell things for cost or below but I think in time he eventually understood that it’s better to blow it out at a loss and circulate that money into other products , than have the money sit on the shelf for 60 days and then do it reluctantly.
People’s ability to compare prices without driving all over town has changed things. Plenty of customers have the internet on their phone or call someone else to have them do a quick search. Most have some idea of what a reasonable price is.
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Some customers maintain a respectful good humor when haggling. Some make it a far to important personal challenge and their attitude turns nasty when they don’t get what they think is a “win” for them. It’s amusing how it varies. I am often intrigued and frequently exasperated by the interpersonal dynamics of it.