THE BLOG
01/03/2008 04:58 pm ET | Updated Nov 17, 2011

How to Negotiate Like an Indian -- 7 Rules

2008-01-03-ferriss.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.

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...

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.

Related links:
How to Negotiate Luxury Treehouses and Convertibles

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Timothy Ferriss is author of the new #1 NY Times bestseller and Amazon Top 10 Customer Favorite, The 4-Hour Workweek [http://www.amazon.com/gp/product/0307353133?ie=UTF8&tag=offsitoftimfe-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0307353133]