Negotiations & The Price Tag Syndrome

When I was a schoolboy, close to my parents house was a residence for elderly people. To earn a little money, I regularly went shopping for a few ladies from that residence. They would give me a list and money, I bought the stuff down in the village store, transported the goods on my bike back to the residence, got a smile and, more important, after examining the purchases, my tour-salary of 1 or 2 Francs.

Through my regular shopping duties, I became an expert on prices. I would know and tell the ladies, that prices of butter or tomato juice had recently gone up to make sure to get enough money for the purchases.

You might think, why is this man telling us stories from his childhood when the subject is negotiation.

Well, through my many shopping tours, I had the firm believe, that a written price on a product is untouchable – take it or leave it.

This believe, I call it the ‘price tag syndrome’, costs me quite some money ten years later, when I bought my first car. I couldn’t afford a new one, so I went to a dealer who offered second hand vehicles. I had exactly 6000 Francs to spend. When I saw that black Fiat 127 with the red price tag of 5900 Francs fixed inside the front window, I knew I would buy this car. In fact, I was proud to pay less than my whole 6000 Francs.

The good feeling vanished quickly, when I presented my new car to a colleague who was a repairman and – after he glanced the motor and had a quick look under the car – told me that this Fiat would be valued at 4500 Francs max by his garage.

For the first time I was aware, that there is a difference between price and value. This is the most important lesson before entering any negotiations when buying a car, a house, a laptop or whatever on the second hand market.

The second step is information. After all, the seller knows a lot more about the product than a buyer. Get even with the seller by examining the market before entering negotiations.

Step number three is leverage; from a buyers perspective it’s good to know, if a seller is under pressure to sell or not and it’s perfectly ok to take advantage of that knowledge.

Value, information, leverage – with all that in mind, I wouldn’t pay to much for my first car, but this experience is in my mind to this day, when I have to negotiate.

Now, the same three steps are also valid in salary negotiations.

To get in a superior position, companies simply take advantage of the ‘price tag syndrome’. They offer a job with a fix salary – take it or leave it without room for negotiation.

To get back an advantage, it’s necessary for any applicant to know his value for a company, if a enterprise really depends on his skills, knowledge or contacts and what competitors are offering for similar jobs. Value, information and leverage are the three pillars of any successful negotiation.

Sometimes, it also pays off to be very blunt. Maybe this is not yet happening on Romania very often, but this is a true story from America.

Farnoosh Torabi was 26, she worked  as a producer/reporter for a financial news organization and made 45.000 Dollar a year, when she was offered a better job as senior correspondent.

In the negotiation with the manager, she bluntly asked for a salary of …. 100.000 Dollar per year.

The manager didn’t kicked her out of the office right away, instead he offered her 85.000 Dollar per year.

‘How about 90.000 Dollar?’ Torabi asked.

‘We got a deal!’ the manager replied.

That’s why we close with an advice by Ms Torabi: “In the end, always be aware that you don’t get what you deserve, but what you negotiate.”

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Good luck with your next salary negotiation. If you manage to get more money, maybe it’s a good ideea not just spend the surplus, but think about investing it. The first steps to become an successful investor – read it in the next chapter: http://www.theleader.ro/stock-market-1/