Wednesday, April 22, 2015

The Only Way to Haggle Successfully

In previous posts I shared why you're leaving money on the table by refusing to raise prices and how to raise them without incurring dissent.  In future posts I discuss how and when to raise prices to achieve maximum profit while improving your brand and keeping your clients happy.

But let's explore another way many proprietors leave money on the table: by reacting to pricing pressure by indulging haggling.  If you work in retail, you'll find this technique directly applicable.

The tools of negotiation are information and skill.  It's widely believed in negotiation that the first person to name a figure loses.  Why is this?  When neither party knows the other's expectation the playing field is level.  So the first party to disclose their limit is at a disadvantage.  Without reciprocating, the second party can then react by moving their own figure closer or further away as they choose. They can fake their limit to exert pressure.

Because of this a seasoned negotiator always encourages her opponent to name a price.  If her opponent is also skilled, she'll defer.  This will go back and forth until one acquiesces.  Often, this figure will be in the form of a range with fuzzy boundaries.


How This Pertains to Retail Sales


In a retail operation, prices are published.  This means that buyers are forearmed with the seller's expectations while the seller is not similarly equipped.  Thus a retail seller flexible on price puts herself at a disadvantage because the buyer knows her limits without her knowing the buyer's.

This is why large retail chains don't indulge haggling.  So if you work at a small retail store, follow their lead.  

What You Can Do


The next time a customer asks you for a discount, apply the discounted upsell that I explained in a previous blog post.  Offer to discount an additional purchase that has a high markup.  This increases the overall profit of the sale while allowing the client to feel they won a concession.

Use this reframing technique to put money into - rather than remove it from - your bottom line.  Try it and leave a comment below to let me know how this works for you!


Have you ever printed a huge run of printed material only to discover a typo after the fact?  I'll show a way to avoid costly printing mistakes in the next article.  Look for it in the next couple of weeks.  And please keep your comments coming!  


Until then,
profitable business All!

P.S. Thank you for your comments, questions, and readership.  For further reading on negotiation, I recommend Getting to Yes.

7 comments:

  1. I have also ready "Getting to Yes", a very enlightening book and one that has encouraged me to look for different aspects which can become part of a negotiation.

    I'd say that price negotiation can sometimes depend on the industry and nature of the supply of goods. For a software company there's really a very small marginal cost of supply. So that might affect how you approach discounts, or at the extreme, free copies for promotions or reviews.

    ReplyDelete
    Replies
    1. Thanks for your comment, Dan. I concur: negotiation must be adapted to fit the circumstances. I appreciate your insight. Please continue to read, refer, and comment on future articles. Glad you enjoyed the post!

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