October 5, 2014
Everyone wants a bargain. So negotiating a price is something we could all get involved in sooner or later.
How do you get to the best price for a product or service?
Well it depends on whether you are buying or selling of course. One bit of advice I’ve often heard is that a seller should allow the buyer to suggest a price. I often see this happening when I’m buying and the seller asks, “What’s your budget?”
To me this is a dangerous question to answer. Let’s say I walk into a garage and start looking for a car. One of the sales team will undoubtedly ask me what my budget is and then steer me towards cars in that price range or a little above.
If I’m after someone to design a garden for me and get asked the same question it is even more complex as the price to design a garden is totally different to the cost of then building the design. So which figure do I quote?
The thing is the first person to mention a price then “anchors” the price at that figure. That’s great but there is a problem. If you want a particular spec it doesn’t leave you any space to add any “extras” in that your price may have excluded.
It is far easier to describe the specification you want, get the seller excited about the sale and then negotiate the price down. We all know it is hard to push water uphill .. its nearly as hard to get a seller to add major extras when they only have a fixed price being offered.
Qualifying the Buyer
As sellers we are told to qualify the buyer. In other words can they afford my product or service (and not waste my time when they can’t afford it). So we try to establish their budget.
As a buyer my advice is to side step that question and qualify the seller as being capable of providing what you want (and not wasting your time with empty promises that they can supply).
As the seller we need to qualify the buyer as a genuine buyer but let’s not paint either one of us into a corner too early on.
As soon as a seller asks me what my budget is I know the whole process just got a lot harder and I’m immediately on the defensive. I sense the seller is more interested in their income than making sure I buy what I want or need.
The negotiation game is one of cat and mouse and only the fittest survive.
The way to win this game is to establish facts and plan accordingly.
I’m buying a house at the moment. So my questions revolve around what is my specification; in other words location, number of rooms etc. Then I need to establish the value of the house I’m looking at. For example when did it last sell and at what price and what do similar houses in this area sell at.
Then I need to establish a bidding strategy. What am I prepared to pay, what will I offer, at what price will I genuinely walk away (and not just feign a lack of interest at that price). I also need to establish the sellers situation; can they move quickly, do they desperately need to sell etc.
Strangely enough house sellers rarely ask you what you are prepared to pay .. they assume the price tag will indicate the price and that you might haggle a bit. Car sales people are more than likely going to try to establish your budget before they show you a car .. in one case I’ve had a car salesman ask for evidence of my ability to pay BEFORE giving me a test drive. I walked away and went to another dealer.
Estate agents also want to establish your ability to buy but rarely ask for evidence or ability to pay until an offer is made (they do of course ask you for your current position but not evidence).
Kitchen sales people adopt another tactic. They mention a range of prices early in the sales process .. in my kitchen buying experience the “same” kitchen could cost between 2-3,000 and 50-80,000 depending on the spec and extras .. (think about MDF versus marble worktops, cupboard fitting etc). They need to know where in the price range you feel comfortable and if they can match your needs. The technique they use is called price norming.
Three Ways to Negotiate?
So there are at least three different ways in which price agreement is approached by sellers. The art of a good deal is to keep control when buying or selling. The person that does that usually gets the best deal in my experience.