Haggling
When two parties involved in a transaction negotiate until a common ground is met
What is Haggling?
Haggling occurs when two parties involved in a transaction negotiate until a common ground is met. Common ground is met when the two parties involved make back-and-forth offers until a price is agreed upon. The price agreed upon is generally fair and equitable for both parties involved. Haggling is another word for negotiating, bartering, and bargaining.
Summary
- Haggling occurs when two parties negotiate the financial terms in a transaction.
- Haggling is socially acceptable in specific situations such as purchasing a car, real estate, and flea markets. It is not socially acceptable in commercialized businesses, such as retailers, restaurants, and supermarkets.
- Apart from price, areas such as payment plans, interest rates, quality, delivery, and setup can all be haggled.
When is Haggling Socially Acceptable?
Haggling allows the party to get better prices, but it is only socially acceptable in certain situations. Listed below are situations where haggling is socially acceptable:
- Business-to-business commerce
- Suppliers
- Manufacturing and production negotiations
- Transportation of goods
- Loans
- Real estate negotiations
- Salary negotiations
- Cell phone contracts
- Car purchases
- Rent (in some cases)
- Private lessons
- Flea markets
- Uncommercialized food markets
As the list above shows, haggling is done in the business world quite often. Although, there are certain situations where haggling is considered rude. It will be discussed below.
When is Haggling Not Socially Acceptable?
In other situations, haggling is considered rude and is not socially acceptable. Listed below are situations where haggling is not socially acceptable.
- Retailers
- Restaurants
- Supermarkets
- Pharmaceuticals
- Special events
- Commercialized businesses
Haggling is not considered socially acceptable in larger markets. A consumer would not walk into a Cabela’s and try to haggle down the price of a crossbow.
What Can Be Haggled?
For the most part, haggling involves the negotiation of the price until a common ground is met. Apart from price, several different areas can be haggled to ensure that both the buyer and the seller are happy with the transaction. Shown below are some of the areas that can be potentially haggled during a transaction.
1. Price
Price can be haggled in a transaction. It occurs when two parties negotiate back-and-forth until a common price is set. In general, both parties need to be satisfied with the price for the deal to go through. Haggling the price generally occurs in car purchases, real estate negotiations, and flea markets.
2. Payment Plans
When the payment is actually received by the seller can be haggled. For a big-ticket item, the seller can be haggled to receive payment a month after the buyer receives the item. It can be seen in a company’s “accounts payable.” Haggling payment plans generally occurs in business-to-business commerce.
3. Interest Rate
The amount of interest paid on an item can be haggled to ensure the satisfaction of both the lender and the borrower. Haggling the interest rate is most commonly seen in loans.
4. Quality
The quality of a product can be haggled. It will occur if a buyer is willing to pay for a “grade B” product rather than the more expensive “grade A” option. Haggling quality most commonly occurs in big-ticket items, such as cellphones and cars.
5. Delivery
How the product gets from point A to point B can be haggled. It can be seen in businesses who are looking for a more affordable way to get their product overseas. Haggling the delivery is generally seen in B2B transactions with suppliers and transporters.
6. Setup
If a product needs to be built in order to be usable, the setup can be haggled. A buyer could agree to pay more money if the seller “adds a setup” into the deal. In such a way, both the buyer and seller are fairly compensated for the deal. Haggling the setup generally occurs in negotiations involving items that need to be set up.
Methods to Avoid Haggling
Some businesses cannot afford to deal with hagglers because of their low product margins. In such situations, there are several methods to deter consumers who haggle:
1. Cash Discounts
Depending on the U.S. state a business is located in, credit card fees can range from about 3% to 5%. Such high credit card fees can be avoided by offering someone who haggles a cash discount for their desired item.
2. Adding Products
It can be beneficial to suggest bundling a large number of items for a reduced price. It will actually be more beneficial to the seller due to the number of items sold compared to the price discount.
3. Sales
As stated, haggling generally occurs when two parties negotiate the price of an item. Consumers are less likely to negotiate the price of an item if there is a store-wide sale.
Additional Resources
CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.
To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:
