The following is a staff post by My University Money.
The Negotiation (Photo credit: Wikipedia)
Repeat after me: Everything is negotiable. This is one of the coolest personal finance tips that I have ever been given. I don’t have much interest in clipping coupons, or shopping for eight hours looking for that perfect deal on a basic product I want to buy. For some reason however, I enjoy looking at expenses that others take for granted, and applying the concept that everything is negotiable to them.
There are a ton of people that just accept the arbitrary fees and ridiculous business practices that get applied to them daily, and they simply don’t have to. The whole idea that someone would spend hours cutting out coupons, but meekly accept the bank’s first offer on mortgage rates is crazy to me. One of the tactics I have specifically used to great advantage in negotiations playing the lifetime loyal card. Basically, reminding the company you are dealing with that you have a lot of business with them, and while you would really like to stay with them, there is this offer from another company and…
Negotiating to a mutual advantage
One area where this proved especially effective was when I went to purchase a vehicle after university. Each dealership I went to I mentioned, “I’m not much of a car guy, so as long as the vehicle treats me right, I’ll definitely be back here for another one. Oh, and we’ll probably be looking for another vehicle for my wife in a couple years too.” Car salesman make a living off of repeat customers like that, that will come specifically to them.
None of them knew I planned to buy a small car and drive it forever when we first started negotiating back and forth, I’m sure they figured I’d be looking for an upgrade pretty soon like most consumers. Let’s just say I didn’t say anything to discourage this thinking. Car dealerships look at that long-term picture all of the time. After all, a meaningful connection with a young couple could be very lucrative over the next twenty years.
After getting some interesting “throw-ins” from several dealers (some of which I would have never thought about asking for on my own) I went to one that had the car I really wanted and I more or less asked him to match all of this, as I consistently reminded him that my wife was more a fan of that other company so she wanted to go there, but I was trying to persuade her this company was, “Full of good people.”
Loyalty can be expensive if you don’t take advantage of it
Another are where this loyalty and comparison tactic can be effective is through banks. Banking is a business model that depends on your loyalty/laziness to maximize their profits. They know that once they hook you in for a mortgage, you will likely go there for other loans, and hold a monthly account there as well.
Get creative when you negotiate. I have seen plenty of people get their monthly checking account fees whipped away just for renewing their mortgage (think about how valuable all of that interest is to the company) and asking for it. Another interesting strategy in the whole mortgage game is to approach a couple direct competitors about switching over. Many salesman and employees will get big commissions if they can poach another bank’s mortgage. In order to seal the deal they will throw all kinds of stuff at you in addition to the absolute bare-bone interest rate that they can offer. Get this in writing “For your wife to see” or whatever, and then show it to your old company.
Remember the line, “I have always dealt with _____ and I would like to keep dealing with you guys for the next 20 years, but you have to be competitive with this offer I’m getting from _____. They gave it to me in writing that ______, and they said they could probably do even better if I moved my other accounts over there.” This will send all kinds of alarm bells off as no one wants to be responsible for losing someone with multiple accounts, and I guarantee someone will labour on your behalf to get you a much better deal than before. Even a couple tenths of a percentage point can be a substantial amount of money when you are looking at a large mortgage.
This can be applied to other industries as well. Places like insurance companies can be leveraged into providing perks if you make the argument that you don’t have to have all your insurance coverage at one place, but darn it, if you just match this offer, you’ll keep all the rest of it with them as well. I’ve also heard of many credit card companies competing to keep you around, but they aren’t so found of me because I always pay my balance off monthly (therefore I’m not worth much to them).
Just remember that certain key phrases like “lifetime loyalty” carry a lot of weight in the retail sector. Most people will simply renew whatever agreements they have with their financial institution without really looking around, and the banks, auto dealerships etc. know that; consequently, they’ll do everything they can to keep so much of your business, and that can be leveraged to your negotiating advantage.
I love the Office reference!
I will be honest it is tough to find loyal businesses never mind loyal customers these days.
I agree, loyalty should be rewarded. I use that card with m bank. I refuse to pay any fees at all. I managed to have a free safe deposit box (for life), never paid for printing of checks and I get traveller’s checks for free. I even have an interest bearing checking account (no min. balance).
My favorite phrase is “what do I need to do to get (fill in the blank)?” I quietly wait for an answer. 99% of the time, they tell me what I need to do or just give it to me.
Never underestimate the power of silence in negotiation either. The human need to fill in the silence will take them off of their usual negotiation path.
All good points. Especially your first (which I learned very late in life) EVERYTHING is negotiable (well except death and maybe taxes).
We used this with our insurance agent last time we sat down with him to review policies.
Taxes seem to be negotiable these days as well, as long as you can pay a good negotiator (aka – accountant).
I used our long-time loyalty to AT&T U-verse recently to get a technician fee of $49 waived. It works. If you’ve been a customer for a while anywhere, they do try to keep your business much harder than if you don’t have a history together. 🙂
And so they should right? I mean you have a proven history of spending money with them and sticking to the company. What kills me is when companies only offer perks to new customers and not the people that have been loyal customers in the past!
This is a great tip!
I’m more inclined to negotiate for things since living in Egypt when the price of almost anything is never set.
I have a story I think is funny though related to me bartering in Egypt! I had just arrived and was told “Everything can be bartered for”. So I started trying to barter for everything, from my SIM card from Vodafone (cell phone company) to buying a coca cola in the Supermarket. I soon learned with some Egyptians looking at me like i was nuts that some prices are fixed, even in countries where bartering is very common :).
That’s an awesome story. My dad loves negotiating, but people think he is crazy here in Canada. When we took a trip down to Mexico he was in his glory. He got to barter on everything from lunch, to taxi fares. Great fun if that’s your thing.
Ha ha ha, I bet he was in his element!
Using the lifetime loyalty card is an excellent negotiation strategy. As you mentioned, many of us are willing to show our loyalty to our banks without the thought of negotiating banking benefits to improve our financial status. The phrase “have your cake and eat it, too” applies in this case. We can be loyal customers, and at the same time earn greater features and benefits. A win-win situation for sure.
We’re trying to get comcast to lower our bills because they keep increasing the price all the time, maybe I should use this tactic.
Bartering can be fun, but I liked Forest’s story on bartering from everything from SIM cards to coke, haha. Yeah, sometimes the price is the price. However, good point in that you can get more just by asking. I think I need to do this with my old bank soon, if they don’t want to see me go. 🙂
Negotiating is fun! Especially if you twist their arm (not literally), and they just throw in other perks for you just so you wont go to the competitor.
To Marie: Regarding taxes, My university money is right, you can negotiate taxes if you hire a really good accountant. You can also waive penalty fees depending on your case.
Earlier today I was waiting for my free mobile phone which is part of their loyalty program for renewing my mobile plan. It didn’t arrive so I called in to check what was going on, only to find out that they did not have a record of me availing the loyalty program which is not true because I spent almost an hour on the phone last week to process my application for the loyalty program. A furious me threatened the agent I spoke with and told him I will transfer my mobile subscription to the competitor if they will not deliver my mobile phone within the week. Lo and behold, after being put on hold for 15 minutes, the agent came back to bring me good news! I should receive my phone any time tomorrow. See? Negotiating can help you get what you want out of these people, whether its a bank, a safe deposit centre, a mobile service provider or cable provider.
So get creative! Lol