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March 28, 2009

Thinking about value... and buy my valuable furniture?

March 28. Day 271.

If you're an economist, or didn't almost flunk college econ like yours truly (thank God for grade inflation), please forgive me. The next post is going to be a sleeper. Probably what you covered on day one of business school. No, what you figured out when you started selling used Porsches out of your mom's garage when you were 15. No, what you learned when you were 7 and ran a successful lemonade business, followed by a neighborhood IPO. So how about you go play catch with your son or bake some peanut butter macadamia cookies. You have better things to do. Trust me. Shoo. Scram!

But if you're like me, dear reader, and consider "plus" and "minus" to be the most aggressive tools in your bag of accounting tricks or wouldn't be caught dead calculating a tip in your head when you have a cell phone in your pocket, read on. You might find this interesting.

Here's my thought for the day: Value. So much about negotiation requires knowing what your goal is worth to you. Do you really want that house for $400,000? What about $600,000? When will you walk away?

The same goes for sellers: At what point do you refuse to make the sale? And, what do you charge to maximize your profits but stay competitive?

These are some questions that are creeping into the back of my mind as I approach certain negotiable transactions...

Like today.

This morning, I did a major declutter-cleaning. Yeah, we just moved, and it finally sank in that we have too much stuff. Would have been nice to know that before lugging it from the old place. I piled trash bags of clothes, shoes & more by the door, and dragged over a few items I'm hoping to sell on Craigslist.

I posted three things -- two shelves and a lamp -- and asked for more than what I spent to buy them. Besides being a greedy little trollope, I'm also curious: How informed are shoppers on Craigslist? An object's value is, by one measure, whatever I sell it for. So... will people catch on? And, a second question: if Target decided the lamp is worth $40 and appealed to a grad student, will a $60 lamp appeal to someone with deeper pockets? Might someone like that lamp more if it costs more?

According to one analyst, selling overpriced services and goods is just a question of semantics. Overpriced? Or worth the money? Geoffrey James, at Sales Machine, states that "Both concepts are completely dependent upon context and perception."

For example, when you offer an intangible benefit to the buyer, above and beyond what the competition offers, you're adding value. So if you're not charging more, you're basically discounting.

But what if you're a jerk like me? Selling used furniture, with no added value, at a premium price? Geoffrey says that's ok, too
Let’s suppose that there’s no good reason whatsoever why your offering costs more than the competition. (Maybe your boss just wants to buy a new yacht.) In that case, it is still possible to transform being overpriced into a intangible advantage, providing that you sell to customers who automatically associate “high priced” with “better.” And don’t kid yourself, there are plenty of people who think that way.
Basically, the sucker model. (Here's his his full explanation, which is much more detailed.)

Within hours, I got lots of takers for two shelves, but for the lamp, a woman replied to say it's selling new for $30.

Gained: Hoping for $10 profit on the shelves. Still waiting for a taker on the lamp, before I adjust the price. At worst, I hope, charging more than I paid will allow me to break even when shoppers haggle.

One last thought: much of this project has been geared toward minimizing losses -- through discounts and the like -- since my grad student stipend is the same every month. But what I've been wanting to do is find ways to maximize my gains. Normally, I could ask for a raise, find reasonable ways to charge clients more, or negotiate a salary when I start a new job. But since these aren't happening (yet), I've done the next best thing.

What do you think? How does the concept of value play into your thoughts when you're deciding whether -- and how -- to negotiate?
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