Saturday, 27 October 2007

You don’t get rich by paying what they ask

You don’t get rich by paying what they askSathnam Sanghera: Business Life
As the son of Punjabi immigrants, I was not surprised to read a report from the Financial Services Authority showing that among Britain’s major faith groups, Hindus and Sikhs are the best at making ends meet. Of course they are! They never go on holiday. They never eat out. And they haggle over everything: I spent my childhood being dragged around Wolverhampton as my mother bartered over everything from secondhand sofas to sultanas.

I kept the most excruciating of these memories suppressed until I read the results of another study this week, showing that most business negotiators are bad at bargaining. Researchers divided 266 Chicago MBA students into either buyers representing a motorcycle maker, or sales reps for a parts supplier. After three negotiations lasting 45 minutes each, they compared the deals that had been struck against the limits that the teams had decided in advance and found that each side had underestimated how much the other was willing to give away.

While these Chicago MBAs may have been bad at haggling, they at least tried, which is more than can be said for most British people. Apparently only two out of five British consumers ever try to barter and failing to haggle when buying a new car costs British consumers £512 million a year. Research has found that one of the reasons why women get paid less for doing the same jobs as men is that they are less likely to try to negotiate pay rises.

Are Brits simply too embarrassed to haggle? Or do they just not know how to do it? In case it is the latter, I thought I would provide a four-point Punjabi guide to haggling, the basic principles of which, I would argue, are applicable to negotiations everywhere, from the boardroom, to the corporate purchasing department, to your local branch of Greggs:

Ham it up. A typical negotiation should follow this basic pattern. Vendor: “That will be £20.” You: “How about £6?” Vendor: “Don’t mock me.” You: “Bye then.”

If the vendor has any nous, he will at this point produce an offer. But the key thing to remember through the procedure is to maximise the drama: avoid eye contact when entering the shop; try not to show too much initial interest in an item; express astonishment at the first price in the form of wild laughter and the slapping of thighs. And if the vendor starts to give you a sob story about how he is saving up for a liver transplant, respond in kind, perhaps with a story about how you are saving up for a set of wheelchairs for your three children.

Negotiate for as long as you can. Travel guide books and websites such as Howtohaggle.com will tell you that you should never barter at length “it only creates an angry mood”. But they are wrong. As any trade union will tell you, sheer persistence is an important part of deal-making. You can exhaust people into a bargain. And it helps if you are dressed slightly eccentrically as you go on and on. It’s amazing the deals people are prepared to offer simply to get a wildly gesticulating Sikh woman in a salwar kameez out of a store.

Do not pick your battles. Again, the guidebooks and websites will suggest otherwise, claiming that there is something undignified and cheap about trying to haggle over bus tickets. But as anyone who has been to the Asian subcontinent will know, this is not the Indian attitude at all: we would try to haggle down the price of a Big Mac, if consuming the Holy Cow was allowed. And anyone who thinks such behaviour is cheap should remember that researchers have found that high earners are far more likely to barter when shopping than modestly paid workers: more than half of those on salaries in excess of £100,000 say that they frequently quibble over store prices.

Use a child as an intermediary. In the case of my family, this was a necessity: my mother doesn’t speak English, so her kids were frequently called on to translate her unrealistic demands. But I was intrigued to read Michael Donaldson, an American entertainment lawyer, remark in a book called Fearless Negotiating that children make the best negotiators. “They state clearly what they need and want, speak with a genuine voice and they are persistent.” This is true, but in my case, standing in Dixons at the age of ten as my mother instructed me to find out the “real price” of a video recorder from a sales assistant, I think it was my visible mortification and the pity it inspired that led to better deals.

Of course, I realise that some of these tips may be difficult to apply in certain negotiating scenarios. Spending an entire afternoon haggling over a box of staples may be unrealistic. Conveying messages through a child during merger talks may be slightly eccentric. Suddenly appearing in a salwar kameez or a turban to ask for a pay rise may raise a few eyebrows. But the potential rewards are enormous and anyone doubting the power of haggling should take inspiration from the story of Mohammed Shafiq, an Asian off-licence owner, who, when faced a couple of years ago with a raider wielding a 12in knife and a demand for £500, remarked: “I can’t afford that; how about £10 and a drink?”

According to reports, the disoriented raider responded by saying he would accept £50 and as Mr Shafiq considered the figure, Mrs Shafiq sneaked up and whacked the robber with a rolling pin. Mr Shafiq then clubbed him over the head with a brass-handled walking stick before calling the police, the exchange having cost him not a single penny. That’s what I call a deal.

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