I recently bought a back issue of Entrepreneur Magazine. Although it was written two years ago, I still find some stuff written about it helpful and educational.
I would like to share with the things I learned from the first article I read, “Is This the Best You Can Do?” by Jennifer Wang
This article speaks about haggling. In life, we love the feel of negotiating for something and getting a good bargain. For a Filipino born of a Chinese descent, like me, bargaining is a skill expected of us. We started to learn the art of haggling when we were still young, trying to wheedle toys from our parents. Sometimes they give in, sometimes they don’t. Then we hear our moms do it when they go to places like Divisoria, Greenhills, and even the market. Our fathers will casually mention a good deal he got from the office, like materials being sold to them cheaper than its market price. We all love a good deal, and shop more during sales and discount seasons.
When you are the one selling or offering the product/services. How will you know what’s reasonable and what’s not, particularly when you are just starting and you don’t have much experience?
This brings me to the story of someone I know. Let’s call her “S”. S graduated recently, majoring in Piano. Part of her career goals is to teach piano lessons on the side, as she prepares for better things to come. She is a good teacher and she has been playing, learning, and honing her craft for 18 years! Think about the amount of hours she has used for practicing, annoying the neighbors and causing her to miss out on her social life. Think about the amount of money spent on her weekly private lessons that spanned for almost two decades.
Recently, she acquired two new students — rich (they have a big house in Greenhills) and mature (above 40’s). She agreed to go to their house and teach them for P750 per hour. Let me tell you, that rate is quite low, because she will spend two hours in traveling to and from that place so if you think about it, the profit is lesser than that. However, since S is such a kind and innocent girl, she agreed to it.
The students, being old, asked her to computerize a particular score, saying that their eyes can’t see very well, and mentioned that they will pay her extra. S spent hours doing it at home, and when she handed it over to them, nothing about the extra was mentioned, and she didn’t bring it up anymore — she was embarrassed to do so.
Recently, they spent two hours rehearsing and instead of giving her P1,500 for two sessions, they asked if they can give her P500 per hour instead, and then P100 extra for traveling. Being the naïve little S, she didn’t know how to say NO, so she agreed to it halfheartedly. Then following week, guess what they gave her, P600 for two hours!! These students were clearly taking advantage of S!
After reading that helpful article, I now have pieces of advice to her, and to you as well. When someone haggles with you, these are the things you should consider:
1. Know your goals. Are you doing the job simply because you dislike being idle? Are you doing it to earn money or simply to gain experience? Know what you want so you’ll know what and how to negotiate. In a good deal, both parties should always come out as winners. According to Lauren Bloom, a business ethics expert, all parties should be able to walk away, feeling that they got into a reasonable deal. When you don’t have what your client wants during negotiation time, maybe you can use it as an opportunity to develop and package a new product.
2. Know your limits. Everybody wants the best. But you have to know, that the price of an object or service tends to match with its quality. This is quite hard to gauge, specially in service businesses. One example: You have more to demand from a school whose tuition fee is Php100,000 a year as opposed to a school whose tuition fee is only P40,000 a year. Sure, they both shall meet the required standard of the government. But the quality of teachers, facilities and even cafeteria food should be different. Now if you are a small business owner, you should research on your market carefully and decide where to position yourself. In my case as an events host for example, I started my career charging people low. But I found out that low fees attract a certain type of clients I didn’t really want — clients who just hired you because of a price match — there’s no loyalty or relationship. They just want the position to be filled up. Anyone would do as long as it’s within the budget. Now, when I got a more established reputation, I increased my fee a bit, and my client base shifted. I found myself hosting in nicer venues and dealing with better suppliers. Still, I was aware of the current market price and decided to put myself a little lower than the rest of them. I didn’t know then, that people perceived price to be equal to the quality. People who have money to spare want the best, and they are willing to pay for it. People who are excellent are usually in demand and that’s why they can ask for their price. By putting myself a few pesos below the others, I was unconsciously suggesting that the quality of my services is poorer than theirs. Thus, next year (2012), I have decided to match the rate of the trending market price. Of course, if I’m not being excellent in what I do, then I cannot demand the best price, am I right? 😛
3. Think twice before agreeing. According to Bloom, hagglers are annoying, particularly if you feel they’re suggesting the goods and services you’re providing aren’t worth what you are charging. Think twice before you accept a job you’ll probably regret later. If someone is trying to take advantage of you, it is quite alright to decline their offer and recommend a competitor’s business to them.
4. Protect your reputation, and your industry’s reputation too! Never cut your fees out of desperation. If you are really good with what you are doing, you will create a niche in your market and your business will prosper. If you feel that your customers did not give you the fee you’re worth, then you will start resenting the assignment and maybe start cutting corners. In case of over-competitive markets, such as Architecture or Photography, there are many newbies who are quoting prices that are too good to refuse. If you are one of those, please don’t do it anymore. You will ruin the entire industry and eventually lose the business. My case in point — Importing and buying China products resulting to local industries closing down. Poor, jobless Filipinos.
Going back to the article, it mentioned that the safest way to convince a hard-nosed haggler is this: “show people you offer the best value, and separate this from price.” well you just have to make sure that your product or service has value.
And if you are the hag that everyone hates, isn’t it about time that you change and share your wealth some more? 😛