How to Negotiate like an Indian — 7 Rules

152 Comments

sales_transaction.jpg
Guess who won?

Indians have founded more engineering and technology companies in the U.S. during the past decade than immigrants from Britain, China, Taiwan and Japan combined (Source: Where The Engineers Are, Vivek Wadhwa, 2007).

Incredible.

The entrepreneurial abilities of Indians in general has amazed me for years. It seems that Indian culture produces an uncommon blend of innovative thinking, business-minded aggression, and comfort with numbers. But there is another ingredient…

Two weeks ago, I saw a screening of the film 2 Million Minutes, a new comparative documentary that examines education in the US, China, and India. The filmmaker, Bob Compton, also wrote a book titled Blogging Through India, which I thumbed through before the movie.

Lo and behold, it contained this great little description on one of the greatest skills Indians bring to the table:

Negotiation.

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In India, every transaction — EVERY transaction — is negotiated. Merchandise, cab fare, restaurant bills, wedding doweries — the list is endless.

As our guide Vishnu explained, “In India, we bargain to the level of the individual vegetable purchase.”

While awkward and uncomfortable to most Americans, that level of negotiating can be quite valuable.

Hotmail founder Sabeer Bhatia, a CA transplant from Bangalore, credited the bargaining skills he learned in vegetable markets at home for getting Microsoft to push its acquisition price for his company from $160 million to $400 million. Bill Gates’ eye teeth were floating in tea with that deal.

Here are a few rules for bargaining on the buy-side when in India…

Rule #1 – The true price of any item is what you pay — There are no suggested retail prices in India. Nothing is labeled, so it pays to talk with several vendors before making a significant purchase.

Rule # 2 – Try for 70% off — Don’t accept less than 30%

Rule # 3 – Make them show lots of merchandise
— If it is a rug merchant, you want the demo guys sweating profusely before you make your first offer. Get the vendor to “invest” in the transaction — emotion, time and energy.

Rule # 4 – Offer on one item at a time –
If you plan to buy a couple things DON’T let on at the outset. Act like you intend to buy only one item, if that much. Get the seller to give you prices on each item; play one item off another to show you are looking for the lower price point.

Rule # 5 – Wait for the pad of paper
— Every Indian sales person has a pad of paper and a pencil that they pull out when the bargaining gets a bit more serious. Though they write down the price for an item, this is only the starting point – remember rule #2.

Rule # 6 – Say “TOO HIGH”, a lot
– Don’t even start negotiating until the salesman has scratched through the initial price and lowered it at least twice. I found that simply staring in silence at the pad of paper for a long time would result in the vendor cutting the price.

Rule # 7 – Imply a bundled purchase — OK, now that the price has been cut 25-30%, ask the salesman what deal he would give you if you buy two items. Expect 5% off. Ask for three items; get another 5%. Then add a very expensive 4th item — one which you do not intend to buy. This will excite the vendor and he will do a bunch of calculations which you will be unable to follow. The price will come down for the expensive item as well as for the other items you intend to buy. Lock those prices and drop the expensive item.

At this point, you should have been able to shave close to 50% off the initial price. Most Americans generally are satisfied at this point and close the deal.

One final point – no matter what price you pay — if the sales guy is smiling when you leave — guess who won…

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Is it a stereotype that Indians are good at negotiating? Sure. Is it accurate? Just neglect to prepare next time you match wits against an Indian entrepreneur and you tell me.

Do you have your own negotiating strategies, tips, or stories? If so, please share in the comments, and feel free to build on or borrow from the recommendations in the 4HWW.

If you’re interested in checking out 2 Million Minutes, which is provocative to say the least, the next screening is this Thursday, Dec 13 at 7:30pm in the 500-seat Varsity Theatre in Des Moines, IA:

1207 25th St
Des Moines, IA 50311
(515) 277-0404

Fans include Barack Obama. For free tickets, just call Meg Charlebois at 317-202-2280 ext. 11 or email her at Meg@dittoePR.com before Thursday at noon.

Posted on: December 11, 2007.

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152 comments on “How to Negotiate like an Indian — 7 Rules

  1. I am amazed at this blog. It is true that indians are excellent at negotiating. I think though at times negotiating every deal can wear on you physically and emotionally. But, as a whole these are some interesting observations you have pointed out. I liked the idea of buying dropping the last product at the end. I could this being very useful for businesses which are about to buy multiple cars/trucks at a time. I will try a lot these out next time I am in Cancun. These rules would seem to be very applicable to custom things like: wedding cakes, costumes, a home improvement company doing work on your house, and so forth. This blog alone is worth thousands. I can tell you from personal experience in owning a landscape and a concrete company, that this type of negotiating WOULD save you a ton!!!

    Best

    Jose Castro-Frenzel

    Like

    • Jose, there is something even more expensive than money or time.
      Regardless someone buying from you or you buying from someone, when it gets to the point that you feel that an attempt is being made to cheat you, its better to thank them and leave. There are many more vendors or customers out there and this first one learned his lesson. he will be more considered from now on. Dishonesty toward me is a great insult
      One of those customers was blaming on economy and weather in order to avoid paying for repair service already done, by me, at agreed price which was competitive, realistic and fair. I simply took the parts out , put the original damaged parts in and waved goodbye adding that I will not do any work for him at any price. Yes I lost time, but saved my dignity.
      Cheat me once- shame on you, cheat me twice-shame on me. My pride is more valuable than his money. There are many good customers who need and value my services. No, I will not discriminate someone based on his race or cultural habits, but I will not permit myself to become a puppet either.
      Let an Indian hire an Indian service and repair person. They will get along pretty fine ( LOL)

      Like

  2. Much of what you post on this is true, but I would also add that much of Indian people’s entrepreneurial motivation is driven by an unleashed desire to makes lots of money and acquire the kinds of material, capitalistic wealth which was the province of Western Europe and America for the last few hundred years. That was already evidenced by the Japanese in the 70s and 80s, and recently by countries like S. Korea, China, and other sourtheast Asian countries. I’m sure the Eastern European countries will follow as well.

    It’s what happens when you release repressed, pent up desire to acquire wealth.

    In addition, your insights into the negotiations that go on between customers and merchants is something that was always part of Indian and Asian societies, and I believe much of Europe as well. My parents emigrated here from S. Korea and they thought it was unusual that American’s did not try and negotiate a better price for stuff they bought, likewise when my parents shopped in Korea town in LA, I wondered why they always tried to talk down a better price with the merchant.

    This is strictly a cultural thing, and I don’t think it correlates to their recent successes in business.

    -Don Kim

    Liked by 1 person

    • Completely agree with you Mr.Kim. I’m from India and have lived and worked in ASEAN and have travelled the region. Also I’ve had very limited exposure to East Asian community as well. As far as buying/bargaining is cocerned I’ve found the similarity in all these places. I’m sure even Europe should have been the same except that the current day society in Europe would have largely evolved-out of the bargain-buying habit. And as far as business negotiation goes, every successful (and sometimes not-so successful) businessman should be definitely having it in him irrespective of race, colour, creed or region. I guess the success of Indians (and other Asians) in the U.S Tech landscape has got more to do with the business environment in U.S (silicon vallye style enterpreneurism) and the fabled immigrant work ethic (coupled with the desire for the riches of the new world) rathen than the vegetable-buying negotiation skills.

      The blog writer is a smart alec. He is trying to create a stereotype out of nothing to keep steady flow of traffic to his blog!!!

      Like

      • I don’t agree with you. Stereotype already exists. I am in sales and service business, and each time I have to deal with someone from region you mentioned I leave with bad taste in my mouth. Finally, after so many times of bad encounters I do state that I charge for my time for estimate. Usually phone gets hanged up on me, seldom a phone estimate is requested (to get something free anyway) . I ask for credit card number to charge them for phone estimate and then I get hanged up. In isolated cases only, after trying with so many businesses they call you and agree to sign a contract for order, and after work is completed they will tell you they have to do something for a few minutes and leave. After several calls to they will answer you they cant make it today. Then I remove parts I installed, put back old ones, leave a note with tenants that Landlord refuses to pay for repairs and leave. Where will the snowball roll from there is not my problem.

        Like

      • I must disagree with you again. Stereotype already exists.They do not try to get a better price. They try to cheat you.
        I used to get annoyed by this, but now I employ a different strategy.
        Price is given once! By me. No one puts a price on my work!
        If the price ( competitive, fair and realistic) is not accepted, then I will not discount my own self , so NO DEAL! There are a lot of good customers needing my services and I am not entertaining someone who is trying hard to cheat me.

        Like

    • Don, American Commerce is designed to adjust itself, unlike other countries.
      Why even bother? Before buying we all have an Idea of what is the average price for an Item, don’t we?
      A peddler is not even entrepreneur. A single goal he has is to get as much for every single Item as he can.
      A buyer is looking for a chance to get something for nothing ( buying $100 item for $30 insures him $70 for nothing. Buyer argues he put time in it and it is the value of his time. Seller also has invested equal amount of time and not gotten a penny for it, lost $70 and is upset. Which supplier will sell him $100 MSRV Item for $30? You can negotiate all you want, but he will only sell it for Cost + expenses + some profit. I don’t know how is it in India, but here in US obvious low price could mean trouble ( bootleg, stolen, refurbished, If we buy American, then our economy will bloom. We will have jobs, we will prosper. What is it that you can not find here in US that you must buy it in India or in China?
      Those countries prosper on US Dollars not on Rupppies of Yuans.

      Like

  3. The graphic on the 2 Million Minutes home page is gorgeous. Provocative, yes – the trailer alone got me shockingly stirred up.

    I am still very conflicted about my own education. I was a poster-child for well-roundedness. I spent summers doing volunteer work, was a respectable athlete and musician, and scored a perfect 36 on my science ACT and a near-perfect in all other subjects.

    Yet, somehow I more or less fell through the cracks in our collegiate education system. I continued to do well academically – but at the end of the day it really hasn’t served me or anyone else because I haven’t yet successfully made the transition from student to productive member of society through any existing channels.

    I wonder how much non-academic skills like negotiating (perhaps learned in childhood as a regular part of life) are helping young Indians and Chinese make that transition. In my case, learning to negotiate really well could probably make up for having an art degree.

    Actually, I have started learning through the Sandler Sales Institute. I recommend it for negotiations on this side of the ocean. http://www.sandler.com/

    Like

  4. I’ve done this type of negotiating in Turkey for buying clothes and suprisingly, it can be a lot of fun. I often have to force myself not to smile or laugh when the sales person lowers his price once again. One of the best (i.e. time-saving) techniques is to just walk out of the store if you don’t like the price. Usually they’ll shout the best price they can give you when you have left the store and then you can re-enter and say, “Now we’re talking”.

    Like

  5. I think the entrepreneurial Indians are the exception. Indians, in general, are extremely conservative, cautious and rigid when it comes to following policies, rules, and laws. These kinds of attitudes don’t really foster an entrepreneurial spirit.

    I also agree with Jose Castro-Frenzel that I’d rather pay the inflated fare than enter a negotiation to save a few bucks, except for when I’m in the mood for fooling around…

    Like

  6. Well timed for me — I’m heading to India in two weeks. So, thanks!

    But a question: Isn’t there room for win/win negotiating?

    On a recent trip to West Africa, I became frustrated with traveling companions who would tease others for “paying too much.” I’m not sure I agree with Tim’s assertion that the true price (or value) is what you pay. If the dude will accept as low as $1 for an item, and I want it for less than $5 and end up paying $3, I don’t see that as a losing situation for me. Especially in parts of the world where $1 means a hell of a lot more to them than it does to me, I’m glad to get a good deal that isn’t necessarily the rock-bottom price the vendor would accept.

    It’s the win/lose approach to negotiating that sets us up for disappointment. At least that’s what I think — of course, that may be why I’m a church worker and not a world-famous entrepreneur.

    Like

      • I completely agree Scott – I have recently started a new business here in America where I have been dealing with a lot of Indians – after dealing with their negotiations for the past few months I have found myself on the losing end to the point where my business is not making a profit from there business. I already offer a great service at a good price – from here on out – I will only take win-win deals. I now have a zero tolerance attitude towards their negotiations. Losing their business is better then losing my $.

        Like

  7. I got a huge insight into bargaining when I was in an Arab market in Israel. My bf and I were walking through and two American girls were trying to buy something. The vendor named a price and they paid. The vendor said to my bf in Arabic with regard to the girl, “Stupid idiots, they insult me by not bargaining”. He was absolutely disgusted by the transaction despite getting more money than he would have.

    Like

  8. The concept of the fixed price was invented by the Quakers. They believed in not lying, so when they asked you the price, they told you. This turned a skilled activity into an unskilled activity that even children can do. This is the effect of technology.

    Like

  9. The best thing to do in negotiations is to engage emotions of the vendor. If one makes/lets him be more engaged than we are, it is us who make the decisions :) Pricing decisions included!

    Like

  10. My husband is Indian and I have been watching him do this for years! In fact we just got back from India after doing all kinds of shopping (half the time I got left outside because the price would at least double just because I was in the room!) and is really fun to watch them all in action.

    The funniest part is how his brothers think he’s a terrible negotiator! But in America he is amazing – he is running his own restaurant and has been profiting almost from the start mainly because he is a master of negotiation and numbers in general. He is my hero! Because of him I have negotiated all kinds of stuff we normally wouldn’t think to do.

    The silence trick is the one I see the most and was the most puzzling until I learned it. It takes the emotion out of the transaction. I also learned to walk away – once they invest the time they will chase you down if they are serious about making the sale. We got $6,000 off the bluebook (not sticker!) price of my car that way!

    In a way I am biased, but I do like how Indians do business – there is just more human interaction and both sides in the best of deals walk away happy. And you get hot chai!

    Like

  11. It’s best to negotiate when you have nothing to lose. It’s easier to do this as a 3rd party in my career. Much more difficult in my personal life where I can get obsessive or attached to products. Due to personal goals I’ve put myself on a budget over the last year. Which means that if it’s not in the budget I won’t buy it. My normal shopping style is to look and know about everything before making my decision. (Well, this shopping style is worse on a budget!) If the price is too high. I literally won’t buy it. If it’s too expensive I end up staring at the item before I leave. Then that’s when the reductions start happening. It shocks me since I have not intended to buy the item nor have I asked for the reductions. This is a great skill to have. In your example buying these types of products can take a few hours to maybe a few days.

    However, I wonder how much it varies when dealing with larger entities over longer periods of time.
    I recently met a venture capitalist Christine Comaford-Lynch. She talked about negotiating for months or even a year on some projects. One of the projects was with a larger corporation like Microsoft involving millions$$$. Do you have any personal knowledge or industry knowledge on long term corporate negotiations?

    Best Wishes, Kristine :)

    Like

  12. As I’m reading this, I can see myself totally messing up the first couple times. This seems like a great way to get out of your comfort zone if something like this scares you. Also, keep that poker face and not getting emotionally attached seems like a key. If you’re one of those smiley, “nice” people all the time they’ll stomp all over you! After reading your book, Tim, I can tell your amazing negotiation skills have catapulted your success. I’ll make a commitment to get over some “negotiation fear” and f-ing go for it ;) Thanks!

    Like

  13. My tip would be don’t be afraid to walk away in these smaller negotiations. Sometimes you showing the willingness to walk away will get the salesman to lower the price drastically.

    Like

  14. Hee, hee… that was so fun (and true). I travel to China regularly and can attest that some of that info would be quite useful when bargaining there. I used to think I was pretty hot stuff because I would counteroffer something like 30% less than the initial offer. Boy was I wrong! Now I start at about Rule #2’s 70% off.

    One rule I would add is don’t be afraid to walk away. Turning your back on a deal that you just can’t quite get sealed will get you a quick “Hao de, hao de” (ok, ok) most of the time and if it doesn’t, well you’ve just found the basement and now you’ll be better prepared to negotiate with the next vendor. Remember, try not to leave money on the table!

    In my wife’s hometown of Hangzhou, they have a saying about selling to foreign tourists: “Sha Zhu” (? ?). It means Slaughter the Pig and refers to how lucrative selling to foreigners can be. If you don’t want to be the fat pig being led to the slaughter, follow Tim’s steps (and don’t be shy… it IS tough for many of us Westerners to not get intimidated or angry with bargaining but you just have to go with the flow… trust me, the locals will respect you more for it).

    p.s. check out comedian Russell Peters’ hilarious take on this with his sketch “Indian versus Chinese” http://youtube.com/watch?v=ZtbyVFLl_7U

    Like

  15. Hee, hee… that was so fun (and true). I travel to China regularly and can attest that some of that info would be quite useful when bargaining there. I used to think I was pretty hot stuff because I would counteroffer something like 30% less than the initial offer. Boy was I wrong! Now I start at about Rule #2’s 70% off.

    One rule I would add is don’t be afraid to walk away. Turning your back on a deal that you just can’t quite get sealed will get you a quick “Hao de, hao de” (ok, ok) most of the time and if it doesn’t, well you’ve just found the basement and now you’ll be better prepared to negotiate with the next vendor. Remember, try not to leave money on the table!

    In my wife’s hometown of Hangzhou, they have a saying about selling to foreign tourists: “Sha Zhu”. It means Slaughter the Pig and refers to how lucrative selling to foreigners can be. If you don’t want to be the fat pig being led to the slaughter, follow Tim’s steps (and don’t be shy… it IS tough for many of us Westerners to not get intimidated or angry with bargaining but you just have to go with the flow… trust me, the locals will respect you more for it).

    p.s. check out comedian Russell Peters’ hilarious take on this with his sketch “Indian versus Chinese” http://youtube.com/watch?v=ZtbyVFLl_7U

    Like

  16. In my experience, I’ve found no matter what culture you’re dealing with, NEVER be afraid to walk out. Otherwise smile, be polite, and haggle for what you want to pay. The salesperson will never let the item go out the door without making a profit.

    Like