Friends don’t ask friends for discounts…

I have noted in previous posts a strong uptick in my cross cultural training courses in recent months which has primed me to pick up on some interesting ways that cultural filters show up time and again in business. One of the things we always talk about is how western cultures (particularly the US and countries like Germany) are heavily influenced by criteria decision making while in China things are influenced by relationships. The average tourist in China who was gone off the grid and gone shopping in a market where haggling and fake goods are predominant has undoubtedly run into one of the most common business manifestations of this cultural filter, “the friend discount.”

In 2001 I came back to China for the first time since 1997 (which in turn was the first time since 1989) and spent a fair bit more time sight seeing on my own than I had in previous trips. One of the more exciting places I ran into (and would go back to frequently until moving to Guangzhou in 2005) was the Xiang Yang Market. For those of you who missed out on this experience the Market was THE PLACE to get fake goods ranging from CK underwear, to Columbia Gore-Tex, to CDs and DVDs. This was a great place to learn your numbers and your haggling skills in Chinese because no price was really fixed and if you tried hard enough you could get some “really good deals” on practically anything.

Xiang Yang Market Circa 2004

In 2001 one of the things that most impressed me about the shop keepers was that they all seemed to know some key English and overwhelmingly they new how to give me a “friend discount.” To my understanding all these years later friends will try there hardest to knock at least 10% off of whatever price they would give to just any sucker walking by. Friends would also continue with some protesting to come down on that price and additional 10-70% depending on what you were buying. But to really get you into the shop and get you to “taste the goods” so to speak they would throw that friendship discount out early and fast to let you know they were reasonable. There might be a vague hint to some criteria based haggling (“look how well this underwear is made”) but the underlying theme was deals were being made because they liked you and only because the shop keepers were willing to sacrifice to keep our relationship in good standing were they willing to keep bringing the price down.

Good hagglers knew how to play off this dynamic. Failed bargainers would point out defects in quality and demand a discount, skillful bargainers would point out how their friend over in stall 35 had such and such rate and since you were good friends you were sure they had the best deal, this put the onus on your haggling partner to prove what kind of a good friend they were. Of course the longer you stay in this kind of culture the worse you would feel if you didn’t take some of the deals your new “friends” were offering.

In business dealings the friend discount is still alive and well even in business to business negotiations. Recently I began working with Siemens again had made an initial offer to Siemens Management Institute based on an existing friendship and had concluded that the friend rate was already given and all hunk-dory vis-a-vis relationship based negotiations. Not only was I wrong I actually adopted the e-mail that came in between workshop 2 and 3 asking for a discount as a case study for future cross cultural training as address to points in business negotiations: 1. discounts are never asked for at the beginning of the letter 2. the friend discount is alive and well.

So I now take it upon myself to quote a little higher with Siemens on anything. The reason? So that I can afford to give a friend discount when it comes up. I recently introduced a colleague to them to deliver an intensive business writing course and central piece of advice. Charge them at least 1,000 RMB more so that you can give that 1,000 RMB away as a friendly gesture when they ask about it. You might say, “John, does this mean that you just charge more to anyone because you’ll just give them a discount later?” This answer is, “It depends.”

Depends on what? Well here is where it gets interesting. A few months ago during a TTT we held here with Dr. Greenaway we tried out an activity called “have you ever?” and the question was had a business negotiation in China. We then split off into quadrants of those who had or hadn’t and by whether you did or didn’t like the experience. A fair number of us (including some of our clients) wound up in the have and don’t like it side of things. When asked why we said none of us liked running the risk of damaging a friendly relationship. So what does it mean? Let’s try and wrap our heads around this a minute…

When you have someone who is effectively just a cog in the machine or a vendor friend discounts are pretty common. As you begin to build up friendships with decision makers you will find those friend discounts slowly decreasing. Why? Because it is seen as risking the friendship to ask for a discount particularly if the rate seems fair. So the paradox here is that friends give strangers “friend discounts” but friends, for the sake of the friendship, don’t give discounts. I do however give freebies frequently. Why? Because it shows a commitment to the friendship and if I have the time and interest then all the better.

Anthropology 101 introduced the notion of reciprocity. China business 101 ought to put serious business negotiations and reciprocity hand in hand.