Pricing when customers haggle
Set a price you advertise and a floor you will not go below, and know what each cedi of haggling costs you.
In a market where every customer expects to bargain, one price is not a price. It is an opening position. And if it is the only number your salesperson has, they are guessing where to stop, usually in front of a waiting queue.
Two numbers fix that: the price you say first, and the lowest price you will accept. This guide is about choosing the second one, because almost every shop has the first and almost none has written down the second.
Start from your cost, not from the shop down the road
Every price decision begins with one figure: what one unit of the thing cost you. Not the carton, the unit you actually sell. Adjoa buys Milo 400g from Melcom Distribution by the carton.
What one tin of Milo 400g really costs
- Carton of 20 tins from Melcom Distribution
- GH₵ 510.00
- What one tin costs you
- GH₵ 25.50
- Your shelf price
- GH₵ 38.50
- What one tin earns at shelf price
- GH₵ 13.00
Do this once per product, on the day you receive the goods. It takes a minute and it is the only thing standing between you and a friendly sale at a loss.
Choosing the floor
Your floor is not the biggest discount you can survive. It is the lowest price you are willing to repeat, because whoever gets it will tell somebody, and that somebody will arrive asking for the same thing.
Three tests a floor has to pass:
- It is above what the goods cost you. Always, with no exceptions for friends, family or a slow afternoon.
- It is above cost and above the share of running costs that unit carries. Rent, wages and transport are paid out of the gap between cost and price, not out of nothing.
- It is a price you could give to every customer who asks, all week, without regret. If it is not, it is not your floor, it is a favour.
Adjoa sets Milo 400g at GH₵ 38.50 on the shelf, and decides she will not go below GH₵ 32.00 for anybody. Both numbers are written down before any customer arrives, which is the only time a floor can be chosen honestly.
The floor is for the big order, not the walk-in
A woman buying one tin gets the shelf price. A man buying 12 for a party is the reason the floor exists. Here is what the argument is actually worth.
12 tins, three different prices
- At shelf price, GH₵ 38.50 each
- GH₵ 462.00
- At your floor, GH₵ 32.00 each
- GH₵ 384.00
- What you gave away to win the order
- GH₵ 78.00
- What you still keep at your floor
- GH₵ 78.00
- What you would keep at his GH₵ 30.00
- GH₵ 54.00
The difference between holding your floor and giving in is GH₵ 24.00 on one order. You make that decision several times a day, so it is not a small number by the end of the month.
Notice that the floor is not a small concession. On this order Adjoa hands over as much as she keeps. That is what a real floor looks like, and it is why it has to be decided in advance rather than in the middle of a bargain.
When somebody down the road is selling cheaper
This is the moment the floor is for, and it is the moment most shops abandon it. Remember two things. You do not know their cost, and you do not know why they are cheap. A shop clearing goods that are close to expiry can beat you all week and be poorer for it.
Matching a price below your floor buys you the sale and loses you the money. It also trains the customer, who now knows your real price and will start there next time.
What to do instead:
- Hold the price on the lines that move fast and bargain on the ones sitting since January. Discount slow stock, never your best sellers.
- Give a quantity, not a price: the floor for a carton, the shelf price for one.
- Add something small rather than cutting the figure. What you add costs you its cost, not its price.
- Check your own cost first. If the wholesaler raised his price last month and you never moved, you may be comparing yesterday's floor to today's market.
Raise the floor the day the cost rises
The quiet killer is a floor set in March that is still in use in July after two price rises at the market. Every unit you sell at that floor now loses money, and the loss only shows up months later as a shop that is busy and broke.
So make the restock the moment you review the price. When you receive goods at a higher cost, look at both numbers before the carton reaches the shelf. AxisTrade does this part for you: when a restock pushes a product's cost above its floor, the floor is lifted with it and the change is put in front of you.
What to tell your salesperson
Give Kwame the lowest price. Never the cost. He does not need it to do his job, and a cost figure repeated in the wrong company is a bargaining chip handed to the person on the other side of the counter.
That is exactly how the sale screen works in AxisTrade: staff can bargain down to the floor and no further, and when a price is refused they are shown the lowest acceptable price and never what the goods cost. There is no override, not even for the owner, because a wall with a door in it is not a wall.
Write both numbers down before the customer arrives
A floor chosen while a customer waits is not a floor, it is a mood. Decide the two numbers when you set the price, tell whoever sells for you the lower one, and haggling stops being a decision and becomes a script.
That is the whole method. One price you say first, one price you will not pass, and a cost figure that stays behind the counter.
Read next
What your profit actually is
Sales, minus what the goods cost, minus money out. A full worked week that adds up.
Counting stock without fooling yourself
Count blind, count often, and read the difference properly before you accuse anybody.
Keeping the credit book straight
Give credit deliberately, record it at the counter, and keep a repayment record that ends the argument.
