Do We Need a Relationship to Get the Best Price?

SANY

Recently, I was asked to help someone make a big purchase, e.g. equipment.  My friend wanted me to help him garner a discount because he thought that I could develop stronger rapport due to my Chinese ethnicity.

The whole meeting was conducted in Mandarin.  I tried to build a relationship with the Chinese people by asking them about their time in Ghana, where they are from, and what they did before.  Regarding the item, I asked several questions but I left the price and discount discussion for later.

After the meeting, my friend and I had a bit of a disagreement.  He was thinking I was going to get all the information so he could share it with his (African) friend.  I told him that we’ll probably have to go back.

The whole episode got me thinking about how culture affects your negotiation and working styles.

Americans

When I lived in Los Angeles, I used to work in commercial real estate financing where my company acted as an agent between the “Money,” e.g. pension funds, insurance companies, commercial banks, and investment banks, and the developer/property owner.  As agents, we fed the Money with prospective projects to fund.  The Money would come to the office and give their pitch on what types of properties they were looking for.  If they had time, then they might take us out for dinner but the relationship seemed to be based on the ability of the Money’s ability to execute quickly and pay us.

Meanwhile, our important relationships were with the developers/property owners.  We called them regularly and kept them abreast of new products and financing schemes available.  Most of the relationship maintenance was handled over the phone or by email.  I’m trying to recall a time when I socialized with them but I can’t.  If you go out, then it usually doesn’t matter who pays because someone’s expense account will be covering it.

Your business life and your personal life hardly cross paths.  (I’ve worked for property owners and other investment banks and things are basically the same.)  Sure, you may take someone out for lunch or dinner but the relationship is rather formal; the two of you are perhaps one level above acquaintances.  Vacationing with each other is totally out of the question. Thus, you can’t ask very much of each other — the price they give you is  the price.  You might be able to get a discount or an improvement if you have been dealing with each other for a long time or if you have some other relationship, e.g. fraternity, alumni connection, common charity interest.  (I’m excluding business conducted among friends.)  I don’t include closing dinners because, by then, the deal is concluded.

Americans pride themselves on trying to treat everyone the same.  No matter if you’re white, black, Asian, or a Martian, you should be treated the same.  (There are imperfections in the system, e.g. red-lining.)

East Asians 

Banquet Dinner

Chinese banquet dinner spread

Now, I haven’t worked that much in East Asia but being Chinese gives me certain insights.  In 2007, I was working for an American developer/property manager who was interested in buying a 120 housing project in Guangzhou, China that had gone into distress.  (My boss was Southeast Asian-American.)  I led a small team to assess the viability of the project.  We talked with the developers and city officials and visited competing projects.

After settling into our hotel, the first thing we did was eat lunch with everyone on the developer side.  “Lunch” involved an eight course meal with plenty of hard liquor.  They toasted us to our good health; we toasted to their good fortune.  We blessed the whole thing with more toasts.  Since we didn’t finish lunch until 3:30pm or 4pm, it was hard to get started on “work” until the next day.

In a way, I was lucky not to participate in night time eating and drinking and… uh… socializing at karaoke bars because there were several women around.  Karaoke builds rapport and relationships through “mutually assured destruction” (MAD).  Everyone sings songs while playing drinking games with 小姐 (xiao jie) until 3, 4, or 5am.  After the introductory night out, you will still have to go out together over the course of the deal.

Who pays for all of that eating and drinking?  Usually the “big men” alternate in covering the cost of the whole night.  Depending on the size of the party, the bill can come to a few thousand dollars.

Only after eating and perhaps going out, can the two sides even begin to engage in negotiations.  In a way, it makes sense.  I don’t know you from Adam but let’s hammer out a $100 million deal that will require the two sides to work together for the next 3-5 years.

In 2011, while living in Ghana, I was socializing with some people of Chinese descent who my friend was doing business with.  The whole MAD thing also exists here with the karaoke clubs and supporting “infrastructure.”

Once you develop a rapport/relationship with someone, then it’s not unreasonable to try to get better pricing and to get information that isn’t on the company’s website.  After all, you’re much closer to being friends than mere acquaintances.  Furthermore, the line between personal and work is blurred.  You can expect to spend much more of your personal time with your colleagues and clients than you would in the US.

Ghanaians and perhaps Africans

Here my experience is relatively limited because Ghanaians always regard me as an outsider.  I’m definitely not part of a connected or prominent family.  I’m not from a local tribe nor region.  Furthermore, I didn’t attend any of the local high schools, universities, nor churches.  All of these things are quite important here.  For instance, one former colleague was rather proud that he stayed in Commonwealth Hall, a residence hall, at the University of Ghana known as the “Vandals.”  It’s like an American fraternity with similar concepts of brotherhood, pranks, and rowdiness.

In 2011, I came to work here for a local private equity firm looking to build a mixed-use real estate project.  They were also looking to do private equity investments as well.  I was wise enough to know that if I just walked in the front door, then I would get the worst price, the obruni price.  Most of the time, I would try to go through a colleague’s relationship so I would be treated better.

Trying to get reliable information is very challenging here.  Except for the commodity products and services, most prices are not posted — nor known.  The hope is that the strength of your relationship will help you garner a lower price.

I’ve been told that Ghanaians like to invite you to their homes to socialize but they don’t do it outside at restaurants.  I think part of it is because Ghanaians are rather private and don’t like people knowing their business.  I also think it’s because Ghanaians are parsimonious.  For instance, last year I was offered a mid-senior level job with a local bank.  My role was to grow accounts and develop relationships with foreign customers.  The monthly entertainment budget was 200 cedis! ($100) 200 cedis!  Where do you expect us to eat for 200 cedis?  Sorry, that’s for the whole month!

Bargaining

To achieve a good price, you must bargain.  When I was a child walking about the markets of Hong Kong and Taiwan, I never liked to bargain because I always thought I would offend the vendor with a low-ball price.  Now I know better.  The vendors will never name a price that will hurt them.

In East Asia, people bargain as well but between friends, Africans do it slightly differently.  In places where bargaining is the norm, I’ve learned that the person will not feel he has gotten a good deal unless there is some bargaining involved.  When I’m dealing with friends, however, I will give my best or “last” price.  We’re friends, after all, so let’s skip the whole dance.  Here’s my “real price.”  I’ve noticed in Ghana that even among friends, people expect a fair amount of back and forth.

For instance, I’m trying to sell my inventory.  A friend asked for the price and I told him flatly that it was X for most everything.  Without even thinking if that was a fair price, he said, “That’s too expensive.”  Then he threw in some mepaatsau which means “I beg” you to lower the price.  Honestly, I was a bit offended because he was treating me like a common vendor — as if we did not have a relationship.

In summary, Ghanaians seem to rely on stronger relationships than Americans.  People here tend to know each other through friends, family, church, and school so it’s also likely that you will see people from work in your off hours. More often than not, you will be getting things done through “a friend” who you hope will be getting you a better price than the listed price.  Bargain, bargain, bargain.

Closing Thoughts

Regarding my friend, I realize that the disagreement stems from different cultural expectations and ways of behaving.  Ghanaians will always treat Ghanaians better than a foreigner but this is true among the Indians, Chinese, Nigerians, Jews, etc.  The one group that I wouldn’t expect much negotiating room is with Americans.

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