That is not the final offer

Many clothing stores and boutiques in China have no price tag on some of their items. The reason why they are doing this is to leave some room for negotiation. In order to maximize the profits, the shop owners would offer different prices to different customers on the same item. They adjust their prices based on the types of customers. For example, the shop owner usually offers a very high price to foreigners or tourists.

I remember once, my friend was surprised that I bought a dress for ¥150 which only worth ¥50 (she got the same dress)……

When I saw that dress, I immediately fell in love with it. Obviously, the shop owner noticed that I was interested in it from my excitable behaviour.

Seller: This is the last one, only ¥ 200! You can try it on if you want.

Me: Can you make it cheaper?

Seller: Oh! It looks great on you! ¥ 200 is not expensive at all! ...... Okay, I can give you a 10% off discount which is ¥ 180?

Me: Can you do any better?

Seller: Erm.... Let’s say ¥ 150, and that is the final offer. Otherwise, I’ll lose money.

Me: Okay! I’ll get it.

The shop owner employed the technique of scarcity. The dress became more attractive and valuable when the availability was limited (Cialdini, 2007). The owner made the first offer of ¥200 which set an anchor.  As soon as the owner makes the first offer, it will directly influence the consumer’s perception of reservation value and therefore the final outcome. As I am not familiar with anything there so the shop owner’s anchor worked. ‘‘The power of anchors is substantial.’’(Malhotra & Bazerman, 2007)

The shop owner complimented me on my appearance with the dress, it would increase the likelihood that I buy the dress. A recent study found that compliments can increase purchasing behaviour (Dunyon, Gossling, Wilden & Seiter, 2010).

In addition, the shop owner was willing to make a concession herself which generate reciprocity (Cialdini et al., 1975). I was thinking: she had already been given me 25% off discount, I should accept it. In order to reciprocate, I also made a concession which was not negotiate anymore and paid her ¥150.

To avoid being get ripped off by them, collect more information before negotiation for calculating the other party's reservation value and evaluating the zone of possible agreement. If I had known these, I would have saved ¥100.

By Hau Wong (Blog 5)

Reference

Cialdini, R. B. (2007). Influence: The psychology of persuasion. S.l.: Collins.

Cialdini, R., Vincent, J., Lewis, S., Catalan, J., Wheeler, D., & Darby, B. (1975). Reciprocal concessions procedure for inducing compliance: The door-in-the-face technique. Journal of Personality and Social Psychology, 31, 206-215.

Dunyon, J., Gossling, V., Willden, S., & Seiter, J. S. (2010). COMPLIMENTS AND PURCHASING BEHAVIOR IN TELEPHONE SALES INTERACTIONS 1.Psychological reports, 106(1), 27-30.

Malhotra, D., & Bazerman, M. H. (2007). Negotiation genius. New York: Bantam Books