Rafi Mohammed

Discounting is the Name of the Game

Posted on December 16th, 2008 (1 Comments)

As we head into the home stretch of the holiday season, the theme this year is “how low will stores go on their prices.” Here are a few pricing observations on this holiday season.

Buy 1 Car Get a Second for FREE. Pretty eye catching, don’t you think? Rob Lambin’s University Dodge in South Florida is offering customers a spectacular deal on Dodge trucks. Here’s the offer: buy a loaded 4 door pick up truck ($32K – $50K) at full price and get a 2 door base model (valued at $24K) for free. OK, there’s the catch that you have to pay an additional $3,000 in taxes, “dealer fees,” and tags for the “free” truck. Who would have known there are taxes on a free product (wink, wink). That said, this promotion is bringing in droves of customers. And while most customers opt to forego the free truck in return for a larger discount, to date 15 buyers have driven home a truck on the house.

Negotiate, Negotiate, Negotiate. Haggling at well-known retailers is becoming increasingly popular. In fact, mega retailer Home Depot is embracing the notion of negotiation: “We want to work with the customer, and if that happens to mean negotiating a price, then we’re willing to look at that,” a Home Depot spokeswoman claimed in the New York Times. She further added that Home Depot “has adopted an ‘entrepreneurial spirit’ campaign to give salespeople and managers more latitude on prices in order to retain customers.” Geez, the spokeswoman is all but screaming: “offer us your best price and we’ll work with you.” So on your next major Home Depot purchase, offer them 15% less and see what they’ll come back at. Additionally, recent news reports have highlighted that negotiation is fair game at most well-known retailers where you would have thought the price on the tag is the final word.

Here’s my advice to retailers that empower their sales force to negotiate: make sure your sales associates understand value. I learned this lesson from a wise retailer in upstate New York. As a graduate student on a budget, I entered a local electronics retailer with an electronics ad from a rock bottom discounter that was located 250 miles away in Manhattan. “I’m willing to purchase this product from you if you match the price in this advertisement,” I commanded. The owner thought for a second and then opined, “There’s something additional that I must offer or else you would have simply purchased from the Manhattan discounter.” Of course, he was right. I valued the opportunity to enjoy the product immediately, avoid shipping charges, and have a local contact in the event that the product was defective. So my point is that if you are willing to let your sales force negotiate on your behalf, please take a few minutes to emphasize to them the value your company adds relative to the next best alternatives.

Discounting is indeed the name of the game. And right now it's anyone's guess whether retailers are playing Monopoly, Sorry, or You Sunk My Battleship.

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Readers' Comments on This Blog Entry

From rachel simeone on December 16th, 2008
This is fascinating both as a marketer and as a consumer. As a marketer it does make me wonder what that dealership is going to have to do next year to maintain year over year sales.