In earlier 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 gain 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 show 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 Published Prices
If you post your prices, you’re unwittingly forewarning your customers without similarly equipping yourself. You automatically accept a disadvantage if you negotiate because the buyer knows your limits without you knowing theirs.
This is why large retail chains don’t indulge haggling. To keep what little profit you make, follow their lead.
What You Can Do
The next time a customer asks you for a discount, apply the discounted upsell that I share in an earlier post. Offer to discount an extra item that carries a high markup. You increase your overall profit while allowing your client to feel they won a concession. Read more about it here.
Use this re-framing technique to add cash to – rather than remove it from – your profit. Try it. Leave a comment below letting me know how it worked for you!
Have you ever printed a huge run of printed material only to discover a typo after the fact? In the next article I show a way to avoid costly printing runs. Look for it in the next couple of weeks. And please keep your comments coming!
profitable business All!
P.S. Thank you for your comments, questions, and readership. For further reading on negotiation, I recommend Getting to Yes.