The 7 Laws of Negotiation

Sometimes, it takes an economic downturn for folks to rediscover a lost art. I've heard all the buzz lately about people beginning to negotiate the price of everything from new shoes to cell phone plans. When we see companies slashing prices and luring us in with incentives and other goodies, we rightly begin to wonder just how firm the price was in the first place. Finally, America is taking the haggle out of the used car lot and applying it a bit more liberally. (See also: 5 Phrases to Avoid When Negotiating)

For some of us though, the art was never lost, and we constantly marvel at how readily some folks hand over cash before employing a few simple and time-honored "tools of trade." Over the past couple of decades, I've distilled successful negotiating down to seven key principles that can help the newbies out there and serve as a refresher to those who might be getting rusty:

1. Come prepared.

Never begin to negotiate on the price of an item that you haven't researched and understand the value of. In order to get the best deal, it's essential to know what the market supports for the item in your area. Ask yourself: is it a good deal to begin with? What have other items like it sold for recently? How is this one better or worse? What's my ideal price and what's my maximum price?

2. Be polite.

Negotiating should be less of a battle and more of a dance. Have a conversation with your seller, kick the dirt, and find some common ground. Realize that both parties have an investment in the outcome, and that a happy seller is as important as a happy buyer. Sellers who leave feeling like you drove a hard but fair deal will be more likely to "dance" with you again.

3. Don't make the first move.

This is where a bit of psychology comes in. If you're in a situation where the price of an item is not stated, let the seller toss out the first number. Whoever quotes this magic figure first takes the most risk in negotiation — is the price so outlandish that the seller has alienated the buyer? Is it so low that he could have gotten twice that amount? If you can't avoid naming the first price, opt for a fair, if slightly low-ball offer. Remember, you can always increase your offer, but decreasing it is like trying to unlay an egg.

4. Time it right.

Don't start haggling the minute you meet your seller...or worse, on the phone or in email. A few months ago, I was selling some antique furniture and advertised one piece online with the photo and price. I got three calls within an hour from folks asking me to come down on my price before they even went to the trouble of coming over to see it. This method is tactless and shows little skill and even less effort. (See also: 9 Secrets of Highly Successful Craigslist Sellers)

5. Get creative.

Negotiating on price is the most obvious way to employ your skills, but there are many other things that can tip the deal in your direction. Don't get stuck on dollars and forget other factors that can equal dollars. If the item is large and hard to move, ask the seller to include delivery. How about a few lessons on how to use that guitar instead of the $20 discount you're looking for? Maybe that cell phone carrier would include a free car charger and earbud to win your business.

6. Be able to walk away.

If you're working hard on a deal that you believe just isn't going your way, be prepared to politely wrap things up and walk away. Remember, in the game of negotiation, walking away is the ultimate card to play, so don't overplay it or play it before you're ready. Typically, seeing a potential buyer heading toward the door will motivate most sellers to make a deal.

7. Flash the cash.

If you've gone to all the trouble to close a sweet deal, don't spoil the moment by not having cash in-hand. Remember, cash is still king — showing up with the green is a huge bargaining chip in itself. Leaving to hit the ATM gives your seller time you don't want him to have — time to reconsider or get a better offer. Oh, and while we're on the topic, have exact change. There are few things that show worse form than explaining your tight financial circumstances to a seller and then sorting through your c-notes to pay for that $40 bicycle. Think in advance and expect success — have the money ready.

In the end, experience will teach you a lot and give the extra bit of courage needed to start the conversation about price. You'll be surprised how flexible most pricing is and soon learn to see opportunities that you didn't before. Even traditional retail stores aren't above a bit of "creative pricing" especially if they're locally-owned and it's near the end of the month or the sales quarter. Remember, be bold and follow the strategies above for a lifetime of rewarding negotiation.

This is a guest post by Kentin Waits. Kentin has worked in web marketing for 13 years and run his own eBay business for 10. In 2009 he published two articles for Backwoods Home Magazine and is currently working on a page-a-day desk calendar on the topic of financial empowerment.

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Guest's picture

Any tips on how to revise these negotiations methods for services, like a health-club membership?


Guest's picture

Well, health clubs are notorious hard-sells, so you'll do yourself a great service if you approach it assertively and well-caffeinated. I would listen to the sales pitch and take a fairly hard line on price from the onset of the conversation. Have information on what competing gyms are charging for monthly rates and what the their contract terms are. Have your ideal monthly price in mind and let them know that other gyms are just as convenient, so you need a more compelling reason to choose theirs. Ask your gym to beat the competition. Sales staff at these places are aggressive, so be prepared to be pressured and don't fall for the "I can only offer you this price if you sign right now" routine. Good luck in the lion's den!

Guest's picture

When we were buying another camera for our photography business, i negotiated it all through email.

I recognized there are two types of sellers, actually pros and recreational users. I always asked if they could come down to my price- if they could I would buy. The recreational users would not negotiate (wanting to get their money back) the other pros would as they are looking for some cash to move forward.

I did not want to waste my time in-person negotiating with someone who would not negotiate. So I love negotiating via email for things listed on craigslist. But I always quote a price and start negotiations so as not to offend.

Guest's picture

Great post and it could not have come at a better time. Just yesterday I was looking at a dinning room table and it was just a little more than I wanted to spend. My friend and I were both wondering if I should try to negotiate and if so - how does it begin.

Thanks for the tips.

Guest's picture

Usually you can put a verbal 'feeler' out to see if the seller is open to some price flexibility. I usually start the conversation by saying "can you do any better on the price?" or "how firm is your price?" If the seller doesn't bite, you can approach it from a different route by saying "well, my budget is $X" or "well, that's just a bit more than I was looking to spend; would consider $X cash?" Good luck and thanks for the message!

Guest's picture

Great post.

I've found negotiating is a wonderful way to save money. If you know the strenght of your position and hold fast, you can get amazing savings.

I recently wrote a similar article at:
Learn Save Invest

about how I saved money negotiating work on my truck.

Keep the great posts coming. I will stay tuned as usual.

Guest's picture

I think the first law should be "ask". You can get discounts at a lot of places you may not have thought of (i.e. big box retailers) by just asking.

Not really part of the actual "negotiation" process, but a pre-cursor I guess

Guest's picture

I worked in big ticket sales for a few years and I will agree that having the right amount of green on you to pay for the item you are dealing for is important. That said, actually "flashing the cash" is not something you want to do. Telling the seller you have the cash in your pocket or subtly showing them how much money you are carrying doe not let them know you are serious, it let's them know you are someone who expects to be accused of not having the cash on them, it signals that you may be dishonest, cheap, obnoxious, and likely overly confident of your ability to deal.

Don't get me wrong, there's little wrong with answering directly if the seller asks you whether you have the cash on you, but using the promise of cash in hand as a negotiating tactic doesn't hold as much weight as it used to. When credit cards were less reliable and laws against bouncing checks less enforced, cash up front was a bigger deal. Carrying a big wad of cash instead of a debit card today is more indicative of an inability to manage one's finances than of any wealth or skill in business. At present, a buyer pulling out a huge fold of greenbacks is more likely to make the seller of a big ticket item think they are dealing with someone who is inexperienced in deal-making who does not often make large purchases.

Also, this may sound counter-intuitive, but some sellers don't like dealing with cash in large amounts, particularly large sellers. Cash requires counting and storing and doesn't require the submission of important identifying information about the buyer that most companies place a great deal of value in.

Guest's picture

Don't get too excited over the product, no matter how much you want it. If you show too much eagerness, the seller will sense your desperation and refuse to budge.

Guest's picture

Do unto others what you want others do unto you. Majority of salespeople will benefit from making a sale — even at a bargain price — but they’re unlikely to do it if it costs them their dignity. So be courteous and don’t be astonished if the negotiation process takes a little longer than a normal transaction.

Guest's picture

I would say your first tip might be a hindrance to someone getting the best deal possible. Chester L. Karrass’ course states that people who are not aware of a “fair” price and start lower, usually end up getting a better deal than those who negotiate with a fair price in mind. American’s negotiate with “fair” in mind, other countries like China and Russia play hardball. Just look at our current trade agreement with China.

Guest's picture

go shopping on a rainy day. stores tend to be quiet and sales people are eager to sell

go shopping with a friend who wants the same item. negiotiate with the sales person who then sells two with one transaction.

Guest's picture

When it comes to asking for a discount, you have nothing to lose. I've found that you can negotiate the price of just about anything. I even reduced my cable bill since I told them I was having a hard time paying the $80/mo. fee. They lowered it down to $65/mo. for 6 months.

Guest's picture

"He who wants the deal the most, gets the worst deal"