The Negotiation Guru

Tim Ferris wrote a blog entry on negotiations. He quoted a portion from filmmaker, Bob Compton. This is an interesting observation of how negotiations are being conducted in India.

This is not to say that every Indian negotiates like this.

————————————————————

In India, every transaction — EVERY transaction — is negotiated. Merchandise, cab fare, restaurant bills, wedding doweries — the list is endless.As our guide Vishnu explained, “In India, we bargain to the level of the individual vegetable purchase.”

While awkward and uncomfortable to most Americans, that level of negotiating can be quite valuable.Hotmail founder Sabeer Bhatia, a CA transplant from Bangalore, credited the bargaining skills he learned in vegetable markets at home for getting Microsoft to push its acquisition price for his company from $160 million to $400 million. Bill Gates’ eye teeth were floating in tea with that deal.

Here are a few rules for bargaining on the buy-side when in India:

Rule #1 - The true price of any item is what you pay — There are no suggested retail prices in India. Nothing is labeled, so it pays to talk with several vendors before making a significant purchase.

Rule # 2 - Try for 70% off — Don’t accept less than 30%

Rule # 3 - Make them show lots of merchandise — If it is a rug merchant, you want the demo guys sweating profusely before you make your first offer. Get the vendor to “invest” in the transaction — emotion, time and energy.

Rule # 4 - Offer on one item at a time – If you plan to buy a couple things DON’T let on at the outset. Act like you intend to buy only one item, if that much. Get the seller to give you prices on each item; play one item off another to show you are looking for the lower price point.

Rule # 5 - Wait for the pad of paper — Every Indian sales person has a pad of paper and a pencil that they pull out when the bargaining gets a bit more serious. Though they write down the price for an item, this is only the starting point - remember rule #2.

Rule # 6 - Say “TOO HIGH”, a lot – Don’t even start negotiating until the salesman has scratched through the initial price and lowered it at least twice. I found that simply staring in silence at the pad of paper for a long time would result in the vendor cutting the price.

Rule # 7 - Imply a bundled purchase — OK, now that the price has been cut 25-30%, ask the salesman what deal he would give you if you buy two items. Expect 5% off. Ask for three items; get another 5%. Then add a very expensive 4th item — one which you do not intend to buy. This will excite the vendor and he will do a bunch of calculations which you will be unable to follow. The price will come down for the expensive item as well as for the other items you intend to buy. Lock those prices and drop the expensive item.

At this point, you should have been able to shave close to 50% off the initial price. Most Americans generally are satisfied at this point and close the deal.

One final point - no matter what price you pay — if the sales guy is smiling when you leave — guess who won…

—————————————————————————————

Jens: Well, this is really a stereotype.

I am writing an article on the rules of Chinese negotiators. Feel free to email me your experience.

—————–
Jens Thang
Negotiation Skills for Everyone

Email: jens@thenegotiationguru.com

This can cost you a lot of money if you fail to understand all the terms and conditions. Always make sure that all the terms are properly negotiated before the end of a negotiation. Do not take things for granted.

I recently learned how important it is to negotiate all the terms and have the terms documented. Do not rely on mutual trust.

The setup

I had to buy a car to travel to work and decided to buy it from a friend. Let’s call him Jerry. The car was not in a good condition but Jerry had to sell it off. Deciding to do Jerry a favor, I agreed to buy the car from him.

There were 2 rounds of negotiation for the car.

During the 1^st round, Jerry offered a price of X amt and he will pay for the transferal fee of title deed. As X amt was not justifiable due to the condition of the car, I decided to negotiate with him two weeks later.

For the 2^nd round, Jerry decided to drop the price a little. I was still a little hesitant. Many friends discouraged me from buying the car. Since I gave him my word earlier, I decided not to negotiate further.

On the day of the sale, he said to me “Jens, you are paying for the transferal fee.”

That took me by surprise. I was living under the impression that he was paying for the transferal fee.

His defense line was, “since it was not mentioned during the 2^nd round of negotiation, whatever that was negotiated during the 1^st round would not be valid.”

He was right. I was the one who made the mistake of not making sure the condition would still be valid after the price reduction. My assumption was wrong.

The transferal fee was equivalent to the reduction in price he gave in the 2^nd round. At the end of the day, I was paying the same amount.

This entire transaction was based on relationship and trust. I did not feel the need to document everything. That was my fatal mistake.

Point to note: No matter who you are negotiating with, always make sure every term is made clear and documented. This can save you much trouble and even the relationship. The person you are negotiating with might not treasure the relationship as much as you do. Never take things for granted.

Remember: Always negotiate every term and condition. Document all commitments.

—————–
Jens Thang
Negotiation Skills for Everyone

Email: jens@thenegotiationguru.com

Before you step into the negotiating room, you have to consider many things. One of the things that you should consider is “what other options do I have?” Answering this question will alter the way you negotiate with the other party.

All skilled negotiators know their objectives before they start negotiating. They also have a bottom-line ready in case they need to walk away from the deal.

Apart from having your objectives and bottom-line, you need to consider your alternatives.

“What will I lose if there’s no deal?”

“Is there a better option?”

“Do I have another offer?”

“Can I get this from another firm?”

Think through all the possible alternatives that you can have. There are usually more alternatives if you look hard enough. One of the common mistakes a negotiator make is to think that they have everything to lose if there’s no deal. This will change the way you negotiate. Be really careful of this.

Never be too focused on trying to close the deal.

Imagine you have to shop for a birthday present for your best friend. You decided to get him a red tie.

Now there are 2 scenarios:

1) There’s only 1 shop in this world which sells red ties

2) There are 10 shops in your neighborhood that sell red ties

The way you negotiate in the 2 different scenarios will be vastly different. If you think that there’s only 1 shop in this world that sells red ties, you probably haven’t looked hard enough. There’s probably another shop that sells red tie just round the corner.

Having alternatives will improve your leverage when you negotiate.

Remember: Always have alternatives before you start negotiating.————–

—————–
Jens Thang
Negotiation Skills for Everyone

Email: jens@thenegotiationguru.com

What if you are face with such a goat? The nibbler attacks just when you are ready to close the deal. He will start asking for modest things to be included in the deal right before the deal is done. You can’t help but feel the urge to grant him his little demands.

“Can you add in this tie together with the suit?”

“Can you give me three years free warranty together with his?”

“There will be free delivery to my place right?”

You know that nibblers are attacking when they look for additional stuff to be included in the deal. They demand for something just before the agreement is being signed. Some people are really good at that. Just when you think you are reaching the finishing line, they throw you off by trying to squeeze some stuff out of you. You do not hope to see this deal go down the drains or strain the relationship with the other party, you begin to say yes.

Stop for a moment!

Why are you allowing this to happen? You must resist the temptation to close the deal and in the process, agree to every concession they ask for.

How to deal with such a situation?

1) Be very specific with the terms and clauses.

You must be very clear and very sure of what is included in the deal and what is not. Refuse to give the concession. Learn to say no to nibbling. Being assertive will prevent such a situation. When the other party has the leverage, you will be more prone to succumb to such nibbling acts.

2) Hold something back to give (if they start nibbling)

This is a popular tactic by retail stores. In order to retaliate against such requests by the consumers, they always have little free gifts prepared. I was trying to nibble before I pass them my credit card. I decided to try to ask for additional things to be included before I make the purchase.

“Will you be able to add this pair of socks together with my shoes? I need black socks.”

“Sir, we can’t do that. But we can give you a little brush to shine your shoes.”

There was no mention of the brush before I nibbled. This is probably the strategy of the shoe store to ward off nibblers like me. Both parties end up satisfied. I was glad I got the free brush, and they were glad they got the business.

3) If-Then tactic

The “If-Then” tactic is a very well-known tactic. Everyone deploys this tactic. When the other party starts to nibble, always try to trade for something.

“Will you add 3 years warranty to this?”

“Sir, we can do that. But you will have to purchase a 1 year warranty and we give you free upgrade to 3 years. How’s that for you?”

This almost always works! First, you can dissuade them of trying to nibble further. Second, you can get additional business.

Remember: Never succumb to nibbling.

————–
Jens Thang
Unleash The Negotiation Guru In You!

We never treasure things we obtain easily. This applies to all parts of life. We only treasure things that we cannot have and don’t see much value in things we get too easily.

To illustrate this point:

2 years ago, I was given the task of being the baby-sitter for the day. I had to take care of my niece. She was 6 years old then. It’s amazing how much i can learn about human psychology just by playing with my niece.

Kids love attention. And this can be irritating at times when you have other things to attend to. Imagine you are rushing your report which will be due the next day. And a kid keeps coming to you, demanding for attention. What will you do? Naturally, we will find something that will hold the kid’s attention, at least for a while. I gave my niece a soft toy to play with, hoping that it would hold her attention. After 5 minutes, she threw the toy on the floor and bugged me for another! I reckoned that if i were to give her another toy, the same thing would happen again. So, i decided to give value to the next toy i was going to give to her.

“This toy is really precious to me. My best friend gave it to me and I REALLY love it. I can’t let you have it.”

I did this for like 10 minutes. She grew impatient and started throwing tantrums. I simply ignored her. Then i said, “Alright, if you can be a good girl for 15 minutes (pointing to the clock), I will let you see my toy.” She agreed immediately.

In negotiations, similar situations happen all the time. We have something that the other party wants. Learning to hold back and create value for that thing (even if its free), we will be able gain leverage. Always give weight to everything they ask for.

We often hold back on the concessions we are willing to give until the other party agrees to giving us something that we value. Augmenting the attractiveness and value of a particular offer is a powerful tool to use to get what we want from the negotiation.

Never give away concessions too easily. Let them work for it.