Sunday, February 22, 2015

The Art of Haggling: An Introduction

The Art of Haggling: An Introduction


Through out all of history haggling has been an everyday part of trade, that is until very recently. In the US and other industrial countries the act of haggling has all but disappeared. Why do you think this is the case? Can it be brought back? Should it? Can it be an effective tool in the modern world? How is it done? Can someone learn how to haggle? We are going to go through all of these.

What Is Haggling?


Haggling is the negotiation process between a buyer and seller or their representatives over the terms of a purchase normally price. The process of haggling can last anywhere from a few minutes to several hours depending on the size of the purchase. The goal of haggling is to reach a mutually acceptable price for an item. In many Asian cultures the negotiations over a large purchase can take several days and is considered a social event, which may include the buyer and seller eating or having tea or coffee together.

In many cultures haggling is not only expected, but if it does not occur can be considered insulting. Asian, Middle Eastern, and even South American cultures expect to haggle over price. If you do not do so you will be cheated.

Currently the only areas that it is generally accepted that haggling will occur in the US is while trying to purchase an automobile, furniture, or a home. Some people enjoy the back and forward of the negotiation process, others see it as almost a confrontation.

In the States asking about price means very little, but in some cultures asking about a price indicates intent to purchase and should not be done so lightly.

End Result of Transactions


Stephen Covey in his book the Seven Habits of Highly Effective People talks about negotiations. The possible results of trade are win/win, win/lose, lose/win, and lose/lose. We will cover these in reverse order. 

Lose/lose is when the end result of negotiations leaves both the buyer and seller unsatisfied. How does this happen? This can only happen when neither the buyer or the seller have given themselves the option to walk away from a transaction. Both the buyer and the seller need the transaction to occur, but cannot come to a mutually agreeable outcome. The transaction takes place because both the buyer and the seller see no other option, but neither is happy in the end.

Lose/win is when the buyer has been taken advantage of and knows it. The seller has won and has done a disservice to not only that customer, but to themselves. The seller may think that they have optimized their profit, and they have on that one transaction, but many times their reputation will be damaged.

Win/lose is when the buyer has taken advantage of a seller. They know the seller is desperate and has used that knowledge to pay an unreasonably low price for a product or service. The buyer has achieved a great deal, but at the expense of someone else. I have had this happen to me as a seller. It is not a good situation to be in and I refused to do business with that buyer in the future. 

Win/win is when both parties reach a mutually agreeable price and/or terms for a transaction. Both parties are satisfied with the outcome and will gladly do business with each other again. This should be the goal of all transactions. This is where balance has occurred. 

How to Haggle.


Haggling is a skill that requires development. You are most likely not going to do very well the first time you try. There are some things you should keep in mind when you are negotiating price.

What the Item is Worth to You


When you look at an item decide what you are willing to pay. This can be a set amount or a range. If it a range have in mind what would be a great deal and what would be just acceptable. There may be times when you will want to pay more for an item than the asking price. These situations are rare, but when they do occur the seller has either undervalued an item or do not know it's worth. Sometimes your integrity makes you pay more than what is asked. Again this situation is very rare.

Most times the seller will have priced the Item at a comfortable price for them and will have a little bit of "wiggle room".  Some sellers in the US may be offended that you try to haggle, if that is the case just walk away and remember that the next time you have opportunity to trade with that individual, but still have a price in mind that you are willing to pay. All transactions should be a win/win.

What you Think is a Fair Price

I know that many people think this heading and the one above are the same, but they are not. There are a lot of things that I think are a fair price, but they are not worth that much to me. As an example I will use a television. I have seen really nice televisions on sell for around $200. These sets are decent quality and are comparatively a very good deal. For someone who watches a lot of television, these advertised prices could be a "door buster". For me however, they are nothing more than an interesting side note. The only time I watch television is if someone else in the family has it on and the program is something that I find interesting. I could do completely without a television at all. There have been times that my family was watching something that I didn't care to watch. I just stayed in the family room and wrote or worked on something else. I am not the target market.

Tools for Haggling

The Low Ball

When a person low balls they make an offer for an item or service that is on the low side of fair. If a person is asking $100 dollars for an item, I might make an offer ranging from $35 to $55. If the person is asking $100 and I know it is worth much more I may not use a low ball offer. It is times like these that a person may be offended by a really low offer. Remember, your offer should be on the low side of fair, not below fair.

The low ball offer is a starting point for negotiations. In normal situations this will cause a counter offer and the game is on.

Condition of the Item

If there are scratches, dents, or dings, these can be pointed out as a reason that the price should be lower. I have looked at an automobile before that upon close inspection had been wrecked. It wasn't bad, but it was enough that it had to be repaired. The seller claimed to not know that it had been wrecked and I believe that they did not know. I showed them the evidence of the repair and was able to negotiate a better price. Even the condition of packaging can be used to negotiate price.

Cash

It really doesn't matter if you like the current economic system or not; "Cash Talks". Especially when dealing with small merchants. Lots of people and small companies no longer take checks. Accepting credit cards can get expensive. I have operated a small business and know how quickly the fees can add up. When I was taking credit and debit cards for transactions there was a per swipe fee which at the time was $0.27 per transaction and a percentage charged for each time someone used a card. The percentages ranged from 1.67% to 2.55%. These add up quickly. 

Even when dealing with an individual, if you have cash in hand and do not have to come back and pay them later, this will garner you a better price. No worrying if the check will clear.

Bundling

If you are having difficulty coming to a mutually agreeable price look around and see if there might be something else that you would like that the seller doesn't value as highly as you. By combining two or even more items together the seller gets more money, but you just might get a better deal. 

Example: You value a cast iron wash pot at $60, the seller values it at $105. You see a corn sheller that you value at $90, the seller only values it at $30. You are offering $150 for two things that the seller only values at $135. That seller is going to let you have them and both of you will be happy with the transaction. That my friends is a win/win.

Buying in Bulk

If you are looking at a peck basket of tomatoes, don't think you will be able to haggle much unless the seller has over 100 pounds that need to be sold. But if you are buying in bulk say 10 pounds or more, you will have a good chance at getting a better price per pound. This is true of anything. I remember one time my dad was looking at buying an old pickup truck to fix up to sell. The man had three of the same model. I do not remember the starting price, but by the time it was said and done we had purchased all three for a little less than twice what he was expecting to pay for one. We took the three trucks and made two. We didn't have to go looking for parts. Once we were done, we sold what was left of the third truck as scrap metal. 

Other Opportunities

If a seller has what they know to be a unique item that they believe is in high demand, it is very unlikely that you will get them to budge on price. If there are several other items that have the same function for sale in the area you have another tool. "Old Joe has another model and he is only asking this much for his."

Be Willing to Walk Away

If you cannot come to an agreement, just walk away. Remember the goal is a win/win ending. It may be that after a day or two the seller will come down a little more on price or you may realize that the item is worth more to you than you thought. Even if neither one of these things occur, you should be able to shake hands and part with a good conscience.



Where to Haggle?

It is pretty much understood that haggling is expected for big ticket items. No one even thinks twice about about trying to get a better price on automobiles. I know I keep coming back to that, but that is really the mainstay of haggling in the United States. But what about haggling on antiques? Small appliances? Camping or survival gear? Yup, I do it as much as I can.

Places where haggling is expected or at least not uncommon include trading with individuals, yard sales, flea markets, and to some extent farmer's markets. Haggling at flea markets is very common. Anywhere there is a significant Latino population you will notice the increased frequency of haggling. I really like that.

Have you ever thought of haggling at a big box retailer? I do it all the time. I have successfully negotiated a better price on items from Wal Mart, K Mart, Lowe's, and Tractor Supply. There are some tricks to it though. When trying to negotiate a better price with large retailers, you must be able to give a reason they can no longer expect to receive full retail for that item. Items that have damaged packaging, that have been returned, that are slightly damaged but still usable for their intended purpose, discontinued, and clearance items are all on the table. 



My wife and I were in Wal Mart the other day when I saw this percolator. I have wanted one for a while. I told her that I wanted to find the manager and see if I could get it for a lot less. We were on a tight schedule so I was unable to make the deal happen. Little did I realize that my wife went back the next day. She found the manager and was able to purchase the percolator for $5.00. She saved over $9.00 including tax just by asking. This was her first attempt at trying to get a better price and she was successful. I am very proud of her. She had previously always been nervous about asking, now she is addicted.

For most larger retailers department managers, assistant store managers, and store managers can give you a better price most of the sales floor people do not have that power. Seek them out the management and just ask. The worst they can do is say no.

Get out there and do a little haggling you may find out like my wife did that you really enjoy it. Doing this will help

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