This is a savings tip+tactic. I want to make you aware of a money-sucking weapon used against you, and then I want to teach you how to wield a money-saving weapon of your own.
Americans, for the most part, do not enjoy negotiating. I’ve attempted to examine my own hesitations when it comes to negotiation and I believe it has to do with status. It seems a bit needy to haggle — as if I couldn’t afford the price their asking. “Oh I can afford it buddy! I’ve got money oozing out my ears! Just let me show you how much status I have! I’ll buy TWO at full price just to prove it!”
Or something like that.
Hopefully you’ll move quickly beyond that type of attitude and will be on your way to saving toward your bottom line by disarming sellers and wielding a magical 7-word weapon of your own.
There is a classic tactic of retailers called anchoring and if you’re aware of it, you can combat it (as we YNABers very well know, awareness is the key to just about everything!) when doing your purchasing.
Originally introduced to the idea of anchoring in Russo/Schoemaker’s excellent book Winning Decisions, I’ve tried to be very aware of it, and how it’s used against me when it comes to my purchases. In an instructional module that Russo wrote in May 2006, he described a simple exercise he did with his students to demonstrate the power of anchoring:
“The anchoring bias can easily be shown by posing two related questions to students. First, ask a question that implants an anchor value. For instance, if the quantity to be estimated is the year that Europeans defeated Attila the Hun, the first question might be: “Was the year that Attila the Hun was defeated in Europe and forced to return toward Asia before or after 900 CE?” Then the second question asks for the year directly: “In what year was Attila the Hun defeated and forced to return toward Asia?” (emphasis added)
You might guess what happens. Students have been anchored to the year 900 CE by the previous question. As a result, their estimate for the exact year of Attila’s defeat is unmistakably clustered around 900 CE. Russo makes the case even stronger when he uses each student’s last three digits of their phone number in place of 900 CE. The students all tend to answer near the year given even when that year has absolutely no bearing on the second question.
How is anchoring used against you every day? Ever heard an auto dealer talk about the MSRP? Ever looked at a clothing tag and seen that suggested retail price crossed out to show you your sale price? Discount price? Today-only price?
I only mention anchoring because it’s a classic tactic that can easily be combated by simply knowing that it’s a psychological trick that really does work.
Oh, I wish I could take credit for this, but it was actually based on an interview of Richard Paul Evans that I heard on the Glenn Beck show while I was driving around the other day. Glenn Beck described it as:
“Seven words that will change your course, seven words that will change not only I believe your financial future but also the course of your life.”
Those 7 magical words? Is that the best you can do?
Period.
Embrace any silence that may follow.
Use this all over the place. Use it at restaurants, retail outlets, hotels, airports — everywhere. Evans says it’s a rule for every one of his staff members to use that line whenever they’re purchasing anything. They’re seven harmless (but powerful) words! They’ll cause no embarrassment, you’ll feel no pain, and you’ll likely end up saving a bundle.
What you’ll find happens nine times out of ten is that the person will come back (after having spoken with a manager or whatever) and offer you some percentage off, and then apologize for not being able to offer a steaper discount.
Do this in places where negotiating just never happens. Walmart. Gap. Target. You will be amazed at what happens! And at the mom and pop shops you’ll find an even easier time being able to talk to the person that can actually call a few shots. Try this out and shoot me an email at jesse@youneedabudget.com with your story!
Is that the best you can do?
If you’re looking for a full-on thesis regarding negotation, this little email won’t be for you. However, the excellent book Getting to Yes: Negotiating Agreement Without Giving In will certainly suffice. It is a great source if you find yourself wanting to improve your negotation skills. I highly recommend it.
However just knowing about anchoring, and wielding your own negotation weapon will go a long ways on their own.
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This is The Wallet. My name is Jesse Mecham, founder of YNAB. Here I focus on the YNAB methodology, software, personal finance, and more.
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Magictofu
August 4, 2009
YNAB Pro at 49.95 + 5% coupon code; is that the best you can do?
Jesse
August 5, 2009
@Magictofu, Touché! Let me ask my manager…
Carolyn Asher
August 18, 2009
Beautiful! :)
Jared
August 18, 2009
I think I saved a little more than that Magictofu with a little Google power, but the software is worth it. Single-handedly one of the smartest decisions I have made was dropping money down for YNAB. My emergency fund is two months, I live off of an extra month of salary ahead, and I know where I overspend and can save money. Kudos, Jesse.
Jesse Tedoff
August 18, 2009
You’re quoting Glenn Beck?
I just unsubscribed, this is really disappointing.
Patrick
August 18, 2009
Jesse – Is that the best you can do? (just practicing)
Mark
August 18, 2009
Jesse, are you saying that during your regular grocery shopping at Walmart, to ask the cashier if they can do any better? If you’ve had excellent experiences with this, that’ll help dispel my incredulity, but I have to say I’m quite skeptical. Or are you referring to bigger purchases, like toys or TVs?
Jesse
August 18, 2009
@Jesse, I was actually quoting the author that was being interviewed on the Glenn Beck show. I happened to be in the car and was channel surfing. I actually don’t listen to talk radio much at all. Sad to see you go. This principle is great either way.
Jesse
August 18, 2009
@Mark, we use it for larger purchases — before we’ve brought it to the cash register (at Big Box stores such as Walmart you need to be talking with a manager, and it’s hard to find them, so I don’t do this unless the potential savings will be worth the time I’m going to spend finding the decision maker). Though by large, I don’t mean it has to be several hundred dollars or anything like that.
Nana Montana
August 22, 2009
This is a line that my father, a yard sale trader from way back, used all his life. Consequently, we have acres of stuff, that is now vintage and worth something. Seriously, the line does work, especially with tradesmen who own their own businesses. They frequently have a lower price for “locals,” no matter where you are in the USA.
Gary
August 25, 2009
Yes, it does work! Local Walmart had a discontinued model lcd tv on sale at cost minus 15%. Which was a great price.
I asked to see manager and said something like, “Look, this is the last unit, it’s been on the shelf, all dusty, the clerk isn’t sure he can find the box–I can take it of your hands right now–is this the best …”. Got it for additional $50.00 off!
Charlie
August 25, 2009
I think this will work best on big ticket items. I mean it would be a little silly to negotiate a pack of gum. I have seen it work in several situations. As a retired loan officer, tactics such as that were used by my wiser customers. Most people do not realize that loans can be negotiated. If asked a question like, “Is that the best I could do?”. I would have to stop and think, “What do I need to do to get this business and can he get a better deal somewhere else?” Usually, I would come back with a little lowerer interest rate. If asked again, I may lower the loan fee. But, if the customer asked again…… I dug in my heels and said, ” Yep, that is the best I can do.” The key is to use balance and not overdo.
Ljam
August 25, 2009
i like it. i get so embarrassed negotiating, i make my wife be bad cop. i will try this out soon with a general contractor i am meeting with this thursday. i’ll let you know what happens.
Angela
September 1, 2009
Thanks for the references. I may use that Richard Paul Evans book as a resource when we present a church class dealing with finances. I will definitely be sharing YNAB Pro. I hit one year of use next week– a year of true accountability. I see our failures and successes. I charted out next year ahead of time. Our goal is to have the car, student loan, and all non house debt paid off. I see in YNAB we can do it if we put our nose to the grindstone, God willing! I have the vision. Thanks a million!
Chris
September 1, 2009
This is an excellent tactic. It can and will work. And YNAB Pro is worth EVERY cent that it sells for BTW.
isabella mori (@moritherapy)
September 8, 2009
i have to admit that at first glance, i don’t like the sound of it. it sounds very critical. BUT i have a lot of clients who don’t like MY suggestions at first so i think i’m going to try it :)
Carol
September 15, 2009
As small business people who do everything we can to be fair to both us and the customer if someone tries to talk us down we are offended. We don’t try to rip anyone off and we don’t want to be ripped off. If people try to talk us down we try not to do business with them. It is not worth my time to work on someone’s equipment who thinks my time is not worth anything. I guess we are not the norm but that is how we do business.
Dave from Toronto
September 16, 2009
Jesse et all. Hey dudes I actually used this line on Jesse and it worked!
I would say the strategy is a little over simplified. For instance don’t ask the cashier at walmart “if that is the best he/she can do” they don’t have the authority to make that decision.
What has worked for me:
I was in a shoe store in a busy mall during back to school week. I noticed other shoe stores were selling “Buy one pair get the second half off” -but at inflated prices to cover their profit margins. So I said to a clerk in the aisle, “I noticed other stores are having a sale, but yours are all regular priced. She responded by saying “just tell them you forgot your coupon at home and they will give you $10 off.” What coupon? I said, I don’t know anything about a coupon? She said “just tell them you will be fine”
$10 smackers ($15 after canadian taxes) for 30 seconds work? that works out to big bucks!
Then I went to the internet and did a comparison shop for my car and home insurance. $300 saving estimate. I sent my insurance agent an email and she could only give me $180 off. Better than a kick in the head tho ain’t it!
Dave
Dave Howell
September 16, 2009
Hey I was one of those guys that felt awkward negotiating. This little exercise has changed my feelings totally. Let me walk you through this using the shoe scenario above. I hated math until is had something to do with my money. Shock and awe/Watch and learn:
Start: haggle for $10 and feel bad. Who cares? it is only 10 measly bucks.
Then: calculate the what the hourly rate is. Saved $10 for asking a 30 second question. $10/30 seconds x2 x 60= $1200/hr
Okay, $1200/hr almost touches my hourly rate, so maybe it is worth my time. BUT Then…
Next: I am a Canadian and we get taxed like crazy (but no complaints here).
More than 55% of all my money ends up in government coffers so in after tax dollars that is $1900/hr. But Then…
Next: I made a deal with myself. Any money I saved through negotiating I get to invest for 20 year @ 5% compound interest for 20 years so that 1900/hr is actually $5154/hr.
So it is a matter of perspective whether you saved $10 measly bucks or whether you made $5154/hr. But two things I do know:
1) Going through the exercise of doing that math is such a mental hit, it makes negotiating fun. I am no longer see myself as a haggler but a chief negotiator;
2) If someone is going to pay me big bucks like that, I am going to take every second of that kind of work that I can get!
Given the same outlook I also earned 1,898.85/hr from my insurance company, 1369/hr from my bank and $976/hr from my phone company this week!
Cat
September 22, 2009
Having worked in locally-owned restaurants through high school and some of college may I make a note that this is NOT a worthwhile idea there unless you happen to be organizing a large party (we discounted people who pre-paid for around $200+ worth of food. Free drinks, extra server just for their table, etc.)
But when people were trying to haggle a $50 check…no go. The business has to make some profit, you know?
What people said above about using this on big dollar purchases holds true in the restaurants too.
That said, I know a woman who got $200 off a formal occasion dress by haggling in this way. Last one, style going out of season, etc – that the best you can do?
Kieth
September 22, 2009
Listening to Glenn Beck is a positive in my book Jesse. Great tip also. I will try it soon, as I have two large ticket items to purchase. A vehicle and a washer/dryer combo.
Texan
September 23, 2009
Disappointing to see Glenn Beck mentioned here. Disturbing actually.
Is that the best you can do?
Jesse
September 25, 2009
I have to laugh at the reaction re: Beck considering I so very rarely listen to any talk radio, and that the idea comes from the person Beck was interviewing…
Polarizing figure apparently though!
Dalyn
September 29, 2009
Speaking as a cashier/manager, that NEVER works with me. And I work at a used book store. But I stay firm on the price. That money we make is money that goes to my pocket. So if you try to haggle me for fifty cents on a one dollar book, go to the library. Hagglers are my second least favorite customers. Re-sale dealers being my least favorites.
But like I said, I work at a second hand bookstore so we don’t have any big ticket items. Good luck on that!
Zachary
October 6, 2009
I am the GM of a Hotel and if you want to save money on your stay you should ask this question especially if the hotel isn’t full. We want to fill rooms! I teach my staff to either lower the rate or upgrade to a better room.
Fred
October 10, 2009
Great tip. I could have used it on my recent purchase of a new van when dealing on what they were giving me for my trade-in. I am a Glenn Beck fan so you win some and lose some but it all evens out.
Jack
October 13, 2009
Jessee,
Great tip. I’m a Glen Beck fan too and so is my wife. We attended the 9-12 Project in Washington recently along with at least 1.2 million other people who are unhappy with what the government is doing (can I say spending all OUR money?).
Glen Beck is responsible for that. Here is a list of his 9-12 Principles. I’m having a little problem figuring out why anyone would be disappointed in Glen Beck.
Jack
PS: you’ll notice that thrift is one of the 12 values.
—————
9 Principles, 12 Values
The 9 Principles
1. America Is Good.
2. I believe in God and He is the Center of my Life.
God “The propitious smiles of Heaven can never be expected on a nation that disregards the eternal rules of order and right which Heaven itself has ordained.” from George Washington’s first Inaugural address.
3. I must always try to be a more honest person than I was yesterday.
Honesty “I hope that I shall always possess firmness and virtue enough to maintain what I consider to be the most enviable of all titles, the character of an honest man.” George Washington
4. The family is sacred. My spouse and I are the ultimate authority, not the government.
Marriage/Family “It is in the love of one’s family only that heartfelt happiness is known. By a law of our nature, we cannot be happy without the endearing connections of a family.” Thomas Jefferson
5. If you break the law you pay the penalty. Justice is blind and no one is above it.
Justice “I deem one of the essential principles of our government… equal and exact justice to all men of whatever state or persuasion, religious or political.” Thomas Jefferson
6. I have a right to life, liberty and pursuit of happiness, but there is no guarantee of equal results.
Life, Liberty, & The Pursuit of Happiness “Everyone has a natural right to choose that vocation in life which he thinks most likely to give him comfortable subsistence.” Thomas Jefferson
7. I work hard for what I have and I will share it with who I want to. Government cannot force me to be charitable.
Charity “It is not everyone who asketh that deserveth charity; all however, are worth of the inquiry or the deserving may suffer.” George Washington
8. It is not un-American for me to disagree with authority or to share my personal opinion.
On your right to disagree “In a free and republican government, you cannot restrain the voice of the multitude; every man will speak as he thinks, or more properly without thinking.” George Washington
9. The government works for me. I do not answer to them, they answer to me.
Who works for whom? “I consider the people who constitute a society or a nation as the source of all authority in that nation.” Thomas Jefferson
The 12 Values
* Honesty
* Reverence
* Hope
* Thrift
* Humility
* Charity
* Sincerity
* Moderation
* Hard Work
* Courage
* Personal Responsibility
* Gratitude
Dennis
October 20, 2009
@Jesse Tedoff: So what you’re saying is:
I am canceling my subscription to a really good source of financial tips because the author *might* have political views that are different than mine, even though those views are not expressed at all in the tips.
Wow, I feel really sorry for you and the people around you. Just wondering: do you check the political position of the cashiers at your coffee shop or fast food restaurants too?
Brenda
October 23, 2009
@Dennis Good point. In my town, you don’t have to bother checking the political position of the cashiers at one local coffee shop. It’s called The Conservative Cafe and the tag line is Coffee Done Right.
Need I say more?
Tony
October 27, 2009
You have to explain the quote of Glen Beck,,,,,please
Brian
October 27, 2009
It is almost November and still no YNAB 3. So I ask, Is this the best you can do?
Otherwise the blending of the concepts you illustrate and the software you provide work extremely well together.
Thanks
Jesse
October 28, 2009
Alas Brian, it is. Taylor has been logging at least 16 hours per day for almost 7 days a week…and he’s been doing that for about two months now. I’m fairly certain he would say it’s the best that he can do. We aren’t going to push the software out the door until it’s done, and it isn’t done.
Believe me when I say that we’re much more anxious to be done with it than you are to be using it :)