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Don't Gouge Your Customers - Even if You Can (Part 1)

Notes on Negotiation Written by Marty Latz, Latz Negotiation Institute

Our AC unit recently went on the blink with the temperature in Scottsdale around 115. Yikes! We needed to get it fixed or replaced ASAP. Talk about weak leverage! Fortunately, we found an AC guy willing to come out within a day and fix it.


I’ve never been happier to pay a bill.


Could he have charged more? Absolutely – he had the leverage as AC repair folks have been super busy this summer, and we were desperate. But he didn’t. Why?


There are at least four circumstances in which you should not fully exercise strong leverage. I highlight one here, and one each in my next three weekly columns (I am switching to short weekly columns focused on only one lesson, as learning theory suggests this will be more effective.)


1. The future business relationship may be very valuable

I expect this AC contractor anticipated that we would contact him next time our AC unit breaks. He would be right. Next time we might also need a new unit or extensive repairs, each of which would be more profitable to him than any additional profit he could have charged this time.


I also expect he really values his reputation as charging a reasonable price and not gouging his customers. I will recommend him as a result, and this may lead to even more business for him. Plus, I would NOT recommend him had he charged me an “emergency” premium.


A similar circumstance arose last year when we bought a new Hyundai Palisade. Every dealer we called but one charged a “market adjustment” over MSRP. Why? They had leverage, given the high demand and vehicle shortage.


The one that didn’t said they never charged over MSRP because they wanted our future business and the future business of our friends.

Latz’s Lesson: Don’t gouge your counterparts – even if you can – as the value of your future business relationship may outweigh any short-term incremental benefit.

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Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts' proven research. He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com



ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN • Premier Indiana CLE

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