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How to Strong Arm Your Way to a Better Deal

Posted By Jim On 02/11/2009 @ 7:34 am In Personal Finance | 18 Comments

The economic malaise has probably had an effect on your life, I know it has had one on mine. However, as bad as you think your personal prospects are, it’s worse for companies that have to make payroll, rent, and debt obligations. At the end of the day, you have to take care of you and your own, which is why I recommend that you periodically shop around and use that information to strong arm your way to a better deal on the services you already buy.

Don’t feel badly about using your most powerful a weapon, the power of choice, to negotiate a better deal. When you pay $60 or $80 or $100 a month for cable television, you’re not getting $60 or $80 or $100 worth of service. You’re getting something the company is selling to someone else for $30 a month. They will charge whatever the market will bear and it’s up to you, the consumer, to push back and tell them that their price is too high. At the end of the day, they would rather you spend $5 a month than quit and spend $0.

How to Strong Arm Your Way to a Better Deal

  1. List all the recurring bills you have each month from your power bill to your cable television bill to your cell phone bill.
  2. Take just one of them today, let’s say your cable television bill, and find all the competitors that service your area.
  3. Now find all the competing offers out there and find the best one. It’s OK if the service offering isn’t a perfect match, as long as it’s close then it’ll work. So for cable television, you don’t have to find a cable television provider, a satellite provider will be good too.
  4. If you are under contract, find out how much the early termination fee (ETF) is.
  5. Call up the competitor and get the full details of the promotion you saw. If you have a contract, ask if the competitor would be willing to pay the early termination fee in return for your business (service providers are willing to do this, I had door-to-door Comcast guys try to get me to terminate my Verizon FiOS contract)
  6. If you are under contract and the competitor won’t pay the ETF, get the next best offer and repeat. If none of them are willing, wait until your contract ends to continue (sorry!) unless the promotional offer is so good it would make financial sense.
  7. Call up your current provider and politely ask them (this is important!) if they will match the promotional offer. If they refuse, tell them you’d like to cancel your service because the competitor’s offer is better.
  8. You should be transfered to “Retentions,” where someone should give you a matching offer, or at least a better offer than what you were paying. If they don’t, you have to be prepared to either hang up and start the process over again (in the hopes of getting a more forgiving CSR in retentions) or cancel and use the competitor’s service.

My friends and I go through this ritual every single year with cable television. The best Comcast deals [3] usually only last 6-12 months before the promotional period expires. Every year, we would call Comcast, pull out a flier from DirecTV or Verizon, and try to argue a better rate. My friends in Baltimore City had a little more trouble than me in the suburbs because Comcast has a virtual stranglehold on cable television. Comcast’s only competitors for cable television were satellite providers like DirecTV. Fortunately, the best DirecTV deals [4] are very competitive with Comcast’s offers so they were still able to strong arm a better deal.

You can do this with cell phone service, internet service, almost anything where there are good substitutes and a low marginal cost. Marginal cost refers to how much it costs to actually offer you service. With cell phones, the marginal cost is very small because the cell phone towers are already constructed and in use. It’s simply a matter of giving you a handset and the right to add traffic to the line. With cable television, it’s even lower because the infrastructure is in place – you simply have to plug into it. Home security systems like ADT? Same thing, adding another customer might add some load to the system but they certainly make way more money on the subscriber fees.

(Photo: michal_hadassah [5])


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[3] best Comcast deals: http://www.bargaineering.com/articles/latest-comcast-deals-rebates.html

[4] best DirecTV deals: http://www.bargaineering.com/articles/directtv-satellite-television-deals.html

[5] michal_hadassah: http://www.flickr.com/photos/17699661@N00/3214701196/sizes/m/

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