What Is a Big-Ticket Item?
A big-ticket item also referred to as a BTI, is a high-priced item, such as a house or car. In the context of retail stores, they may also refer to products with selling prices and profit margins that are significantly higher than those of other items in the stores. In economics, big-ticket items are sometimes called durable goods or goods that last a relatively long time and provide utility to the user.
- Big-ticket items are major purchases, such as a house or car, that require a significant financial commitment. In retail stores, they may refer to expensive appliances or electronics.
- Since big-ticket items are long-term purchases, many customers take time to research options before choosing to buy.
- Some big-ticket items have seasonal prices, meaning you can get a better deal if you're willing to wait.
- Many sellers offer financing to help customers afford big-ticket items. This is easier to pay on a monthly basis, but you will ultimately pay less with an upfront payment.
- Customers hesitate before big-ticket purchases. Many sellers have developed psychological tricks to help ease customers into the commitment.
Understanding Big-Ticket Items
There is no accepted dollar threshold level that defines a big-ticket item. It depends on the buyer and his or her level of wealth or income. Someone earning $200,000 per year may not consider a $1,000 video game console a big-ticket item, but a consumer who earns $50,000 a year may.
A big-ticket item need not be a luxury product or one purchased with discretionary income since many products that typically fall within this category (e.g., refrigerators and washing machines) are considered necessities. The number of big-ticket items or durable good sales can be an indicator of the performance of the economy and consumer confidence.
Big-ticket items typically refer to items desired rather than needed, such as an expensive gold watch.
Tracking Big-Ticket Items
Durable goods can be tracked on the monthly Manufacturers' Shipments, Inventories and Orders report and monthly Retail and Food Services sales report issued by the U.S. Department of Commerce (commonly known as the "Durable Goods" and "Retail Sales" reports). Note that the durable goods report divides categories by shipments and new orders and is measured in value at the manufacturers' level.
The retail sales report is perhaps more useful because it directly breaks down categories that consumers are familiar with in terms of "big-ticket" items. Motor vehicles, furniture, electronics, appliances, and building materials (for the expensive home renovation that people want) appear in the monthly retail sales report.
For example, the retail sales report for May 2021 showed estimated monthly purchases by category, in addition to historical data from previous months, and the prior year. In the five months before May of 2021, retail consumers spent $641.9 billion at automotive dealers, an increase of 42.5% over the same period in 2020. Consumers spent $36.1 billion at appliance and electronics stores, an increase of 35.9% over the previous year.
When to Buy Big-Ticket Items
Each product has a different pricing cycle, depending on when it is most in demand. According to U.S. News, the late fall months are a great time to buy a car, since that's when the newest models hit the lot. Dealers are therefore eager to clear off old inventory, meaning better prices and rebates for older models.
The same general rule goes for electronics, although the timing is slightly different. For iPhones and other smart devices, the price for new models tends to drop a few months after the latest release—but the price for older models drops immediately. Historically, the worst times to buy an iPhone have been in the summer.
What to Consider Before Buying a Big-Ticket Item
Buying a big-ticket item is a major decision that should not be made on a whim. In addition to conducting thorough research on the qualities and features of a big purchase, it's also worth taking the time to ask if you really need that WiFi-enabled food processor. But some items really are necessities, and for those purchases, the following questions will help you make the most of your money.
Are You Getting the Best Deal?
A good deal means a lot more than just getting the lowest price. Many items, especially electronics, have a large tradeoff between price and quality, and some discount appliances are sold without a warranty. Before you open your wallet, it's worth taking some time to learn about the manufacturer, the brand, and any known issues so that you know what problems to expect.
Do You Need It Now, or Can You Wait?
Prices tend to go through seasonal cycles. Many items are heavily marketed for the December shopping season, meaning you can get good deals in January or February. There may also be deals during the summer holidays, such as Memorial Day or Labor Day. You may be able to get a better deal if you're willing to wait.
How Will You Pay for It?
This question is easily overlooked, especially for major expenses like cars or houses. While it's certainly easier to finance these purchases with a bank loan, compounding interest means that you'll ultimately spend more money than you would if you had simply paid cash. Saving money now can mean big discounts later on.
Pay Cash if You Can
While financing a big purchase is much easier on your monthly expenses, you will spend less money in the long run if you can pay upfront. If possible, it's worth saving up for big-ticket purchases.
How to Sell a Big-Ticket Item
Making sales takes a lot more than offering a good deal. It's certainly easier to move a high-quality product than a low one, but there are also many psychological barriers to overcome when persuading strangers to open up their wallets. The following techniques have proven successful with professional salespeople:
Many consumers are justifiably worried about getting a bad deal, and high-pressure sales techniques can put them off even further. It is important to develop a sense of authenticity and trust with potential clients through face-to-face meetings and frank discussions of their expectations for the purchase. Some big items, like new cars or houses, will take several meetings before buyers are confident enough to finalize their decision.
Micro-conversions are small commitments that bring customers closer to a final decision, such as test drives, walk-throughs, or other experiences that facilitate an intention to buy. Some car dealerships offer helpful online quizzes or surveys to help find a car that's "right for you." Although the customer can always back out, these experiences make it a lot easier to overcome their initial hesitation.
Affirm the Customer's Decision
It's also important to make sure the customer feels satisfied after their decision and does not feel buyer's remorse. Not only can this help avoid some customer complaints and bad reviews, it also makes them more likely to come back on their next big-ticket purchase.
In order to keep customers happy about their decisions, many sellers optimize the post-purchase experience in order to keep the customers engaged. Customer satisfaction surveys, friendly reminders about maintenance or upgrades, or invitations to keep in touch can help keep buyers happy that they've made a good decision.