Bargaining for things, yea or nay?

[Martini_Enfield]

The thing to bear in mind is that haggling can cost the seller money even if no sale is made.

Let’s take a shop selling computers and washing machines and TVs and so on. Let’s say the margin is 5%, so on a $500 item, the profit is $25.

Let us further suppose that the salesperson is getting paid $20 an hour (yes, that’s more or less the going rate in Australia).

In our example, someone has come into the store to purchase a new TV. They ask the salesperson for information about the various TVs in store, and spend about 15 minutes evaluating products, benefits, features, and so on.

At this point, the customer has found a TV they like, which is priced at $500. The customer knows that the store can offer deals, and the salesperson knows the maximum discount he can personally authorise is 2.5%. The customer, feeling that $12.50 off a $500 item isn’t a “deal” at all, counter offers with a $400 offer, which the salesperson rejects as it’s way below their cost price.

To cut out the tedious middle part of this example, the salesperson and the customer go back and forth for about another 15 minutes, with the salesperson having to take the customer’s more realistic offers to his manager, who is busy doing manager stuff elsewhere.

Alas, no agreement can be reached, and the customer leaves to re-evaluate their budget (or find a store which will meet their price). But that salesperson has been with a single customer for 30 minutes, which means the profit from the sale of the TV is down to $15 (as it’s taken $10 worth of the salesperson’s time to haggle over the TV with the customer), assuming the next person through the door says “That TV is perfect, I’ll take it!” without discussing the price.

Obviously that’s an off-the-cuff example, but the point is that it does take time to haggle and negotiate and the end result is that the store will have to find a way of increasing their margin on products (which explains the push for extended warranties, accessories, and so on with purchases), or charge more for it in the first place, or “Mark up to mark down” (where you have an inflated asking price but can suddenly bring the price down to something a lot cheaper to give the appearance of offering a deal when it’s not really).

As I’ve said before, the difference between working somewhere where “discussing the price” was an accepted way of doing business, and somewhere that the price is cast in solid dolomite, is just amazing. The latter environment is far less stressful and tiring (for staff and customers), and it’s definitely my preferred way of operating.

[cosmosdan]

@Martini_Enfield

The thing to bear in mind is that haggling can cost the seller money even if no sale is made.

Let’s take a shop selling computers and washing machines and TVs and so on. Let’s say the margin is 5%, so on a $500 item, the profit is $25.

Let us further suppose that the salesperson is getting paid $20 an hour (yes, that’s more or less the going rate in Australia).

In our example, someone has come into the store to purchase a new TV. They ask the salesperson for information about the various TVs in store, and spend about 15 minutes evaluating products, benefits, features, and so on.

At this point, the customer has found a TV they like, which is priced at $500. The customer knows that the store can offer deals, and the salesperson knows the maximum discount he can personally authorise is 2.5%. The customer, feeling that $12.50 off a $500 item isn’t a “deal” at all, counter offers with a $400 offer, which the salesperson rejects as it’s way below their cost price.

To cut out the tedious middle part of this example, the salesperson and the customer go back and forth for about another 15 minutes, with the salesperson having to take the customer’s more realistic offers to his manager, who is busy doing manager stuff elsewhere.

Alas, no agreement can be reached, and the customer leaves to re-evaluate their budget (or find a store which will meet their price). But that salesperson has been with a single customer for 30 minutes, which means the profit from the sale of the TV is down to $15 (as it’s taken $10 worth of the salesperson’s time to haggle over the TV with the customer), assuming the next person through the door says “That TV is perfect, I’ll take it!” without discussing the price.

Obviously that’s an off-the-cuff example, but the point is that it does take time to haggle and negotiate and the end result is that the store will have to find a way of increasing their margin on products (which explains the push for extended warranties, accessories, and so on with purchases), or charge more for it in the first place, or “Mark up to mark down” (where you have an inflated asking price but can suddenly bring the price down to something a lot cheaper to give the appearance of offering a deal when it’s not really).

As I’ve said before, the difference between working somewhere where “discussing the price” was an accepted way of doing business, and somewhere that the price is cast in solid dolomite, is just amazing. The latter environment is far less stressful and tiring (for staff and customers), and it’s definitely my preferred way of operating.

Couple of things

Usually if the profit margin is as low as you describe then prices are not negotiable. If it is by 2.5% then little time is wasted in negotiations. The smaller the amount you can negotiate the less time wasted.
Although payroll is a factor busnesses don’t usually factor time spent with a customer into cost that way. There’s the actual cost of the item and then there’s overhead which is rent, lights payroll etc. They don’t add the time spent into the cost.
Customers vary. Some require more time than others for product info and some negotiate quicker as well. Combine that with a decent salesperson who will steer the sale and the conversation and won’t waste time. I’ve ended negotiations more than once when the customer wanted to keep talking. Oddly enough some see harassment as a negotiating technique. You gotta learn how to shut it down.

I think as competition reduced profit margins companies adopted price guarentees and eleiminated most bargaining although when you need some sales that’s exactly what happens.
It can be stressful for the employee who isn’t used to it but usually there are pretty clear guidelines about how far you can go and you learn technique and style as you go. I don’t see it as stressful for the customer unless you count the ones who make it too personal and get pissed if they can’t get their way.

[Martini_Enfield]

@cosmosdan

Couple of things

Usually if the profit margin is as low as you describe then prices are not negotiable.

You’d think so, but in my experience that’s not always the case. What you often end up haggling over isn’t the main item itself, but the accessories- “OK, if I buy this $500 laptop, what sort of freebies am I going to get with it? What sort of deal are you going to give me if I get a bag and a mouse and software with it?”

Although payroll is a factor busnesses don’t usually factor time spent with a customer into cost that way. There’s the actual cost of the item and then there’s overhead which is rent, lights payroll etc. They don’t add the time spent into the cost.

Perhaps not in a “Specific Expense Line On The Ledger” kind of way, but it’s certainly something that salespeople and management need to take into account- it’s not really “Worth” (from a purely financial point of view) spending 45 minutes helping a customer decide between two $29 transistor radios when there’s maybe $5-$8 worth of profit in those radios for the company to begin with. Especially if the store is busy and there are other people who need the salesperson’s help.

Customers vary. Some require more time than others for product info and some negotiate quicker as well. Combine that with a decent salesperson who will steer the sale and the conversation and won’t waste time. I’ve ended negotiations more than once when the customer wanted to keep talking. Oddly enough some see harassment as a negotiating technique. You gotta learn how to shut it down.

Australian customers, in my extensive experience, do not respond well to what they perceive to be “American-style” or “High-pressure” techniques. So, if they want to keep talking and there aren’t heaps of other people who need your assistance right then and there, you basically have to let them.

I think as competition reduced profit margins companies adopted price guarentees and eleiminated most bargaining although when you need some sales that’s exactly what happens.

Depends on the company. Every retailer claims to have the “Lowest” or “Best” price, but that’s clearly not the case. Interestingly, though, at least two major retailers have been advertising a respectable price for a good and then doing a verbal lower price for customers, making it impossible for them to get it price matched elsewhere (since price guarantees generally require proof in the form of a current catalogue or written quote or something along those lines).

I don’t see it as stressful for the customer unless you count the ones who make it too personal and get pissed if they can’t get their way.

From the customer’s point of view it’s stressful because they have to visit all these stores and haggle with all these different salespeople to get “their best price” and then go back to whoever offered them the best deal and hope the salesperson they were dealing with hasn’t gone on lunch or finished for the day. When there’s a “No Haggling” policy, customer sees the price, knows that’s all they’ll pay full stop, and can either make a decision there or take the information with them without having had to spend half an hour with a salesperson trying to get a decent price.

[Khaki_Campbell]

@Martini_Enfield

But that salesperson has been with a single customer for 30 minutes, which means the profit from the sale of the TV is down to $15 (as it’s taken $10 worth of the salesperson’s time to haggle over the TV with the customer), assuming the next person through the door says “That TV is perfect, I’ll take it!” without discussing the price.

This assumes that the salesman is always busy, like a worker on an assembly chain. Most of the times he’s not.

[cosmosdan]

[quote=“Martini_Enfield, post:103, topic:547442”]

@cosmosdan

Couple of things

Usually if the profit margin is as low as you describe then prices are not negotiable.

You’d think so, but in my experience that’s not always the case. What you often end up haggling over isn’t the main item itself, but the accessories- “OK, if I buy this $500 laptop, what sort of freebies am I going to get with it? What sort of deal are you going to give me if I get a bag and a mouse and software with it?”

Believe me in know. I sold computers for a long time as the profit margin got small. Some customers think items are marked way up. They imagine a $500 computer cost the store $250 instead of over $400 and we have room to haggle. You simply tell them you don’t have room. Without revealing details I often told people “Sorry , competition has brought the prices down and there’s no wiggle room” or, if sales have been slow and you want the sale you might offer to throw something small in to tip the scale but there’s not a lot of time invested in bargaining.

Although payroll is a factor businesses don’t usually factor time spent with a customer into cost that way. There’s the actual cost of the item and then there’s overhead which is rent, lights payroll etc. They don’t add the time spent into the cost.

Perhaps not in a “Specific Expense Line On The Ledger” kind of way, but it’s certainly something that salespeople and management need to take into account- it’s not really “Worth” (from a purely financial point of view) spending 45 minutes helping a customer decide between two $29 transistor radios when there’s maybe $5-$8 worth of profit in those radios for the company to begin with. Especially if the store is busy and there are other people who need the salesperson’s help.

Of course, it’s overhead so you have to consider it. No decent salesperson will waste time haggling over a low profit item if other customers are waiting. There’s polite assertiveness. You tell them that’s the best you can do and to let you know if they want to buy it, say excuse me and walk away. If there’s other customers waiting that should be clear to them as well. I’ve done it with no customers waiting to shut down the “I’ll nag you into a discount” customers.

Customers vary. Some require more time than others for product info and some negotiate quicker as well. Combine that with a decent salesperson who will steer the sale and the conversation and won’t waste time. I’ve ended negotiations more than once when the customer wanted to keep talking. Oddly enough some see harassment as a negotiating technique. You gotta learn how to shut it down.

Australian customers, in my extensive experience, do not respond well to what they perceive to be “American-style” or “High-pressure” techniques. So, if they want to keep talking and there aren’t heaps of other people who need your assistance right then and there, you basically have to let them.

I’m not talking about high pressure sales. If they really want help you provide that asking questions about what they want to do with a computer and pointing out the benefits of extra ram and hard drive etc. You provide them with the info they need so they can make an educated choice and you might make a recommendation. You want them to feel confident they made a good purchase, not as if they were pushed into a questionable one. You can do that in a polite helpful way and still steer the sale.
A little chit chat is fine. Often it’s good to relate to something other than the sale. Sports, kids, the weather. Something to identify as two people rather than adversaries. At some point though you can break it off. Most people know you’re working and accept that. We were talking about haggling. You are in no way required to stand there and haggle after you’ve given them the bottom line. Some customers use the “walking out the door” technique to try and get a better offer. I used the “That’s my best offer, let me know if you want it” technique to save us both time and prevent the nagging haggler.

I think as competition reduced profit margins companies adopted price guarantees and eliminated most bargaining although when you need some sales that’s exactly what happens.

Depends on the company. Every retailer claims to have the “Lowest” or “Best” price, but that’s clearly not the case. Interestingly, though, at least two major retailers have been advertising a respectable price for a good and then doing a verbal lower price for customers, making it impossible for them to get it price matched elsewhere (since price guarantees generally require proof in the form of a current catalog or written quote or something along those lines).

Yep. All part of competition. Some customers lie about what they were offered, or use competitors against each other. That’s also where polite assertiveness comes in handy.

I don’t see it as stressful for the customer unless you count the ones who make it too personal and get pissed if they can’t get their way.

From the customer’s point of view it’s stressful because they have to visit all these stores and haggle with all these different salespeople to get “their best price” and then go back to whoever offered them the best deal and hope the salesperson they were dealing with hasn’t gone on lunch or finished for the day. When there’s a “No Haggling” policy, customer sees the price, knows that’s all they’ll pay full stop, and can either make a decision there or take the information with them without having had to spend half an hour with a salesperson trying to get a decent price.

They don’t have to. They get to choose if they want to. If you hate haggling don’t do it. Do a little comparison shopping and make the purchase. No haggling may also mean you have to drive back across town to get the best price. If you ask the store you’re in to price match you’ve saved yourself a trip.
It’s only stressful if you make it that way or allow it. People vary in personality and approach and haggling can be a pain in the ass because of the people , not the act itself.

btw, did you notice how you contradicted yourself in this response. You claimed a “no haggling” policy is better , after you admitted that the best price often isn’t the best price. Customer who want a better deal will ignore a no haggling policy and if you want the sale you haggle.

[cosmosdan]

@Khaki_Campbell

@Martini_Enfield

But that salesperson has been with a single customer for 30 minutes, which means the profit from the sale of the TV is down to $15 (as it’s taken $10 worth of the salesperson’s time to haggle over the TV with the customer), assuming the next person through the door says “That TV is perfect, I’ll take it!” without discussing the price.

This assumes that the salesman is always busy, like a worker on an assembly chain. Most of the times he’s not.

That’s if sales is his only job. We were expected to stay busy cleaning and putting out stock when we weren’t with a customer.

I found that puttering with some little task was often helpful. The customers didn’t feel pressured as you greeted them and chatted a bit because you weren’t in their face.

[Martini_Enfield]

@cosmosdan

btw, did you notice how you contradicted yourself in this response. You claimed a “no haggling” policy is better , after you admitted that the best price often isn’t the best price. Customer who want a better deal will ignore a no haggling policy and if you want the sale you haggle.

I’m guessing you mean a generic “you”, because I can assure you at my current job we can’t haggle with people. But- and this is really important- the “No haggling” policy is backed up by prices that genuinely are very good (as good as you’d probably get if you did go and haggle). Our pricing people just cut the middle step out, which surprised me. When I started working there and got told “You can’t haggle with people, ever” I thought “I’m never going to be able to sell anything!”

What actually happens is the value amount of stuff I sell has gone up markedly. Some people like haggling and go to a retailer where that’s part of the way they do business. Rather a lot of people prefer to just find the lowest or best advertised price (often via the internet or catalogues), come in, put their money on the counter, and walk out with a new TV or DVD player or whatever.

I’ve been working in retail for about 12 years now, both as staff and management, so I know how to haggle and bargain with people- but it gets tiring after a while, IMHO.

[cosmosdan]

@Martini_Enfield

@cosmosdan

btw, did you notice how you contradicted yourself in this response. You claimed a “no haggling” policy is better , after you admitted that the best price often isn’t the best price. Customer who want a better deal will ignore a no haggling policy and if you want the sale you haggle.

I’m guessing you mean a generic “you”, because I can assure you at my current job we can’t haggle with people. But- and this is really important- the “No haggling” policy is backed up by prices that genuinely are very good (as good as you’d probably get if you did go and haggle). Our pricing people just cut the middle step out, which surprised me. When I started working there and got told “You can’t haggle with people, ever” I thought “I’m never going to be able to sell anything!”

What actually happens is the value amount of stuff I sell has gone up markedly. Some people like haggling and go to a retailer where that’s part of the way they do business. Rather a lot of people prefer to just find the lowest or best advertised price (often via the internet or catalogues), come in, put their money on the counter, and walk out with a new TV or DVD player or whatever.

I’ve been working in retail for about 12 years now, both as staff and management, so I know how to haggle and bargain with people- but it gets tiring after a while, IMHO.

I did mean the generic you. I worked for Cicuit City quite a while and they were very good at having very competitive prices. They shopped the competition and did mark downs weekly to keep prices lows. We even had our competitors prices loaded in our computers so we could show customers our price was good. With our low price guarentee there was very little haggling. Salespeople even got fired for throwing things in. Still, there was a lot of pressure from upper management to achieve certain goals so if sales were slow we might entertain a little haggling.

The last two places I’ve worked have been smaller businesses and haggling is a little more acceptable. You are correct, it does get tiring. By being forced to do it more I learned more about it and the techniques involved. My point in this thread is that there is nothing inherently wrong with haggling. IN fact, although it can be a pain in the ass it’s a good lesson in effective communication. It’s okay to like it or not like it. I personally don’t prefer it.

on a side note; It’s good to have folks like yourself on the board to dispell some of the false notions about retail. People who have never been in it have some funny ideas sometimes.

[Markxxx]

I hate it as it’s purely psychological for me. I keep thinking, I paid too much. Even if I know darn well I got a good price, I’m like, “Maybe I could’ve done better.”

[tbruton]

@begbert2

So. The salesperson’s only options are to 1) add value, 2) reduce price, 3) accept the customer’s terms, or 4) refuse to change their terms. The customer’s only options are 1) request a lower price, 2) accept the given price, or 3) refuse to change their terms.

Not necessarily. The same thing can have different values to different people. A win/win is both sides make money.

example: TV with sticker price $500 and free delivery. profit margin is 20% ($100) and delivery costs $50.

Customer 1 has a couple of mates and a large vehicle, so sees no value in free delivery and the seller can offer a discount of up to $50 and still be in the same position, the buyer does his own delivery and saves money.

Customer 2 would have to pay over $50 to get delivery elsewhere, so is happy paying sticker price.

The key to a win/win negotiation from a seller POV is understanding what the customer values (ie delivery, aftersales service, warranty, speed of delivery etc) and what the customer doesn’t care about. The seller then needs to know which of these they can provide at a better price than the buyer can get elsewhere.

From a buyer POV is understanding which services are of value and the price to pay.

In the UK, Ryanair has very successfully run this model, with splitting all parts of the service and charging for each part (ie baggage is extra, airport check-in is extra, food is extra, priority bording is extra (no assigned seating).

When going away on my own for a couple of days (hand luggage only) i will use Ryanair as the flight is cheap and you can avoid the extras. On a long vacation with the family, I will fly another airline as their bundled price is cheaper and i need to use some of the extra services.

Haggling is necessary as most items selling for over $100 are, in reality, bundled goods, and the value of the bundle is different for each customer.