The word negotiations
often conjure up visions of opposing teams of professionals, countering tactic
with tactic to reach an agreement acceptable to both sides. In reality, every
businessperson uses effective negotiation skills on a daily basis.
For example, when I visited
Rome many years ago, I found that the smallest of operations can practice good
negotiating skills. I had just toured St. Peter's Basilica and, having been
raised Roman Catholic, wanted to purchase a souvenir for my mother. On the street,
I met a vendor who held up a lovely cut-glass rosary. "How much?" I asked.
"It's my last one," he said.
"When I sell this, I can go home. So - special for you - 12,000 lira." (About
$20 at the time.) It was my third day in Rome and I had found that everything
was negotiable to a much greater degree than Americans assume.
By then, I understood the
"game." The first mention of any price in Rome, no matter how reasonable, is
met with a flinch. So, I flinched. The vendor, having seen this many times before,
responded with, "How much you wanna pay?"
I started by low-balling
my offer. "I'll give you 1,000 lira," I said. He looked at me, opened his eyes
wide in apparent disbelief, rattled off a litany of facts detailing the quality
of the rosary and said, "How 'bout 11,000?" I had learned that to meet a street
vendor half-way is to lose. I stuck to my position. "1,000 lira."
He then told me about the
large family he had and how he wanted to buy his children new shoes. "I'll take
10,000," he countered. My self-talk said, "You're on a roll!" I made my offer
again, "1,000 lira."
He next bemoaned the price
of food and the cost of feeding his family. "But, you look like a nice guy,"
he said sincerely, "I'll give you a deal - 8,000 lira."
lasted a good 10 minutes. Each time, the price was lowered. Finally, he said,
feigned desperation on his face, "Okay, 2,000 lira and it's yours, and I'll
even throw in this plastic rosary case."
"Fine," I said. "I'm a fair
man." I gave him 2,000 liras and put the rosary in my pocket. About a block
down the street, I encountered another street vendor selling rosaries, which
were identical to the one I had just purchased. To verify my negotiating prowess,
I asked, "How much?"
"2,000 lira," he said. My
self-image shattered, I turned to walk away. As I did, he grabbed my arm and
whispered softly, "But for you, 1,750."
This true story illustrates
seven points that are as appropriate to the businessperson as they are to the
professional negotiator. Whether it's pricing a project or determining a package
deal, these principles apply to your negotiations.
State an opening position
that is perceived to be reasonable and that will achieve the greatest advantage
The perception of being
reasonable is key. Our realities are not based upon how things really are, but
on how we believe them to be. Try to objectively determine if your position
is fair when compared to previous negotiating opportunities. If you were the
other party, would you feel that you had a basis for continuing the negotiations?
The first rosary vendor
took a calculated risk. Because I had just come from St. Peter's, he viewed
me as a prospective rosary buyer. Running through the situation in his mind,
he reasoned that I might already have bought one.
If I had, he would move
on. If I hadn't, I might not know the normal asking price of the merchandise.
He decided to start much higher than he realistically should have. Because I
was not familiar with the price, I truly felt the merchandise was worth 12,000
I took the opportunity seriously.
Had I known that others were selling the same merchandise for a much lower price,
the opening position would have been considered unreasonable. I would have refused
to bargain and walked away.
This tactic may be all right
for a Roman street vendor, but it will, in most cases, meet with failure for
the businessperson. Prospective clients today are shoppers. They talk with several
suppliers before arriving at a buying decision. Opening positions, which are
unreasonable, are quickly found out and disregarded, along with the organizations
that made them.
Expect a counteroffer
that will detail the other side's most favorable position.
Your perception of that
offer will help you determine whether or not the other side is approaching the
negotiations in good faith. If you feel that too big a gap exists between the
two positions, it could be worthwhile to walk away and determine the advisability
Had the rosary vendor's
opening position not been so inflated, he might have viewed my counteroffer
as being way too low. He expressed his surprise, and then waited for a response.
When I didn't budge, he knew that the final sale price would be closer to my
number than to his. However, that was okay with him, so he continued.
Develop a firm picture
of the type and value of concessions you are considering.
When he met me, the Roman
street vendor knew how low he was willing to price the merchandise. That's why
my intransigence didn't dampen his enthusiasm for the potential deal. As long
as his asking price remained higher than the lowest price he was willing to
accept, he continued to negotiate. He had a number in his head that satisfied
him. Any amount in excess of that number was an additional benefit to him, a
sort of windfall profit.
By clearly defining your
anticipated concessions before beginning the negotiations, you keep yourself
on-track with what is happening and with how much further you are willing to
go to reach an acceptable compromise position.
Pace concessions and
make them only after an explanation is given for each one.
Even though you have allowed
yourself room to make them, you will want to explain why a particular concession
is being made. The reason could be as simple as, "I really want your business
and I'm willing to go further than I normally would if you can assure me that
you'll give me a chance to bid on future projects." This type of statement implies
that you are also getting something of value from the concession - the potential
for future business.
The rosary vendor explained
his price reductions, hoping that I would make my own concessions. But because
his initial position was so high, he didn't ask me to raise my offer each time.
This is not the best tactic as the next principle indicates.
Make a concession only
if the other side gives a concession in return.
This give-and-take adds
value to each move because, in effect, each concession is being paid for. As
both sides move closer to a mutually agreed-upon position, each feels that specific
conceded items have intrinsic value because of what was given in return. This
brings to light a basic caveat: If an opening position is set too high and
concessions are made without receiving something from the other party, the value
of the concessions is lessened.
After the first few unanswered
concessions from the vendor, I expected the concessions to continue. I wasn't
certain how low the final price would be, but I felt he would continue to lower
his price because it was relatively easy to get the price reductions and he
asked for nothing in return.
However, in his mind, I
had made a concession - I stayed to bargain further. By not walking away, I
was giving him something in return for his price adjustments. The vendor felt
that if he kept me interested long enough, I would buy.
A small, unexpected concession
will often prompt the other party to act.
Frequently, the bargaining
on a particular point becomes routine and static. Both parties develop mindsets
regarding the validity and scope of the final position. When one party introduces
an unexpected, unrequested concession, the other may see this as a bonus and
be willing to make more of a concession than has initially been anticipated
or thought possible.
In my situation, the street
vendor offered to include a small plastic case. Its value was little, but its
impact caused me to finally increase my offer. A businessperson must also adhere
to a final principle that was unimportant to the street vendor.
If it can be shown that
a significantly better deal is available elsewhere, the value of the final agreement
The lifeline of any business
is a repeat and referral customer. All negotiations must be approached as win/win
situations. If the other party loses the battle, you could lose the war.
Once again, it is the perception that takes forefront. If the other party's
initial "win" begins to look like a "loss," it is the loss that will be retold
to others who may have been your prospects.
The Roman street vendor
exited my life as soon as the rosary went into my pocket. He wasn't concerned
about how I would feel later. Your reputation, though, depends on others perceiving
they have been part of a fair and equitable agreement.
If so, they will return
to you and tell others of your flexibility and willingness to meet their needs.
If not, word will quickly spread that you deal only when you can outdo the other
party, a negative categorization that will affect your business.
As with any skill, negotiations
must be practiced and refined. Remember the lessons I learned on a street corner
in Rome, then use the strategies discussed in the next chapter to make you even
more professional in your negotiations.