Don’t Get Embarassed by the Pawn Stars: Know How to Negotiate

My wife and I have been watching an awful lot of Pawn Stars lately (along with American Pickers). At first I rather enjoyed it. In fact, I mentioned in a post a while back how I appreciated the way History was using shows like Pawn Stars to teach history through the stories told of every day objects as they entered the store. But now the show is starting to annoy me. And not just in the way most shows get annoying after you watch countless episodes back-to-back. It’s starting to annoy me because I can’t stand to suffer through the absolutely terrible decisions that the pawn shop’s visitors make over and over again. If you’ve never seen the show, it basically goes something like this: Sue from Oakland comes into the store to sell an antique collection of ______, including one signed by ______. She tells the camera man, “I’ve come to the store to sell my collection of ______ today because, well, they’ve just been sitting in my attic for years, and I’d really like to go to the casino this weekend with a little extra dough. I’ve done some research and these ______ sell for about $1,200. I’ll be asking $1,000, but seriously won’t settle for anything less than $800.” Sue, however, goes to the counter, explains to the Pawn Stars what she has and why they’re so valuable, tells them she’d like to sell them, and asks for $1,000. What follows next, invariably, is why the show is so frustrating to watch.

“Not even close,” says the man behind the counter. “Try again.”

Now, before the man even tells Sue why she’s ‘not even close’ she gets a scared look on her face and lowers her price. Not only does she lower her price, but she does so in the form of a question. “$900?” Essentially, “Will that satisfy you?”

“Way off,” the man repeats. “Look, if this were in xyz condition, it’d be a different story, but it’s not. Besides I have to keep this item in inventory for who knows how long before it’s actually sold. Give me a serious offer.”

“850?”

“$100. That’s as high as I can go.”

“Come on, they’re worth way more than that! How about $750? Could you do $750?”

“I really shouldn’t pay more than $100. You’ve got to understand, I have a store to run with the overhead for all these florescent lights. But I’ll go $150.”

“Oh come on, how about $700?”

“$200, that’s as high as I can go. I just won’t go any higher than that no matter what.”

Long pause.

“Okay, $250 sounds fair (what?!). You’ve got yourself a deal.”

“Great! Chum, go write up the paperwork.”

Immediately following, Sue does another interview outside the shop with the camera and says, “Well I’d hoped to get $1,000 for my collection of ______. I really hoped they’d be worth more, but $200 probably is a fair price. And, I’m happy to have a little extra cash to go blow on blackjack!”

At first, this was just a little funny. But this script really doesn’t vary at all. It’s amazing how many people are suckered by the negotiations of the Pawn Stars. In fact, often an expert will come in and say something like, “At auction, a collection of ______ like these would sell for no less than $3,000. And the seller will still sell for $1,500! It’s amazing to me.

Now, granted, I’m no expert on negotiations. So I turn to John Greathouse to give us a few lessons on what Pawn Stars can teach regarding negotiations. It says on his website he’s an expert . . . so we’ll take his word for it. Here are five of his thoughts on negotiation lessons to be learned from Pawn Stars (italics mine):

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Powerful Knowledge – Not only is negotiating experience important, but knowledge about the item being negotiated is also crucial. A surprising number of sellers on Pawn Stars have little-to-no knowledge about the item they wish to sell, let alone its approximate market price. This significantly handicaps the seller, as they are unable to evaluate the Pawn Star’s counter offers. It also makes the sellers reliant on the Pawn Star’s experts, who have a vested interest in providing information that favors the buyers and not to the sellers.

BATNA – Most of the Pawn Star Rubes do not appear to have a Best Alternative To a Negotiated Agreement (BATNA) in mind when they enter the store. They clearly want, “as much as they can get,” but they generally are unwilling to walk away without a deal. As noted in Maximizing Your Exit, it is impossible to obtain an optimal result if you are not prepared to negate the deal.

Qualified Buyer – Just as you should qualify your sales prospects, you should perform similar research before approaching a potential buyer. In one episode of Pawn Stars, a Rube brings in a sketch by well known artist. During the negotiations, the Pawn Star negotiator says something to the effect of, “I run a pawn shop, not an art gallery, I can’t pay that much.” The seller should have listened to this remark and sought out an art gallery. Instead, he sold his art to the Pawn Star at a deep discount.

Thus, one of the key considerations to ensure a successful negotiation is to only enter into discussions with a negotiator capable of agreeing to terms that will maximize your outcome. Getting the “best price” from someone who cannot afford to pay a market rate is not a successful negotiation.

Use of Funds – Rather than trying to maximize the value derived from their item, many Rubes hope to generate enough cash for a specific purpose. In one instance, a Pawn Star seller wanted enough money to go on a trip, while another wanted to buy a gift for their grandchildren. Your intended use of the proceeds should remain separate from the market value of the item being negotiated.

Close the Bid / Ask – In many negotiations, there remains a spread between what the seller wants and what the buyer is willing to pay. One way to bridge this gap is to identify non-financial variables that can supplement the value of the overall deal.

For instance, a startup might request premium service at no charge or smaller, more frequent deliveries to allow them to reduce their inventory levels. In the case of a Pawn Star negotiation, the sellers should first identify one or two items in the store that they want, before the negotiation commences. Once it is clear a gap exists between the “bid and the ask”, they can request that the Pawn Star negotiator “throw in” one or more of the previously identified items, to augment the purchase price. This might be advantageous for the Pawn Star, as the list prices of his products already include a hefty margin and thus the real cost of including one or more additional items is less than their perceived value.

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Read the rest of Greathouse’s article, here: http://www.businessinsider.com/pawn-stars-teaches-entrepreneurs-how-to-not-negotiate-real-lessons-from-reality-tv-2011-4

Any other thoughts on negotiation? Feel free to leave them in the comments section, below!

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  1. Pawn Stars Dropped Some Trash, So The Cops Dropped A Ticket.. « Just Spit it Out Already! - December 11, 2012

    […] Don’t Get Embarassed by the Pawn Stars: Know How to Negotiate (thethingaboutflying.com) […]

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