Everyday Negotiation Situations: Should You Negotiate Service Fees?

Everyday negotiation situations can pose some of the most difficult negotiating dilemmas. New research takes a close look at whether it’s always wise to negotiate service providers’ fees.

By Katie Shonkon / Negotiation Skills

everyday negotiation situations

Imagine that you’re about to hire someone to provide a service—say, to repair your leaky roof, design a new website for your business, or host an online event. In such everyday negotiation situations, when you receive a price quote, should you try to negotiate a better deal? 

Conventional wisdom would answer with a resounding yes. Opening up price negotiations aimed at getting to yes could very well end up reducing your costs. Even if not, there’s no harm in asking, right? 

In fact, there sometimes is harm in trying to negotiate better rates from service providers, write University of Pennsylvania professors Einav Hart and Maurice E. Schweitzer in the Organizational Behavior and Human Decision Processes article “Getting to Less: When Negotiating Harms Post-Agreement Performance.” While negotiating may get you a better deal in the short run, it could backfire by reducing the service provider’s motivation to do a good job. 

When Negotiation Demotivates

In a series of studies, Hart and Schweitzer assigned participants to play the role of an employee interacting with another participant playing the role of employer. (In fact, the “employer’s” statements were preplanned by the experimenters.) The “employees” then either (1) negotiated the fee they’d be paid to work on a subsequent task or (2) were told what they would be paid for that task, with no opportunity to negotiate their fee. 

In one experiment, for example, some online participants in the role of service provider were told they would negotiate their rate with their counterpart. The researchers planned the counterpart’s responses so that the negotiation would end with an offer equivalent to $5. Other participants playing the service provider were told during an online chat with their counterpart that they would be paid $5 and were not given a chance to negotiate. 

Next, participants engaged in a letter-counting task for up to seven minutes. Those who had negotiated their wage completed 24.7 strings of letters accurately, on average; those who had not negotiated their wage completed 34.2 strings accurately. 

In Hart and Schweitzer’s experiments, participants who negotiated their wage were less productive workers than those who did not negotiate, even when both groups earned the same amount of money. Negotiating led the employees to view their relationship with the employer as adversarial; as a result, they didn’t work as hard or as well. Negotiation also reduced task motivation when participants interacted face-to-face rather than online and when they negotiated multiple issues rather than just one. 

Haggling in Everyday Negotiation Situations

Surprisingly, Hart and Schweitzer’s study may be the first to compare the effects of negotiating versus not negotiating in everyday negotiation situations. It is also one of the few studies to look at how negotiators (and non-negotiators) behave after reaching an agreement—an important perspective, given that we often don’t know whether a service contract will pay off for us until months or even years later. When hiring someone to repair your roof, for example, you might think you got a great deal, but you won’t know for sure until you’ve made it through a couple of rainy seasons without any leaks.

The results suggest that haggling with service providers for lower rates in everyday negotiation situations can backfire by reducing their motivation to do a great job. Yet, in a follow-up experiment, “employers” who appeared friendly and interested in their counterparts were able to mitigate the demotivating effect of negotiation on employees. Thus, by showing concern for the other party and trying to build rapport, you may be able to get a great deal and ensure that those you’re hiring are sufficiently motivated. 

Considering various contract negotiation examples, it’s important to recognize that industry norms also affect how service providers respond to attempts to negotiate their fees, note Hart and Schweitzer. In law, consulting, and certain other fields, no-negotiation policies are common; the service provider simply names their fee, and the prospective client takes it or leaves it. But in everyday negotiation situations where some amount of haggling is typically expected (imagine a long-term marketing contract), a buyer who drives a hard bargain on price could offend the service provider—and reduce their motivation and performance over the long run. For this reason, when it comes to examples of negotiation in everyday life, our negotiation skills and strategies should include the ability to assess when not to negotiate. 

What have you learned from your own everyday negotiation situations with service providers?