Negotiate Once, Save Thousands Every Year

Sometimes a few simple actions can save you money year after year. The negotiation process is definitely one of those times.

Negotiating works especially well when you deal with a salesperson who is paid by commission. These salespeople often have the ability to give you a better deal (and thus earn a lower commission) in order to earn your business. Situations where you can successfully negotiate a better rate include:

  • Signing up for a gym or health club
  • Discussing your initial salary
  • Buying a car
  • Locking in an interest rate on your home loan
  • And many others

As a blogger about fitness and weight lifting, I have managed to cut my gym membership costs by $20 each month. A friend of mine negotiated an extra $10,000 in starting salaries at a new job. Perhaps you can negotiate a better rate on your home mortgage to save thousands of dollars every year. Each situation presents different and unique opportunities.

Here are the steps to successful negotiation:

1. Do your research

Have an idea of what to expect before you walk in the door. If you understand the market rates of what you are negotiating for, you will be able to avoid getting ripped off, but more importantly, you will be taken seriously when you ask for a better deal that is still reasonable. Set your limits ahead of time, and do not cross them.

2. Use capitalism

Use the principles of competition to your advantage by checking the competition first. There is nothing wrong with having several people compete for your business. The companies you negotiate with use capitalism to become rich, and there is no reason why you shouldn’t be able to do the same. Having more options gives you leverage.

3. Save the best for last

Go to the company that has the best chances of giving you what you want last. You will then be more prepared when you arrive, and knowing what their competitors offer will give you leverage to seal the deal. Don’t be shy when talking about what you liked about their competitors.

4. Don’t be pushy

Nobody likes to have their arm twisted. In the same way that we are turned off by all the tactics that pushy salespeople use, you must be careful to avoid coming across as overbearing.

5. Don’t get too excited

Yes, be a likable person. But if you are jumping up and down with excitement when you go to buy a car, your chances of talking them down are shot.

6. Show interest

Ask lots of questions and let them see that you are a real customer and that a sale can be made. If a salesperson sees this, she’ll be much more likely to invest the time into finding a good deal for you. Again, don’t become excited or emotional, but let the salesperson see that some extra effort could help her to earn a commission.

7. Accumulate face time

Put the time in with the salesperson and have plenty of face-to-face interaction. The more the salesperson invests his time in making a sale to you, the more he feels a psychological desire and commitment to close the deal. Require them to invest their time into you, and you will become a more valued customer in their minds.

8. Plan to walk out

Don’t go into a negotiation with a plan to close the deal on the same day. You may be offered a great deal that you want to accept, but remember that any offer made to you remains legally valid and can be accepted the next day (unless otherwise specified). Making a plan to not finalize the deal on the same day helps you to avoid making an emotional decision, and you can negotiate from a greater position of power by showing that your sale must be earned.

9. Have a confidant

Don’t walk out in anger if you don’t get what you want. Make it clear that your terms have not been fully met, and tell the salesperson that you need to talk to a friend or spouse before making a final decision. But don’t fake it — really find another person to help you think through the transaction.

This also helps you to save face if you need to push for better terms later. The salesman won’t be as upset at you personally if you can say that your spouse, parent, or friend isn’t happy with the deal. If you later decide to take their initial offer, you can simply inform them that your friend/spouse changed their mind.

10. Give a deadline

Before you walk out, let the salesperson know that you are very interested in their offer, but you need some time to think it over and that you will make a final decision on a certain date in the near future. If you let the salesperson know when you will make that decision, you just might end up receiving a phone call with another offer very close to that date or shortly thereafter.

11. Use the fairness argument

This one is very difficult to argue with. Frame your needs in terms of fairness whenever you possibly can. If you are negotiating for a higher salary, find out what the average salary is for your skill level, and then explain why your skills are better than average. Then explain that because of your added skills, you are only asking for a higher salary so that you can receive fair treatment. You will find that it is much easier to ask for fairness than for special treatment.

How about you? I’d love to hear your tips about how to improve your negotiations.

This article was written by Jason, who is the author of World Fitness Network, a blog that will teach you how to lift weights, live strong, and change the way you look and feel.

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There are 21 comments to "Negotiate Once, Save Thousands Every Year".

  1. Heidi says 09 April 2008 at 04:18

    I read this blog via an RSS feed on livejournal and generally am interested in the advice given.

    That said, the minute I saw the word “fatty” used in the first sentence of this entry I tuned out. Frankly, calling someone a “fatty” is derogatory, even if it’s meant in a joking way.

    If World Fitness Network advocates using that particular word, I won’t be visiting it any time soon! There’s no need to (even jokingly) embarrass, shame, or insult people to sell the message of fitness and good health.

    J.D.’s note: Good point, Heidi. I’ve changed the reference.

  2. Martin says 09 April 2008 at 04:30

    These are good tips and well worth following. However, I would change number 11 slightly.

    Rather than speak of fairness, I find it better to discuss how ‘reasonable’ something is.

    The word ‘fair’ can unnecessarily provoke far more than the word ‘reasonable’ does. I haven’t a clue why. Maybe we hear kids shouting, “It’s not fair!” and we don’t have time for that type of argument. Who knows?

    ‘Reasonable’ works on both a positive and negative level too. To suggest that something is ‘unreasonable’ is a lot more adult than saying it’s ‘unfair’. It’s less likely that the other negotiating party will bring down their shutters either.

  3. foxnomad says 09 April 2008 at 05:27

    Here are some good tips I’ve picked up on how to bargain your way to a better price (especially when shopping abroad – but the principles still apply everywhere else!!)

    http://www.foxnomad.com/2008/03/27/how-to-bargain-your-way-to-a-good-price/

  4. Ron@TheWisdomJournal says 09 April 2008 at 05:31

    I would highly recommend Secrets of Power Negotiating by Roger Dawson. It outlines using several tips and techniques for negotiating everything. I reviewed the book back in January and I highly recommend that everyone read it before making any major purchase.

  5. Wayne Mulligan says 09 April 2008 at 05:40

    Great post JD. It’s funny, but it’s not usually a tactical problem when people don’t negotiate for better terms, it’s usually a psychological one. Many people out there just don’t have the confidence/desire to buck the trend to ask for more.

    It’s so ingrained in our society and culture to just take what we’re given and be happy about it.

    But for anyone who’s ever traveled abroad, they know it’s quite different. Take China for instance..many of the shops I went into had dedicated “negotiators” (aside from the regular sales people) because in that culture, everything is negotiable. As JD has mad abundantly clear, everything in this culture is negotiable too — just gotta work the nerve to ask for it.

    -Wayne

  6. Frugal Dad says 09 April 2008 at 05:42

    These are some great negotiating tips! One thing I don’t like to do too often is compare my deal to one another person received (that’s especially true with salary negotiations). Every deal is different, and if you know about another deal someone received, don’t bring it up unless you are using it as a last resort. To me, it just sounds petty to lead your arguement with, “Well, you gave Joe a $10k bonus last year and we worked on the same project.”

  7. The Weakonomist says 09 April 2008 at 05:43

    One big place for negotiation, financial services. Every fee at a bank can be waived, but they aren’t likely to do so because it cuts into their commission. If they want your business, they will waive the fees. I know because I see it every day in my bank.

    I recently negotiated some big savings on my car purchase. Here’s the story :

    http://weakonomics.com/2008/03/10/the-weakonomist-buys-a-car/

    Short version, saved thousands and my car was sitting on the show room when I went to inspect and pick it up. All negotiation was via email. Contact me if you want help doing the same, its easy and I’ve done it for a few others since posting the story.

  8. Finally Frugal says 09 April 2008 at 05:55

    I did this with my own gym membership. I knew that employees at my university were eligible for a discount on both the enrollment fee and the monthly fee. I had to negotiate for this with the person who initiated my membership—-he was unaware of the policy.

    It took time and effort, but I saved myself about $200 by standing my ground. If I hadn’t done the research beforehand and known what I could get, I wouldn’t have been able to negotiate such great savings!

    A key point to successful negotiation, I think, is that you need to be able to say “no thanks” at any time. If you’re coming from a position of not needing the deal, whatever that is, then you have the upper hand. In the end, salespeople want to sell; the question is how much profit they’re going to make from your particular sale.

  9. J.D. says 09 April 2008 at 06:34

    @Heidi
    I think Jason meant no harm. But you’re right — there are better ways to phrase things. I’ve changed the text. Thanks for pointing this out.

  10. Heidi says 09 April 2008 at 06:53

    Thanks! I appreciate the change – it’s one of those words people use casually but that really come across as derogatory, especially when the overall intention is supposed to be positive.

    I know lots of folks who have no problem with being called fat but I know none who are happy to be called a “fatty”. I think it was doing Jason’s site a disservice to have that word used in describing it.

  11. Heidi says 09 April 2008 at 08:34

    Just for referece, I am not the Heidi above. I am one of those that calls myself a fatty – but I do appreciate the change.

    I think that these are great tips – I was just talking to a women’s group about how to negotiate salary. It’s too bad that some people tend to shy away from negotiation – Jason is absolutely right that you can save or make thousands by doing some research and planning.

  12. Vered@MomGrind says 09 April 2008 at 08:36

    Ah, jumping up and down with excitement. I often do that and it does kill the negotiation.

    Need to work on that. Thank you.

  13. Jesse says 09 April 2008 at 10:53

    One little negotiation tip: never be afraid to walk away. There is no car, health club, etc that is not replaceable. And even if it basically is, never let them know that.

  14. leigh says 09 April 2008 at 10:59

    the cultural difference surprised me when i worked for a man from india. he would not buy anything unless he had negotiated a satisfactory discount, and it inspired me to try for the same.

  15. Monevator says 09 April 2008 at 11:47

    Another good tactic is to let them think they’ve won. For instance, if you want X, ask for X+Z but hint a lot about how X might be all you expect to get, but surely you should get X+Z. Often they’ll fall back to X, rather than to, erm, Y.

    Hope that makes sense — I’m sure there’s a term for it in sales. Basically, if you get somebody thinking in terms of a bigger number, then the smaller number won’t look so big anymore, even if they never expected to go so high…

  16. SavetotheFuture says 09 April 2008 at 14:25

    As with anything else, negotiating takes practice. If you are dealing with a salesperson, remember that they probably have training that might give them a slight advantage. Because of this, it is good be prepared before going in, and know what your strenghts and weaknessess are when negotiating.

    I really like tips #8, and #11. Try not to make an emotional decision and choose your words carefully when negotiating.

  17. Jason says 09 April 2008 at 17:58

    Heidi-

    Telling people that there’s a website to help them stop being fat is not meant to offend, but I know it does for some people. For others, it is brutal honesty. The statement was not made to any one person in particular though, but more towards the culture of fat people that we Americans are becoming (more honesty here). Thanks for your input.

    Jesse- Agreed. I think the ability to walk away (other choices) is the single most powerful tool in any negotiation.

  18. Jeff says 09 April 2008 at 20:26

    I don’t really like to get all lawyerly out here on the interwebs, but point no. 8? “[R]emember that any offer made to you remains legally valid and can be accepted the next day (unless otherwise specified)”? That may be the law in your state, but it is not the law in my state.

    All I’m saying is, don’t hang your hat on it. If that’s the law where you are, that’s great, but I wouldn’t plan to use that as a negotiating tool without doing some research first.

  19. SavetotheFuture says 09 April 2008 at 20:45

    As with anything else, negotiating takes practice. If you are dealing with a salesperson, remember that they probably have training that might give them a slight advantage. Because of this, it is good be prepared before going in, and know what your strenghts and weaknessess are when negotiating.

    I really like tips #8, and #11. Try not to make an emotional decision and choose your words carefully when negotiating.

  20. ajmartin says 12 April 2008 at 16:29

    These are all excellent points but from the other side of the counter, I would like to make a few points.

    I sell jewelry, specializing in estate jewelry.
    I try to price my things fairly and do not factor in an automatic 20% discount because some people never ask for the ‘best price’ and why should they pay more than others?

    In newer rings, I use very good stones – a diamond of x size is not necessarily the same thing as the diamond of the same x size.

    So pay attention to advice #1.

    Surprisingly, a lot of people who shop with me don’t seem to realize that they are getting a very fair price on a diamond with a lovely antique mounting essentially free.
    The internet didn’t let them know that mountings have value too. And it doesn’t let you know about all the basic scams out there.

    So know what you are actually purchasing, Don’t spend more than you are really really comfortable with and shop locally so you have someone to go back to .

    Oh, I am a fatty and don’t really mind it. And if you pay attention to #1, the rest follows

  21. Mike Hunt says 14 December 2009 at 01:44

    I have no problem with the usage of the word fatty.

    As long as it’s describing a joint and not a person.

    -Mike

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