Dan Erwin

How to Set the Stage for Haggling Success

Effective hagglers carefully set the stage for their success.  Exploring your own alternatives for haggling success is inevitably followed, says Max Bazerman, by assessing the other party's alternatives.  Setting the stage is the third step in the art and science of haggling.   

Setting the stage is an old idiom very familiar to those of us with background in drama.  Because the stage for your negotiation is a key success factor, setting the stage needs elaboration.  You don't just walk in and start haggling over the price of a product.  My very successful "horse trading" father regularly talked me through stage setting  and its importance. 

If, for example, there was a purchase to be made from one of his ethnic buddies on "14th Street" in old Detroit, he talked to me about the best week of the month, the best day of the week, the best time of the day and who to engage.  He was very calculated in his assessment and I learned that it usually paid off big time.  (I doubt that this kind of experience takes place anymore.  That world is gone.  But if I was along, the sale occasionally concluded with coffee, donuts, candy and a lot of laughter from one of the store owners.  On those occasions when my dad did exceptionally well, he received the kudos, "Well Tom, you did it to me again."  And since my dad had priced the object in question at several other places, the owner was not just BSing.)  Studies over the past 10 to 20 years indicate that my dad's success is typical of trained negotiators.

How do you set the stage for successful haggling?

There is a lot to be said for my dad's focus on timing.  Consumer Reports advises negotiating early or late in the day when the stores are quiet.  But you'll need to know the customer cycle.  I've found that in some suburban stores the best time is between 10 am and about 11:15. 

In addition, Consumer Reports reminds us that we may need to work with a manager out of earshot of customers.  The mere presence of other customers might put an end to your negotiating before you ever got started.

Make certain you've done your homework on competitor's prices and expect the salesperson or manager to verify the prices.  Electronics stores will check prices on the web and will want to discredit prices such as Amazon where delivery times are an issue.  So be ready to push back on delivery times when time is not an issue for you. 

Finally, be polite, listen intently without any need to respond instantly to the salesperson's question of you.  Bazerman and colleagues also remind their readers that stores typically pay fees on credit-card purchases.  Keep in mind that cash may encourage further bargaining.  In major purchases, like autos, cash can work against you because installment loans are a major part of their price, but you don't have to tell them you're going to pay cash until you've already negotiated.  Be especially wary of the tacked on prices for warranties which many firms will attempt.  I recently bought a $60 item at an electronic store where they wanted me to buy an $18 three-year warranty.  I don't buy warranties, not even for a new auto.

One final note for those of you who are resistant to haggling.  Check out the web and you'll see that as a result of the recession, haggling is becoming a lot more common .  In the final analysis, it's street smarts, par excellance, and your buck.

Negotiation Skill: The Power of Deal-Making

Two of the most intriguing eulogies for Ted Kennedy were those of Gerald Seib of the Wall Street Journal and David Brooks of the New York Times.  Although both mourned the death of Kennedy, both also mourned the loss of the craft of legislation, of deal-making, in today's congress.

As a consultant to business managers, far too often I find negative attitudes toward the competency of deal-making deeply entrenched in business professionals.  Although a select group of managers in most organizations develop the needed skills of negotiation and deal-making, their lack often inhibits the careers of others.  Just as successful business professionals must learn to do the politics of networking and managing up, so today's highly diverse business world requires the skills of negotiation and deal-making.

What drives the negative attitudes toward deal-making?

Seib focuses on the structural issues that work to prohibit congressional deal-making:  the ideological polarization of the democrat and republican parties that began in the 1970s, and the "machines" in both parties that work against any middle ground.

Brooks emphasizes the role the Constitution plays in demanding an incremental or gradualist approach to congressional leadership.  He sees the skills and crafts of the legislator as quite different than the skills of leadership.  There is a craft to governance, which depends less on academic intelligence than on a contextual awareness of how to bring people together.

Seib concludes:  Ted Kennedy could do that.  Few remaining have the ability. 

Whether you reject or embrace Kennedy and his politics, underlying his successes are two key lessons for business professionals for whom career achievement and personal success are a priority.  After 1990, Kennedy developed a calculated and nearly compulsive drive for excellence: what today we call deliberate practice.  He never failed to show up prepared for a committee hearing or debate.  A major reason was the quality of his staff, renown throughout the senate for their brilliance and work ethic.  David Brooks alludes to Kennedy's depth of knowledge:

I once ran into John McCain after a negotiating session with Kennedy on an immigration bill they had co-sponsored. McCain was exhausted by the arduous and patient way his friend negotiated. In my last interview with Kennedy, I asked about big ideas, and his answers were nothing special. Then I asked about a minor provision in an ancient piece of legislation, and his command of the provision and how it got there was jaw-droppingly impressive.

In addition, Kennedy was the epitome of the nice guy.   With it's emphasis on competence and warmth, "nice-guyness overlaps deliberate practice.  Kennedy was known as warm, fun, funny, friendly, what Joe Klein called a joyous Irish bull.  Though it may have been in the genes, it had to be learned.  In the 1970s, Kennedy had little to no political and relational instincts.  Perhaps Klein's statement of a conversation with Kennedy in 2008 summarizes it best: I wanted to ask him about those awkward, awful times back when.  But why mess with the mood?  He had exorcised the demons.  He was whole.  

The gift of time   

In his book, The Talent Code, Daniel Coyle calls attention to the fact that more than half of the best coaches are in their sixties and seventies.  Time gives many gifts, but one of the most intriguing is the recognition, now supported by much research, that those of us in those age groups can see that competence and nice-guyness are not born.  They're grown.

Quotation of the Week: Bazerman and Malhotra

It's not news that people are irrational and sometimes make mistakes.  What is news is that, in the context of decision-making and negotiation, many of the mistakes people make are systematic and predictable. 

                From Negotiation Genius, by Max Bazerman and

                Deepak Malhotra

                

Haggling (Part 4): Tips from Yogi Berra

In my previous posts on haggling, I've pointed out that in tough economic times, you're in an entirely new ball game where the old rules no longer apply.  I told my story of haggling over fish prices, and how I worked out a deal significantly less than than the sale price on my favorite fish at my favorite upscale market.   

Now some more personal haggling.  We just got back from two weeks at the lake with the kids and grandkids, only to find that the old, old washing machine was on the Fritz.  So off to the major appliance store, but only after checking out prices on the web. 

After looking around and identifying a potential machine, I engaged the salesperson in chit-chat.  What I wanted to know first was whether he was on commission.  Yep, he was.  That lets me know he's got skin in the game.  The appliance business is tough in this recession.  On my back burner was the fact that I was also quite willing to buy a new dryer at the same time to avoid the pain of  another breakdown, if I could negotiate a "really good price."  

We started out at 15% off the regular price.  Moved from there to free delivery, installation and removal.  From there to an additional 10% off the price because we're seniors--although it would be another month for the usual senior discount.  Next day delivery didn't work out as stated, so the salesperson lopped off the price of two connections for our pain.  What started out slightly above $1,000 came out at $839. 

Here are bargaining tips from Yogi Berra:

"The future ain't what it used to be."  When economic circumstances change, you can expect buyers to be very cautious, and salespeople highly motivated to make a sale.

"You can observe a lot just by watching."  We were at a major suburban department store on a Sunday afternoon, but no one was around except for the sales people.  Furthermore, my salesperson was very tentative about his pricing.  I suspected the sale was more important than the actual price.  We were the only customers that appeared while we spent 30 minutes looking over the merchandise.

"It ain't over till it's over."  You or the salesperson may think a deal is locked up, but the customer can still decide to walk away.

Bottom line:  It's really, well--stupid--not to haggle in this environment.

Related Posts:

Haggling: Suggested Opportunities

Haggling (2): Explore Your Alternatives

Haggling (3): You Can Learn To Haggle

Gen-Y Skill: How to Haggle (Part 3)

If you want to get good at saving yourself a few bucks at a time, you will need to become far more scientific at the process.  Assessing the other party's alternatives is just as important as exploring your own.  Both of these steps should be very analytical and scientific. Just twenty-five years ago, courses on haggling were rarely taught in management schools.  According to Max Bazerman, who's tops in the field, negotiation is one of the most sought-after courses in business schools.  Negotiation is the best way to manage those inevitable conflicts in business and life.  For simplicity sake, I think of haggling as a sub-discipline of negotiation.  Negotiation as a bit more complex and comprises a larger skill base for such things as legal difficulties, contracts, or vendor relationships.    

The conventional wisdom is that haggling is a gift.  Some have it and some don't.  Nahhhh.  Haggling like any other competency is learned, not innate.  And there's plenty of research showing you can improve those skills with some training or coaching.

In my previous post I talked about exploring your alternatives when you have an opportunity pop up on the radar screen.  In this post, I want to flip this discussion from my alternatives to the other party's alternatives.

In the last post I told about making a few bucks off the sale price of Walleye, a fish I really love.  I was at the up-scale grocery and saw the fish on sale for $15.99 and decided that it might be a real opportunity for me.  Since I buy it when the price isn't sky-high, I knew that it usually sold upwards of $20--say, $17.99 or 18.99.  Quickly, I thought through the butcher's BATNA (best alternative to a negotiated sale).  What will he do if he can't close a sale with me or other shoppers?  There were customers buying fish, but I didn't see anyone buying the fresh Walleye which was stacked pretty high.  Furthermore, he'd engaged in a dumb marketing move:  he had Atlantic salmon on sale for $7.99 a pound.  Why would anyone pay for the Walleye when she could have perfectly good salmon at less than half the price of Walleye.  Furthermore, fresh Walleye has short shelf-life.  I walked away to do a bit more shopping so I could analyze my butcher's alternatives.  The only info lacking was how much Walleye he had to sell.  That was easy.  I walked back to the butcher and said that it looked like he had an awful lot of Walleye.  He fell into my trap and told me that he had a lot.

So how did I analyze my butcher's alternatives?  I checked the foot traffic, assessed the amount he had to sell, noted that Salmon was successfully competing with Walleye, and decided that if he couldn't sell it all, he'd have to toss it.

That was my assessment of his alternatives.  Evidently they were accurate, and as my previous post revealed, I bought ten pounds of Walleye at $14.85--a figure below his sale price, instead of one pound at $15.99.

Another tidbit: Consumer Reports notes that inventory tags often tell how long an item has been on the shelves.  Salespeople will be more willing to haggle if the merchandise has been sitting there for a long time.

Exploring your own alternatives and the other's are the first two steps to successful haggling.  It's always easier to learn the skill if you start out with small potatoes.  It'll take time to learn it before you'll be ready to negotiate for a new car, house or mortage interest reduction.  I suggest you need 10 to 15 successes in ordinary haggling before you move on to the big issues.  You need to get used to how the other guy is going to push back on you and how you're going to respond.

Gen-Y Skill: How to Haggle (Part 2)

Explore your alternatives.

If you've decided that now is the time to save some money, learn how to haggle, and that you'd be willing to think of yourself as a "haggler," the next step is to explore your haggling opportunities.  In my previous post, I emphasized that haggling is just a form of negotiation and that it's a serious discipline supported by great research from some of the best org behavior people.  The July/August issue of Negotiation reminds its readers that haggling is both an art and a science.  Building upon the article, in this post I intend to lay out some of the science.

Let's suppose that your TV is on the edge of breakdown, and you'd like to get a replacement.  Before you march into your neighborhood electronics dealer, do the same kind of research you would if you were looking for a new car or a new house.  If you're in the market for a new HDTV, you're talking big bucks.  So you want to avoid being unduly influenced by your recollection of past experiences and end up paying the full price.

FYI: Research shows that we tend to make decisions such as what we'll pay for an object, based on our memory of previous experiences.  Our memory, however is inappropriately influenced by the vividness of a past experience or the ease with which we remember an experience.  This is known as the availability heuristic.  A heuristic is a technique we've developed over time to resolve problems.  People use a variety of types of heuristics.  The mortgage banker is again following the technique, after this financial mess, that people shouldn't spend more than 35% of their income for house expenses.  The poker player follows the heuristic "never play for an inside straight."  Memory is not a trustworthy technique or heuristic for deciding what you'll pay for an object. 

The first scientific step is to begin with a thorough evaluation of your BATNA, the best alternative to a negotiated agreement--the "action you'll take if a particular negotiation ends in impasse."  BATNA is common negotiation-speak, so if you're going to earn an MBA, find yourself hiring vendors for your firm, or becoming a contracts negotiator, you might as well get familiar with it.

In the case of your HDTV, your BATNA might be a low, no-haggle price from Amazon or NexTag.  Just knowing your options and what you'll do if you can't get a good deal will give you bargaining power with your electronics dealer.  Your BATNA also helps you calculate what's called your "reservation price"--the highest price you'd be willing to pay for that HDTV.  

Let's suppose you'd like a 42" Panasonic HDTV that is selling for about $950, and Amazon is selling the same TV for $865 on a sale that will end the next day.  For simplicity sake, let's ignore taxes.  Amazon will deliver at no-cost, but it will be eight to ten days before you can get it.  The Amazon price is your BATNA.  But what's it worth to take the TV home the same day of purchase?  You decide you're willing to pay $50 above the Amazon price and not having to worry about shipping it back if you don't like it.  Your reservation price, then, is $865 plus $50, or $915.   

Some opportunities pop up on the fly.  My wife and I love fish, especially Walleye, which at the top store usually costs upwards of $20 a pound.   In April I was doing some shopping, noticed that Walleye was selling for $15.99 a pound and that it was stacked high in the display case.  I commented to the butcher that it looked like there was a run on Walleye.  He agreed and said that he had plenty.  I did some instantaneous calculating, decided my BATNA was one pound.  My reservation price was $15 a pound.  I told him that I was going to buy a pound, but that if he would give me a deal, I'd buy more.  I said that I'd buy 10 pounds (wrapped in half pound packages for freezing) and give him $14.85 a pound.  (It's a recession and people aren't usually buying expensive meat or fish, even in the best stores.)  He got out his pencil, figured something, and said it was a deal.  Better a lower price than spoiling fish.  Figure it out.  I got the best fish a Minnesotan can eat below the sale price, and kept an additional $11.40.  

As I walked away to finish my shopping while the butcher wrapped my fish, a woman stopped me and asked, "How'd you do that?"  Just smarts, I grinned.        

Gen-Y Skill: How to Haggle (Part 1)

Negotiation, the monthly newsletter put out by the Program on Negotiation at Harvard Law School, has a fascinating article on the science and art of haggling in its August issue.  Haggling and bartering were a bit of my family heritage, what with a father who was a Southern horse trader (on the side) and who also loved haggling with Detroit ethnics during the 1930's and 1940's.  Although a number of my college friends viewed haggling as offensive, I thought their views were nutty.  When they saw what could be done, they asked for help.  My basic haggling rule follows the ubiquitous book title:  Everything is Negotiable.

In some cultures haggling has a long tradition in the markets and bazaars and so it inevitably flows into the bricks and mortar stores.  Some cultures assume that only fools pay the full price on anything.  Growing up in Detroit, I learned that some first generation immigrants and their children--Greeks, Jews, Chalcedonian Christians, Armenians and Lebanese Americans--took haggling for granted.  With the influx of East Indians, I've learned that some of them are geniuses at haggling. 

If you fail to haggle in this economy, you're passing up real chances to save money.  This is a true buyer's market, so just about everything is up for grabs, even, to my surprise, some meat at the supermarket as well as my recent auto check-up.  ($30 off a $180 bill is $30!) 

A May 2009 Consumer Reports poll found that 66% of Americans had tried to negotiate discounts in the previous six months.  Of these hagglers, 83% succeeded in getting lower hotel rates, 81% got better deals on clothing and cell phone service, 71% negotiated cheaper eletronics and furniture, and 62% lowered their credit-card fees.  I make it a rule to haggle over my cable and cell phone bills at least every two years.  Since I use a hotel one or two nites a month, I call the day before I leave and "double-check the fee" and usually get it lowered or some amenity.

So, Gen-Yers, that May Consumer Reports suggests you could save considerable cash by negotiating in the following realms:

• Hotel rates and airfare
• Phone, internet, and cable-TV
• Credit-card interest rates and fees
• Clothing and jewelry
• Furniture, electronics, and appliances
• Medical and dental bills
• Lease renewals
• College tuition
• Existing mortgages and other loans

I'll pump out several posts on the art and science of haggling over the next few weeks.  The academics have researched the sox off the practice of negotiation over the past ten years.  Here's another rule: don't pay any attention to negotiation strategies unless there is research supporting them.  This is a field that seems to attract quacks.  So, I'll happily share the research findings and talk about some relevant experiences.  Stay tuned.