Anyone who has watched the Monty Python movie, The Life of Brian, may recall the market scene where Brian attempts to hide, in plain view, from the chasing Romans by appearing to be making a purchase of a false beard from a street vendor. The vendor, who expects to haggle, is completely baffled when Brian accepts the vendors initial asking price. So he tries, unsuccessfully, to give Brian a lesson in haggling. In the process the vendor sells against himself and gives up much profit.
When sales people negotiate with professional buyers we can be at a significant disadvantage. The buyer practices his/her craft every day. But we only negotiate periodically, so our skills may be rusty compared to the buyer.
Our goal is to close a good quality deal; their goal is often to extract every last penny of discount. There’s an old truism in negotiation that it’s only over once both sides feel there is no more value to be extracted. While this is particularly true in ‘positional’ (confrontational) type negotiations it also holds true to a certain extent in ‘interest’ (win-win) based negotiations. Whatever the negotiation type, it pays to know how to haggle effectively and it pays to help indicate to the buyer when they have reached the end of the haggling road for a particular negotiation point.
From a semantics point of view, I should point out that haggling is not the same as conducting a negotiation. Haggling is about getting agreement on a particular point in a negotiation. It is also separate from the give and take trading that goes on as we try to strike the overall agreement.
Let’s imagine a scenario. I’m trying to sell my piano. My target selling price is $1,000. I have advertised a sell price of $1,250. A buyer comes to view the piano. She likes the piano and offers me $900. I have options:
- Take the offer
- Reject the offer – it represents a discount of almost 30%
- Counter and haggle
Taking the offer is quick but not without pain. So let’s assume we are going to haggle. Effective haggling uses a concept of ever reducing concessions. This means each time we make a concession; it needs to be smaller than the last concession. By doing this, we signal to the buyer that we have less to give – they then feel they are getting closer to the best deal possible.
So our haggling steps could be, assuming small counters from the buyer:
- If they make a lower offer, listen to it and reflect back our understanding of what they have offered. Confirm.
- Justify our current price, offer to reduce the price to close, state the new price of $1,100 and try to close ($150 discount)
- If they counter again, listen, repeat back and confirm
- Then, justify our current price, offer to reduce the price to close, state the new price of $1,025 and try to close ($75 discount)
- If they counter again, listen, repeat back and confirm
- Then justify our current price, offer to reduce the price to close, state the new price of $1,000 and try to close ($25 discount)
- Finally, if they counter at a lower price, either take it or walk away
In between each offer and attempt to close, we anticipate a potential counter. Once we get above our target price we can choose to continue to haggle until there is no further movement from the buyer.
Again, the key to haggling, is offering ever reducing concessions, thereby showing that we are approaching our walk-away point.
Let’s make an obvious observation. With this scenario the seller is making concessions without asking for anything in return. This is clearly not best negotiation practice. So the above flow should be modified to take in to account any other sources of value that can be thrown in to the mix that will help the parties each realize more relevant value. For example, keeping the price at $1,250, but offering to deliver the piano if you happen to have a truck.
One final thought. There is much profit to be won and lost at the end of a negotiation – in the final haggling. Professional buyers are expert hagglers, so level the playing field, build a haggle plan and haggle away!