negotiation Jul 19, 2016
This is a true story based on an experience my friend Nathan and I had negotiating with locals while travelling around China in November 2007. Nathan was working in China for a few years and spoke the language so I spent a few weeks travelling around China with Nathan before he relocated back to the US.
It’s 6am and we’re checking out of our hotel in Xi’an, China. While checking out of the hotel, Nathan asks the hotel clerk how much it should cost for a taxi to the airport. She says 120CNY. Outside, it’s dark and quiet and there's only one taxi available. Here's the exchange between Nathan and the taxi driver:
· Nathan: How much to the airport
· Driver: 100CNY
· Nathan: 80CNY
· Driver: 90CNY
· Nathan: 85CNY
· Driver: pleads for 90CNY and cries to Nathan about being poor and needing the money to feed his family
· Nathan: agrees to 90CNY (90CNY feels like success based on the hotel clerk's information)
Was this a good deal? It depends on your frame of reference. Nathan set his target based on the hotel clerk’s info. But business in China is based on relationships. Most likely, the hotel has a relationship with the taxi drivers in front of their hotel. Having the hotel clerk say that 120CNY is a good price sets their customer up to think they negotiated a good deal when the driver starts at 100CNY and then gives up a little more.
If Nathan had a local contact, a quick call might have defined a good deal as 75CNY. Nathan would then counter the driver’s initial price of 100CNY with 50CNY and settle at 70-80CNY.
What was the difference between these two scenarios? Information. Whether negotiating multi-million dollar business deals or taxi fares, information is key to negotiating a competitive deal. Not only is information important, the source of that information must be trustworthy.