Tuesday, June 19, 2012

The Less Likely You Are to Need Something...

You can afford to walk away from bad deals on things you don't really need in life.  But a funny thing - the things you really desperately need in life are usually priced very transparently.

Further to my last posting, there is one interesting conundrum about our economy - or perhaps it is a natural rule of life - regarding the "Walk Away" concept.

And that is this:  The less likely you are to actually need something the more likely it is that the pricing is opaque and your negotiation leverage is diminished.

Think about this for a second.  The best bargains around are on things you really do desperately need.  It is only when you seek out luxury goods or unnecessary junk that you end up getting hosed.

For example, swimming pools.  Swimming pools are expensive to own and are really not a necessity in life.  So you might think, logically, and someone who sells swimming pools for a living would price them transparently and try to make a sale to a customer by offering a reasonable price.  After all, it is not like people desperately need swimming pools to live, do they?  The customer can afford to walk away if they want to.

And yet, the opposite is true.  We have talked to a number of pool salesmen, when shopping for our last pool in Virginia, and while thinking about a pool for Georgia.   In every case, the game is the same - the price is opaque, and never listed clearly.   The salesmen tries to feel you out as to how much you want to pay, and then tries to sell you as little pool as he can.   It is a nightmare sales situation, and you have little or no leverage, particularly once you decide you really want a pool.   Your only recourse is to decide you don't want one (which we sort of have done, having had one, already).

But then take something that you really do need to survive in life, like food, for example.   Food is plentiful and cheap in this country - obesity being our greatest health issue.   And food is priced fairly transparently in the USA, despite BoGos, and discounts, and coupons.   You go into the Safeway and buy a head of lettuce and the price is right there for you to see.  The grocer doesn't ask what you do for a living, or say, "Well, how much would you be willing to pay for his head of lettuce?"

By the way, in case my last post was unclear on this, whenever a sales person asks you how much you would be willing to pay for something, run away - you are being snookered.    Like the Cop who says, "how fast were you going?" after he pulls you over, there is no "right answer" that won't just get you into more trouble.  Just walk away.

Or take gasoline.  You may bitch about the price of gas all you want (and by world standards, we have cheap gas).   But the price is posted in two-foot-high letters on a sign that is thirty feet in the air.   You never have to guess as to what it will cost - or negotiate on the price.   And yea, you do have the option of driving less or literally walking away, if you want to.   But for the most part, people need gas to get around, and yet, the pricing is transparent.

Or take hot tubs.  You can buy these inexpensively, if you know the rules of the game.  But if you go to a "Hot Tub Store" you will see tubs with no prices on them, and a salesman who says, "How much would you be willing to pay?" - again, telling you that you should be headed for the door.

Motorcycles are another good example.   These are hardly practical means of transport in most parts of the country - other cars and bad weather make them uncomfortable and dangerous.   So they are not a necessity by any means of the imagination.   But try to buy one and negotiate on price.   Good luck with that!  Once the salesman realizes you have bike fever, it is all over for you.

It is an interesting conundrum, to me.  Things you need are good bargains and transparently priced.  Junk you don't really need is priced opaquely and often with staggering profit margins built-in.

But maybe this conundrum is no conundrum after all.    When people shop on price and seek out a bargain, prices fall into line.   The price of gas is posted clearly as no one in their right mind would negotiate on a gallon of gas.   And perhaps because food is so dear to our existence, we do not tolerate games with prices on food.

And even for luxury items, pricing can be realistic, if you are willing to shop around and be clever.  The motorcycle store, the hot tub store, the new car dealer, or whatever, are never going to give you very much of a good deal.  But you might find a better deal, buying the same product from an individual, that is only a few years old, and if that individual really needs to sell it.   At that point, the prices tend to fall into line with the marketplace, and there is less of this "how much would you be willing to pay?" nonsense.

But it illustrates that you really can afford to walk away from bad deals in life as most of the bad deals in life are for crap you really don't need - consumer electronics, electronic services (smart phone, Cable TV), new cars, recreational toys, and the like.

And the stuff you can't afford to walk away from - food, clothing, shelter - is more directly and clearly priced.

If you think about it, this is not such a bad deal for the consumer!   You just have to convince yourself that you don't "need" a new Harley desperately - or are willing to wait until you neighbor falls off his, and then desperately wants to sell it.  Good things come to those who wait!

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