In the city of Shanghai – China, there is a very famous fake market place where one can buy pretty much anything: electronics, purses, shoes, toys, clothes, etc.
During a business trip, I had the opportunity to visit and experience the negotiation performed by the Chinese store owners and it really astonished me how their negotiation strategy was.
My objective was to find good quality electronics, in my mind since almost everything is produced there, I would be able to find electronics for relatively low price. So here my journey begins, and because I did not have much idea of the local prices I had to do a benchmark first. One thing I was aware though, fake market negotiators were very aggressive and always put their first price very up high. I don’t blame them, it’s a smart strategic approach, they are working on anchoring the customer/prospect, so if the customer bargain they have margin to negotiate. And of course, if the customer/prospect doesn’t bargain, they make huge profit.
There I go to the first store, looked around and found a really fine looking Bluetooth headphone. I asked for the price and the store owner promptly replied: 600 Chinese yuan. I immediately asked if that was his best price, the answer: for you 500. I didn’t want to start any negotiation because I had no intention to buy. I was silent after that, and gave that “I’m thinking about” face. That silence gave me another 25 yuan’s savings. But I said, no thank you I’m just looking. Right there I confirmed the huge anchoring they use, with little effort it was possible to reduce 125 yuan. Current price: 475 yuan
Anyways, off I go to the next store and, of course I too used some negotiation strategy to go against their anchoring sales technique. I searched for the same item and asked for the price. Answer: 650 yuan. Wow, even more expensive than the first store I thought to myself. However, I knew what his strategy was so to avoid his high anchorage strategy I shared with him that his neighbor just offered 475 yuan as a selling price. Right away, he agreed to the price.
That astonished me again, for two reason: 1) with little effort I was able to reduce the price by almost 30%, therefore, confirming anchoring strategy and 2) negotiations were based on price only, not a single question why I wanted or what were my interests with that product, which for that case was the quality of the sound.
I did not buy at that store either because I sensed it was still a high price.
As a good negotiator, it’s important to know that focusing on pricing only is a very ineffective way to negotiate. The method of “focus on interest, not position” from the famous book Getting to Yes by Roger Fisher and William Ury explains that very well.
I’m not going to lie, I was having fun with all that negation at first, but when you have to do that position negotiation at every store, it irritates a little. They were not helping me pick the good quality sound Bluetooth headphones I wanted.
Luckily, a friend of mine shared with me a store which the owner did not use anchoring technique. The store owner would only negotiate, as he describes: “real price, no bargain here”.
With that, of course I started with the cool Bluetooth headphone I’ve asked at other stores. Answer: 300 yuan. Are you looking for good quality sound? Yes, I said. Mr. Store owner replied: I have other options with really good quality and price too, please take a look. Right away he started to unbox a few options to try for sound quality.
Wow! First, the prices other places were charging was extremely high and second, his concern to understand my needs and showing me different options was just fantastic. Great negotiation strategy.
Mr. Store owner have spent reasonable time showing and providing information regarding the different options. First information, he advised not to go with fake branded headphones because the sound quality is always poor, original Chinese brands however, would have a really good quality sound output. Second, he put all the option to the test: sound quality and resistance to impact – feature he thought was nice to provide. Lastly, he shared that a frequent customer had just bought one of the options for the second time. After sharing all the information and reducing my uncertainty, Mr. Store owner confidently asked which one I would like to buy.
At the end of the negotiation, I did not buy the headphone I initiated the conversation with, I’ve bought one of the other options shared because of an additional impact “feature” it had, which means headphone does not break easily. And since my job requires a lot of business travel, I thought it was a nice to have.
I’m not sure if he knows how powerful his negotiation strategy was, but one thing is certain, that experience will certainly be remembered as an excellent case of negotiation.
Lessons learned:
- Ask questions/gather information: Truly understand prospect interest. Collect as much information as possible.
- Acknowledge and provide insights – Always acknowledge prospect information and share additional info regarding the interested product/service. Providing insight is a MUST.
- Prove it – Give the prospect a chance to try. Prove the quality of your product and/or service. It’s important to decrease prospect uncertainty.
- Ask for the close – After prospect interest is truly understood, the information provided is clear to both sides, insights are shared, and all product/service uncertainties are reduced, ask for the close.
Overall, I’ve bought a few items in additional to the headphone. And to make it even better for Mr. Store owner, I was accompanied by two work colleagues and they bought from him as well.
There are many instances where people focus their negotiating based on position only, and do not realize that it’s a very ineffective way to get results. I believe this experience was a great example of how focusing on customer’s interests and delivering valuable information to reduce uncertainties, reaches excellent results. Hope this insight was as good to you as it was to me.