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The haggle is “in”

Posted by Michael Bloch in ecommerce (Thursday March 27, 2008 )

Can’t say I’m a big fan of haggling as I find it a bit demeaning, but with the economy seeming to be taking a bit of a nosedive, haggling is becoming more widely accepted in stores that wouldn’t hear of it a short while ago… and perhaps we’ll see this happening more online as well.

Back in the 70’s and early 80’s my mother had a dress boutique here in Australia and if there was something she really disliked, it was haggling customers; particularly those that treated it like a sport. She was very fair in her pricing, so the price was the price. In many countries though, the price is just a starting point for negotiation – even on small items.

It seems that even stores like Best Buy and Home Depot are now allowing for haggling according to the New York Times. It’s not becoming more accepted just because of the economy, but also due to the concept of “customer lifetime value” i.e, lose a little on a first sale in order to gain a customer for life. I think that you’ll hook a customer who will haggle with you for life as well though :).

Still, over the lifetime, you *may* make more from the customer even if you have to drop your prices a little, rather than just making the one sale and they go elsewhere in future. Or if you give in, you *may* just wind up with a bunch of customers where each purchase they make becomes a real ordeal for you. Haggling takes time, time is money and the end result is less of it for you on those purchases.

Haggling certainly seems to be “in” offline, so I guess we’ll start seeing people doing more of it online as well in the near future. Something that bugs me about it is that in cultures where haggling is a part of every transaction, the initial price is always high as a haggle is expected. If this approach becomes too “mainstream” we’ll all be forced to become hagglers whether we want to or not.

If you’re faced with a haggler, but the margin on the product they want is slim – yet you really want to capture the sale, something you can try is to offer to throw in another product for free – something you have a largish margin on.

For example – the customer wants $50 bucks off on a Flomble, so you offer them a $20 discount, plus a free product you sell for $30 but that only costs you 15 bucks. Of course, it needs to be a product they want :).

Another thing you can try is to offer them a small discount, plus a coupon for a further purchase – that will bring them back to your store.

Haggling is a cultural thing in many cases, but for some it’s just the thrill of the hunt. I remember when my parents ran a bakery someone haggling over a $2 loaf of bread :).



 

 
2 comments for The haggle is “in”
  1. My new customers always want to haggle.
    My unit price average is 4k per product as I sell big ticket auto workshop machinery.
    I try to leave enough margin to handle their often overpriced trade-in and any haggling.
    My established customers seldom haggle. They are smart enough to want me to make a good profit, as it allows me to give them exceptional after sales service, and they realize I will not provide it without enough margin to do so.

    My competition only sell on price, often leaving only 1 or 200 dollars profit on a 5k sale. It is not too difficult to explain the service angle on items that need support, and I ask the question.How good will the service be when there is no profit to provide it?

    Comment by Ern — March 29, 2008 @ 1:33 am

  2. Hi Ern, if I remember correctly, you’ve been in business for a very long time, so obviously your approach works :). I think when starting out, taking a whack on the profit side of things is okay to get you started, but then after a while, a model like yours is definitely better – once you’ve made a name for yourself.

    I’d much rather pay a few bucks and get the good after sales support – but that’s another challenge these days. Paying more doesn’t equate to better service quite often.

    It’s interesting and an important point that you also factor in a “haggle” margin.

    Comment by Michael Bloch — March 29, 2008 @ 3:43 am

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