The 7 Negotiation Rules

There are a lot of stereotypes about us Easterners, one trait that receives a lot of attention, especially from embarrassed Westerners, is our love for negotiation. It doesn’t matter if the price is printed on the goods and there is a big sign in a prominent location in the store which declares that the prices are fixed. We always ask at least if “this is the best price” or “are the prices really fixed?”.

To help our friends understand, let me bring these seven negotiation rules to your attention:

  • Rule #1 – The true price of any item is what you pay
  • Rule # 2 – Try for 70% off
  • Rule # 3 – Make them show lots of merchandise
  • Rule # 4 – Offer on one item at a time
  • Rule # 5 – Wait for the pad of paper
  • Rule # 6 – Say “TOO HIGH”, a lot
  • Rule # 7 – Imply a bundled purchase

For an excellent explanation of what these rules means, please read How to Negotiate like an Indian by Tim Ferris. I am sure you will enjoy your forthcoming souq trip a lot more if you keep these simple rules in your mind!

19 thoughts on “The 7 Negotiation Rules”

  1. LOL!!!!

    As a westerner who was “initiated” into this marketplace in Iran in the 70s, this is a great list. But the best was left out…no matter how much you want the “thing” be willing to walk. And vocalize it with words and footsteps! Wait for the tea service and head for the door…you will soon reach a reasonable negotiating platform.

    And above all, maintain your sense of humor!

  2. I learned a lot about bargaining during my years in Bahrain.

    Those seven rules actually work, not just in India or Bahrain. He just forgot one important rule:

    “Don’t make an offer, unless you really want to buy”

    Using these rules (and with a bit of practice) you can often get the price of an item down to 25-30% of the asking price in Kenya.

  3. Mahmood,
    The rules are fine and should be useful in many places not just Bahrain. However, one has to be careful. In some places you may end up being thrown out!

    You can no longer bargain in most big shops in Bahrain where prices are fixed. I am not aware for example, of any big supermarket that entertain any bargaining over price. Do you?

  4. Has anybody calculated how much the cost of bargaining adds to the price of the purchase? What’s your time worth? If you are bargaining for individual vegetables, it seems that you are burning up a lot of time which is money.

  5. @Steve.

    I assume you mean bargaining is a total waste of time.

    Twisting your own words 180 degrees I could argue that the more and better I bargain the more time I’ve saved, because I can get my vegetables with less time spent on working for them ;-)

  6. Well, even in the west there used to be places where you should haggle with a market owner or get taken as a fool. There are also certain situations where it’s acceptable even in the US, such as at flea markets.

    My grandmother and other Filipinos of her generation used to attempt haggling here in the US and she had to be reminded that in most stores that doesn’t work. It still happens over there in street markets.

  7. Milter,

    I wouldn’t say that bargaining is a total waste of time but rather a relative waste of time. Economically, it would be called differential pricing, where every product is sold at its optimal price for each individual customer, something like how airlines sell their seats. However, the transaction costs may well exceed any savings you reap, especially as you bargain for cheaper items. Bargaining also only applies to small stores because it is labor intensive. If you want to sell en masse, you have to have fixed prices.

    When I was in Egypt last November, a little silky red rug caught me eye while we were being trotted through a rug factory tourist trap. I enquired about the price on a whim. The rug merchant said it was $3000 (!) but then said with a $500 discount it would be $2500. Yikes! I told him it was a nice rug but it was meant for a richer American than me.

    So I kicked around the store for fifteen minutes and the guy approached me again and quoted me $1500. I deferred and eventually walked out the door and got on the tour bus. The rug guy sent the tour guide after me to offer me the rug for $1000. Thanks, but no thanks.

    Now maybe if I was serious about that rug I could have bargained it down below $500. Had it been marked below $500, I might have walked out the door with it. However, to buy that rug I would have to go to school on rugs to see what the real market price is. That transaction cost is an obstacle to commerce.

  8. When I was in Egypt, a street vendor kept trying to sell me a plastic Made-In-China necklace for $75. AFter I kept saying NO, he got it down to a couple of dollars.

    I really hate bargaining in these countries. I’ve got no talent for it, and I do feel it’s a waste of my time. When they know you’re an American, they think dropping $3000 USD for a carpet is nothing to you. I’m not swimming in money!

    In some poorer countries I’ve been to, I’ll just pay the asking price(within reason of course). To me it seems unethical to get a dirt-poor vendor to reduce an $8 USD sweater to $4.

  9. Well, bargaining to me is finding an equitable price, a fair price for the goods that I want to buy. It’s not a matter of winning and the seller losing.

    Unfortunately, in Bahrain specifically maybe due to its market size, goods are not normally on the shelf, and if they are, you will find that their price normally inflated. Hence, asking for a discount (or haggling for one) is the norm in a lot of shops and establishments. Not so supermarkets and malls of course, but all else expect “that question”; hence, they have put in a margin to give away should one ask. If they don’t, well, that’s just extra profit.

  10. Bargaining is not confined to poor countries or flee markets in rich ones. Companies being targeted for a merger usually and initially respond by saying that the offer they received was ridiculously low.

    I also believe that property transactions in the US, UK and in many other rich countries are rarely done without bargaining over price.

    A lot of bargaining in flee markets is done for the sake of it. I feel that people derive fun from it too. Only this morning I saw people in our street vegetable market haggling over what must have been 25 fils. This is about 6 cents. Surely this haggling must have been a sort of entertainment

  11. I am absolutely horrible at bargaining…vendors love to see me coming…lol. But I found that by walking away…I will be chased and given a much lower price without too much work on my part…I dont argue with it as I decided if he went through the trouble to leave his store(and many times the seller will follow me out the store and down the street aways) then the least I can do is come back and pay that price…if I really want the item that is. However if the vendor is aggressive in anyway about it…Im gone.

  12. I saw people in our street vegetable market haggling over what must have been 25 fils. This is about 6 cents. Surely this haggling must have been a sort of entertainment

    It is true some do it for entertainment..some do it because its a habit.. but some do it because 4 coins of 25fils is a packet of bread which is the humble dinner of a whole family for a night.. that is true..

    sorry for the sobering thought for what is a entertaining post that i enjoyed. apologies!

  13. J,
    You are right. People haggle for all sorts of reasons and I must admit that a coin here and a coin there could mean a dinner for a night for a poor family.

    I did not mention it earlier but I was actually referring to well off people that still haggle over cents. Surely they are doing it for the fun of it.

  14. or as i mentioned because of a very well rooted habit in their genome.. i tell you some bring a headache to the poor merchant and they go back home with their bargain 0.675443BD toy teddy bear throw it in the face of their kid (birthday!) as hard as they can making them cry and sitting on the sofa tired and grouchy swearing all over of what a bad day it is…

    i think it maybe a bahraini disorder?

  15. J,
    Bahrainis actually are famous for it. You would see them haggling with the poor Indian shop seller over cents but no they would not do that over much bigger amounts when they travel abraod.

  16. I think proper competition, ie a-la monopolies commission or a consumer protection society, could ameliorate this problem. At the moment, prices are fixed by traders dependent on the supply and demand. In a lot of cases, the traders control the supply to push the demand up and hence justify the hike in prices.

    Look at the building materials now since the announcement of the LMRA, and I know that prices will go up again by 20% in January and again before the application of the new labour law in June.

    I suspect that the story will repeat itself across the consumer products throughout.

    Is this a failure in economic policy or just another Bahraini trait?

  17. Mahmood,
    I think things can only get worse on the inflation front especially for food. On the international stage the Chinese are consuming more and more food. Also more food is being produced for the production of fuel or what they call biofood. The end result; higher prices in the supermarkets.

    At the local stage guest workers will soon be more costly and rightly so as work permit fees will rise sharply. Moreover, I read somewhere the unfair system of sponsership may soon be abolished. This will free these poor souls to search for higher paid jobs. The end results; higher prices.

    We may not like it but in the long run this should be positive development.

  18. We may not like it but in the long run this should be positive development.

    I would agree with you, except for the fact that the upward swing in prices, locally, is unfettered and only tempered by the “how much can we fleece them for” merchants.

    Yes, I know I am generalising, but in the absence of proper competition and prevalence of corruption, this is what we get.

    Am I against price hikes? No, if it is competitive market deregulated.

  19. Why is it Mahmood that very few companies have people that no how to properly answer phones. I mean for a large multi-millon BD company for someone to answer the phone by just saying hello has always amazed me, very unprofessional & not very buisness like for perspective customers. The second bitch I have here during my nine years; you can ask a very clear question and the response you will recieve 90% of the time is “Sorry”, sorry Mahmoood that is again a very pathetic answer.

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