Bad news for consumers: Prices are going up. The consumer price index, one of the primary measures of inflation, showed a 5.3% increase in the cost of consumer goods in August compared to the same period in 2020. So far this year, everything from cars, to homes, to food, to gasoline has gotten more expensive.
The good news: The amount you pay for many of the things you buy is subject to negotiation. "Not everything is negotiable, of course," says Andres Lares, managing partner at Shapiro Negotiations Institute. Good luck haggling at the gas pump, for instance. "But a lot more than you think is."
During a period of rising prices, it's more important than ever for any potential negotiator to know what to ask for and how to ask for it, Lares says. Here are three of his best tried-and-true negotiation strategies.
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Depending on what product or service you're negotiating for, there are two ways you can get a better deal for yourself, Lares points out: You can pay less, or you can get more value for your money.
"If you're negotiating for a car, you can lower the price, or they'll throw in floormats and free oil changes," he says. "A hotel might be unlikely to drop the price of your room, but you can ask for a room on a higher floor or free Wi-Fi."
If you think you can get a better deal on something you're shopping for, don't be afraid to ask, says Lares. You'll get the best results if you keep your initial request open-ended. "Say you're renting a lake house for the week and you're hoping to pay a lower rate. You don't want to say, 'Hey, can I get a 20% discount?'" he says. "Rather, you might say, 'Seeing as we're renting at the last minute, and no one else is likely to book this late, would you be willing to discount the price?'"
The seller may come back with a bigger discount than you were expecting, Lares says. And even if they don't, by putting the ball in their court, you're initiating an amicable negotiation, he says. "Asking along the lines of, 'What do you think would be fair?' makes you sound less greedy and more confident making the ask."
Even if you leave your first ask open-ended, it's still smart to have a firm idea of where you want the negotiation to end up, Lares says. Otherwise, things can go off the rails. "If you don't have a number in mind, you are prone to making a bad decision when emotions are running high," he says. "You may have a loose idea that you don't want to pay more than $20,000 [for a car], but after three hours at the car dealership, you may say, 'Fine, let's do $22,000.'"
For any negotiation, start by setting a target price you're willing to pay, as well as a figure you're willing to walk away from. "If they're quoting you $22,000, the most you'd pay is $21,000 and you ideally want to pay $20,000, you can begin formulating your first offer at $19,500."
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From there, script out a few potential scenarios before heading to the negotiating table. If you name the price you're willing to pay for a car, for instance, it behooves you to think about how you'll respond if the dealer comes back with a higher number, or offers no wiggle room on the price at all.
"If you work these things out in your mind beforehand, you're going to have a plan and stick with it," Lares says. "Then when it occurs in real life, you're going to be much more comfortable, willing, and able to negotiate."
There are no guarantees that you will get what you ask for in any negotiation. For the best shot at success, Lares recommends a system with the handy acronym "PAID."
- Precedent. Knowing what others have been able to successfully ask for can help you calibrate an appropriate offer. "Ask yourself if this kind of deal ever happened before, and what scenario led them to negotiating with someone else," Lares says.
- Alternatives. "Think about what else they can do, and what else you can do," Lares says. That means negotiating on multiple fronts. "You should be asking for lower price and higher value," he says. "Now they have alternatives and can give you what works best for them."
- Interests. Understanding the motivations of both sides of a negotiation is going to lead to better outcomes, Lares says. "Think about why someone would be willing to give you a deal," he says. "If it's the rental house scenario, and the house is available last-minute to book for the next two weeks, it's an expiring asset. That may be a good time to push for a lower price."
- Deadline. Understanding when a negotiation will take place allows you ample time to prepare, says Lares. "Work back from that deadline, to create a timeline to do all your research, and don't leave everything to the last minute," he says. And if the other side kicks the can down the road on a negotiation that isn't time-sensitive, make sure to install a new deadline to return to the table, he adds. "Ask when you can circle back," and put the new date on your calendar: "That way it won't fall through the cracks."
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