Tuesday, April 28, 2009

The Fine Art of the Haggle: Reprised

A little while ago, I wrote about an experience I had at a sales kiosk in Yorkdale, and how the prices are far from fixed.

Well, just about everything I guessed at was vindicated when, shortly after, I ended up working a few months at a similar kiosk. I got to see the other side of the equation.

I left the job about two weeks ago, and just came across this post from SomedayNurse, whose blog I'd never read before:

Beware the Mall Kiosks of Death

Have I got a deal for youYou think you are safe. After all, this isn’t a dusty marketplace in Calcutta. This is a shiny indoor shopping mall blasting AC and Top 40 Muzak. Sure, there are things to buy everywhere, but they are all in safe stores were the merchandise itself may be seductive, but no one will bat an eye if you leave without buying anything.

When I think of Mall kiosks, I think of bored teenagers sitting on their cell phones in front of carts of Designer knock-off sunglasses or cell phone accessories. But these guys are slick. Predatory. Young and beautiful, with syrupy accents and hard eyes.

My sister told me about the time she was manipulated into buying a 25 dollar jar of Dead Sea salt scrub from a beautiful Israeli woman who promised my sister the skin of a goddess in five minutes a day. I laughed at her that she could be conned like that.

I am so sorry, lil’ sis. I understand now that you were powerless to resist.

I have really curly hair, and the young man at the Colourful Kitty (yes, I said Colourful Kitty) kiosk asked if I wanted him to straighten it “for fun.”. I didn’t have to stop. I never stop at kiosks. But the straightener was kind of cool. I’d never had my hair completely straight. I haven’t wanted my hair to be straight since I was about fifteen.

The straightening iron did a great job, but he wanted way too much for it. He said I should make him an offer. Even as it was happening, I was thinking how interesting it was that I that someone who considers herself as a critical thinker was allowing herself to be hustled like this.

The worst part was, I didn’t even want the stupid thing that much.

Now I have stick-straight hair and my wallet is minus a days wages. At least it’s a nice straightening iron. If I ever cut my hair, I might actually use it.

[....and in the comments section]

Phaedron Says:
April 28, 2009 at 12:57 am

I actually worked for a short time at a similar Kiosk in Toronto, Canada. It was fun: my job was practically to flirt with girls all day to pump up sales.

The funny thing is, I actually wrote about a kiosk that I encountered on my blog (http://phaedronrising.blogspot.com/2009/02/fine-art-of-haggle.html)... About a week before I ended up starting a job at a similar kiosk!

So? Here are some of the things that I learned...

There's often a colossal margin at an Israeli-style kiosk between a product's "list price" and the minimum price at which a salesperson can actually sell the product. Those prices are never listed in a way that you can browse through without talking to the salesperson.

The salesperson needs to make a lot of snap judgements about a potential customer very, very quickly. The best thing to do is offer the product at a high margin, building enough room into the sale to pay for "free gifts".

There are two main ways of dealing with a price-based objection:

1) You (well, I) would use the margin between the higher "list price" and the minimum price at which the product can be sold to pay for those "gifts".

2) The salesperson can be willing to lower the price.

The first approach is much more common, and here's why:

First, the salesperson knows that 90% of the time that the customer has a money-based objection ("I can't spend that much"), it's not true. Maybe she can't spend that much AND get that cute top she wanted. Of course, she is not going to say that, so she couches the objection as a one-dimensional issue of cost. By adding in those freebies - already paid for by the large margin of the sale - the salesperson can, in effect, sell 3 or 4 things at minimum price while letting the customer walk away with the feeling that she's gotten a fantastic value.

Second, the salesperson can lower the price. This will only happen when he truly believes that you don't have enough money to pay the higher price.

It's a sales structure that we're so unused to in Western retail - the idea that prices are rarely fixed: the price at which an item can be sold becomes, ipso facto, its real price. We're used to seeing a shining red widget on a shelf with a $42 tag on it, and everybody pays the same. In a kiosk like this, the same item will sell for $130, $50, and everything in-between throughout a salesman's day.

It's easy to jump to the conclusion that it's "unfair," but even in North America, we have a culturally accepted example of this sort of flexible-equilibrium price structure: real-estate.

The price of a house is - by definition - what people will pay for it. We're just not used to seeing hair-straighteners, nail kits, makeup or skin care sold in the same way. Our initial reaction is to think it's fair for houses, but unfair for a skin cream, and it usually stems from the fact that the item sells for more than the cost of producing it. Nobody bats an eye, though, when a house sells for more than its construction cost.

The same house could, under circumstances dependent on nothing more than the situations of the seller, the buyer, and the general market, have a $150 000 range that it could potentially sell for. It can feel unfair at a kiosk only because we're not used to the same sales structure being applied on a retail level.

That's why it's so important to make the customer feel like she has "won" the deal.

But do you want to know the most interesting thing that I found while working at a kiosk? People that bought, almost always returned for more. The hardest part is for a salesperson to get that person to make that first purchase!

And when the first sale is made at an expensive price, the customer walks away feeling like they have something extremely valuable: it's the feeling of having that $130 luxury skin cream. She won't want to go back to the $40 stuff she was getting at her local store.

Truth is, what the kiosks are great at is taking a product that's moderately better than the competition, and commanding a substantially greater price for it. Of course, the overhead on a kiosk is far lower than a store at a mall, so the kiosk *could* technically afford to sell a higher-quality product for the same price as the competition. But why would they? In the case of consumable goods like skin care or makeup: if it's sold for the same price as the competition, a customer will assume it's of similar quality to the competition's.

It's the people that you sold to at a "discount" rarely return.

No comments:

Post a Comment