03 Aug 7 Negotiation Hacks to Make & Save Money
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MM note: Negotiation is at the heart of selling, making, and saving more money. It’s truly an art and the more you practice the better you get. And the better you get at negotiating the more mone you can save (& make!). Through a recent conversation, I asked MM reader Win Warfield (yes, coolest name ever!) to share his essential negotiation tactics. These are legit and super valuable hacks.
Tell me if this has ever happened to you:
You purchase something big, yammer on about it to your friends, only to have one of them say, “Oh yeah. We bought a new flat screen, too. But we paid $500 less than you did because we asked if there was any wiggle room.”
It’s like getting hit in the head with a brick (kinda!)
No one wants to be “that guy” or “that girl,” the one who didn’t try to save money or take the necessary steps to find a better deal.
If you don’t want to be that guy, let me save you the pain by sharing six essential negotiation hacks you need to save money. Whether the item you’re purchasing is big or small, it doesn’t matter. What does matter is your willingness to do what it takes to save a few bucks and put the rest away toward retirement or another financial strategy?
1. Price Anchoring
One of the greatest marketing and negotiating hacks out there is a little trick known as price anchoring.
Price anchoring is when a retailer puts a product on the market for, say, $1,500 bucks, and then reduces the price drastically to give you the impression that you’ve saved big.
Fantastic if you’re the sales person but how can you make this tactic work in your favor?
What’s the Hack?
Simple, you be the one to throw out the reduced price first.
For example, if you stumble upon a flat screen for $1500 and want to negotiate it down to $1000, offer that price to the associate first. Anchor it. Don’t let him be the first to throw out a number to you.
Psychologists say that any time you estimate a numerical value, you become prone to the power of suggestion. Let the associate be prone to that power, not the other way around. You can use this same strategy when you are negotiating a raise.
2. Trade Propositions
Trade propositions work incredibly well if you’re looking to rent an apartment or house and you want to reduce the rent fairly and appropriately. Or in some cases, potentially even live rent free.
In a word, a trade proposition is when you negotiate legal labor with the landlord or property manager.
For example, let’s say you can only afford to pay $1,000 a month on an apartment that demands $2,000 a month. Find out if there is something you can do to supplement the additional $1,000 a month. This is more common than you probably realize and your landlord might need some help around the property. You just need to ask.
What’s the Hack?
What is important to the property owner? What does he or she need? If you hit a sweet spot, the landlord might be more than willing to negotiate a trade deal with you.
- Does the apartment complex need a maintenance person?
- Do the lawns need to be mowed?
- Does the landscaping need to be maintained?
- Can you offer to help with managing some of the other units?
- Can you assist with any of the buildings ongoing projects?
If picking weeds or cleaning someone else’s move-out mess doesn’t appeal to you, offer to give up your parking spot or garage space (if applicable). This could shave a few bucks off your rent, too, and put more money in your landlords’ pocket so he can offer the additional space to someone else.
3. Comparison Effect
The comparison effect is a nifty little tool often used by salespeople who want to sell that car or house or TV or insert big-ticket item here à ________ to an unsuspecting buyer.
It is closely related to the social comparison theory, which says we determine our worth by how we stack up against others.
Smart salespeople know this.
Let’s say you’re buying a house. Rick the real estate agent shows you one that is awful. It’s in a bad neighborhood, has drop ceilings from the 70’s, and is nothing like what you want at all.
You politely decline.
Off you go to the next showing. It’s infinitely better. Even if it’s still not exactly what you want, it is a step up in comparison. You know that. What you don’t know is that Rick needs to get this particular house off the market, and so instead of showing you what you really want, he pulled this “silent” negotiation tactic.
What’s the Hack?
To avoid falling victim to this tactic, first acknowledge what’s going on. Say to yourself, “This might be a good option, but I’m biased right now because I’m comparing it to a much worse model. Let me step back and regroup.”
Thank Rick for his time and go home to review your checklist of:
- Must Haves
- Nice to Have
If any of these popped up when you viewed the second house, call Rick back and take control of the negotiation process. The world is officially your oyster.
If the house had none of these options, kick Rick to the curb and find an agent who is willing to work in your favor and will negotiate with you fairly. The last thing you want to do is invest in a house or apartment that you don’t dig after all.
4. Scarcity Principle
You know this negotiation tactic. It’s where the marketer or sales person says the famous last words, “Act now! We only have five spots left!”
Rick the real estate agent uses this tactic, too. “If you like it, you need to put an offer on it right now. I’ve got three other people interested in this house just because of the drop ceiling.”
If you want to be aware of someone doing this to you, pay attention to it when it comes up. And then ask yourself, “Would I be buying this if they weren’t trying to move me into it?”
If the answer is no, don’t put any money on the table. Step back, sleep on it, and reassess.
Having said this, the scarcity principle isn’t a bad hack. If you think it will help you in a negotiation, give it a whirl. It never hurts to be in-demand.
What’s the Hack?
Here’s how you turn this tactic around to serve you: Let’s say you’re trying to sell a laptop so you can have more cash on hand. It’s in excellent condition but you need to make cash fast.
Tell your buyer, “I’ve got another woman looking at this right now. She intends on paying full price for it. But if you really want it, let me know now and I’ll let it go for $50 less.”
See that? You used the scarcity principle and price anchoring in one sentence.
What a pro you are.
5. Establish Trust
If you ask the majority of people to throw out an adjective that describes a salesman, they might come back with something like: slimy, manipulative, or unfair.
If you are any of these, you won’t be able to negotiate a single thing past your nose. Why? Because we are more likely to buy or be influenced by someone we consider trustworthy. Trust means honestly, and it’s the only real way to sell.
What’s the Hack?
Let’s say your selling something. A car, a house, a widget with blinking lights, whatever, if there is something wrong with it, be upfront and tell your prospect.
“The front porch needs work and the A/C doesn’t always cooperate.”
Trying to hide the fact that the A/C doesn’t work won’t serve you at all. If anything, it will make you look like the manipulative salesperson we all want to avoid.
By being honest, you establish trust. So now, when you talk about the major benefits and strengths of whatever it is you’re selling, your prospects are more likely to believe you.
6. Choose the Time
Anytime you want to take control of a negotiation, you put more power in your corner when you call the shots.
Think about this.
Powerful negotiators are the ones who set the time and place for a meeting. So instead of saying, “Will Tuesday during the day work for you?” They say, “I’m available on Tuesday at 1 p.m. or Thursday at 3 p.m. Let me know what works best.”
They don’t ask, they tell.
Experts also say that the weather makes a big difference.
What’s the Hack?
When it comes to looking at a car, a house, even meeting with your financial advisor, you call the shots. You pick the day. And see if you can choose a day where the sun is shining.
When the weather is nice, we’re more apt to want to help people. So if you show up to look at a house, your real estate agent (Rick left town) might be willing to negotiate because it’s nice out.
Try to make your meeting happen in the morning, too. Having a conversation early in the day keeps any potential problems that may have occurred already from creeping in and distracting you or the other party. The fewer problems on someone’s mind, the more apt they are to say yes when you throw out a good number.
7. Order the same thing
So you’ve got a really important lunch set up with your boss or a potential new big client. You sit down at the table and the server hands you the menus. What should you order?
If you want to increase your negotiation power, defer to your dining partner to order first. Then wait to see what they order and, if you can, try to order the same meal and/or drink that they do. Without the other person knowing it, you will have already agreed on something (what to eat!) without even starting the negotiation yet.
What’s the Hack?
By sharing the same experience, whoever you are dining (or snacking) with, will be more likely to listen to you and potentially feel more connected to the conversation. Sharing the same meal together unconsciously creates a connection and can level the playing field for the conversation.
As with any negotiation hack, always stand in integrity. Selling should never be about manipulation. If you feel someone is taking advantage of you, walk away. Don’t invest. Ever.
On the other side of the coin, don’t try to manipulate anyone. Be honest. Honesty is the anchor for every single tactic shared here.
So now it’s your turn to go out there and negotiate. Just avoid the house with the drop ceilings if you can.
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