Price Negotiation Among Retail Merchants: Who Dickers and Who Doesn't

ABSTRACT - Bargaining behavior is an interesting and a familiar phenomenon which has existed virtually as long as humans have exchanged goods among themselves (Lidstone 1977). In peasant markets like the open-air markets of Latin America, negotiation is still a primary means of price setting (Beals 1975, Malinowski and de la Fuente 1982). Even in our modern, mechanistic society price setting remains a complex and dynamic social activity (Prus 1985). Literature related to price negotiation is scant and tends to focus on consumers, especially in industrial settings.

Citation:

John W. Schouten (1987) ,"Price Negotiation Among Retail Merchants: Who Dickers and Who Doesn't", in NA - Advances in Consumer Research Volume 14, eds. Melanie Wallendorf and Paul Anderson, Provo, UT : Association for Consumer Research, Pages: 576.

Advances in Consumer Research Volume 14, 1987      Page 576

PRICE NEGOTIATION AMONG RETAIL MERCHANTS: WHO DICKERS AND WHO DOESN'T

John W. Schouten, University of Utah

ABSTRACT -

Bargaining behavior is an interesting and a familiar phenomenon which has existed virtually as long as humans have exchanged goods among themselves (Lidstone 1977). In peasant markets like the open-air markets of Latin America, negotiation is still a primary means of price setting (Beals 1975, Malinowski and de la Fuente 1982). Even in our modern, mechanistic society price setting remains a complex and dynamic social activity (Prus 1985). Literature related to price negotiation is scant and tends to focus on consumers, especially in industrial settings.

This paper addresses two questions about price negotiation: First, how willing are retailers to negotiate prices directly with consumers? and second, what determines which merchants will and which will not negotiate?

Beals (1975) found that, in Mexico, merchants who were more involved in the production of their goods were more likely to bargain than those who strictly bought and sold. He also noted that, in periodic markets, merchants became increasingly willing to negotiate as market day came to a close. Pennington (1968) presumed that negotiation would be more likely for durable goods than for non-durables. Prus (1985) indicates that salespeople in large organizations will be less likely to dicker than those in small enterprises. Finally, as suggested by literature on teal-proneness (Blattberg 1978, Montgomery 1971, Webster 1971), there may be attitudinal factors which affect willingness to negotiate. Specifically it is asked whether merchants who are willing to ticker are the same people who choose to do so when acting the role of consumer.

METHOD

Data were gathered by personal administered questionnaire from a quota sample of 32 retail merchants of durable goods in Salt Lake City, Utah. Participants were chosen to provide representation of chain stores, multiple outlet regional stores, and single stores. In each store the questionnaire was administered to the highest ranking available person who was directly involved in selling. Upon completion of the questionnaire the respondent was interviewed briefly to cross-check the accuracy of the responses, especially if certain responses appeared inconsistent with other responses or with observable fact.

Willingness to negotiate, the dependent variable, was measured by five items (alpha = .92) on a six-point likert scale. Three items (alpha - .81) were used to determine if the respondent enjoyed or frequently practiced dickering in his or her own purchasing activities. The merchant's involvement in the production of his or her merchandise was indicated on a percentage of total merchandise basis (in retrospect, not a good measure). The size of the organization was measured by the number of stores. Finally, the salesperson's authority to negotiate was measured with a six-Point semantic differential scale.

Multiple regression analysis was used to determine the degree to which merchants' preferences for negotiation as consumers, their involvement in the production of their goods, the sizes of their organizations, and their personal authority to negotiate combine to explain the variance in their willingness to negotiate price with their customers.

RESULTS

The study revealed that-a surprising number, 35.5% of the merchants surveyed, indicated their willingness to negotiate with a four or five on the six point scale. The mean score for all merchants was 3.9. Regression analysis produced an explained variance of .62 for the four independent variables, but only two variables, preference for negotiating as consumers and size of organization, were significant at alpha - .05. The single most important variable was the merchant's disposition toward negotiating, entering in stepwise analysis with an R squared of .53. As expected, the measures for organization size and authority to negotiate were negatively correlated (r = -.684).

DISCUSSION

The results indicate that merchants in small organizations are more likely to exhibit willingness to negotiate price with their customers than those in larger organizations. Moreover, they are more likely to have the authority to do so. The merchant's involvement in the production of his or her merchandise did not seem to be a good predictor for willingness to negotiate. This may have been due to the quality of the measure or the size of the sample. Only three of the 32 merchants, one specializing in custom jewelry, another in custom furniture, and the third in locally produced mattresses, showed any observable production involvement. All three voiced high levels of willingness to negotiate.

The most interesting result of the study was that negotiation seems to be more of an end than a means for the people surveyed. Those that are willing to negotiate are likely to do 80 whether they are selling for their livelihoods or purchasing for their own use. Those who are unwilling to negotiate their prices also tend to prefer not to dicker when purchasing for themselves. This might lead to the conclusion that price negotiation, or dickering, is done more for social or psychological reasons than for economic ones.

REFERENCES

Beals, Ralph L. (1975), The Peasant Marketing System of Oaxaca, Mexico, Los Angeles: University of California Press.

Lidstone, John (1977), Negotiating Profitable Sales, Westmead, England: Gower Press.

Pennington, Allen (1968), "Customer-Salesman Bargaining Behavior in Retail Transactions," Journal of Marketing Research, Vol. V (August), 255-62.

Prus, Robert (1985), "Price-Setting as Social Activity: Defining Price, Value, and Profit in the Marketplace," Urban Life, Vol.14, No. 1, (April), 59-93.

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