The Negotiation Guru

We do get unrealistic offers from the other party. If you are the seller, your buyer will offer a price that is way too low your expectation. If you are the buyer, your seller will probably try to sell you at a price that is totally out of your range. You start to get offended by the outrageous offer the other party shoots. How do you deal with this?

We must learn that by getting angry with what the other party offers is not worth it. It will affect the relationship you have with him and future dealings. You want to still preserve the good relationship with him. Separate the person from his proposal. It is not the person you disagree with. It is his proposal that you do not agree. Seeing the person and the proposal as two separate entities will help you deal better with the other party.

This is what you can do:

1) Call out the tactic

By calling out the tactic, you can be sure that the other party will start to become defensive.“I was hoping that we have a healthy dealing here but the extreme offer tactic that you are using just upsets me. It sounds like you are not interested in closing this deal.”2) Ask for justificationAlways ask for justification! Even if they offer something that is within your range, proceed to ask for justification. When people have to justify their own stand, they start to examine their own offer. Sometimes, you can get them to talk themselves out of their initial offer.“How did you come to this figure?”“Is there a reason why you are offering this?”

3) Flinch!

Show that you are surprised by his offer. The other party might sometimes be ashamed by his outrageous offer. You will know that he is ashamed when he starts to retaliate quickly by saying “Oh…so what do you offer? Give me a good one? I will see if I can adjust my offer.” By saying this, the other party has given away his game. It shows that he does not find his own offer convincing enough since he is so willing to adjust his offer.

You will have to play his game. The other party is trying to anchor you. Be very aware of this. Let them know that they have to adjust their expectation in order to close the deal with you. Make relationship the most important factor in your negotiations.

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Jens Thang
Unleash The Negotiation Guru In You!

When you do want them to go first, how do you make them go first? And you definitely do not wish to end up in a verbal judo.

“What do you think of this?”

“Why don’t you go first?”

“No, how about you go first?”

“Ya, I will go first after you go first?”

“What?!”

This can get really irritating. And it’s off to a really bad start. Try some of these strategies to get them to open.

1.     Act like you are the fool

Once in a while, we have to play dumb to get things our way. The reason why you want them to open is probably because you lack the information to open. And you can make use of that fact. Play to their expertise and use it to your advantage.

“You are in this industry for a long time and I am really new to this. Tell me what’s a good price for this?”

“I think you should know what’s a fair price since you have done many similar deals before.  Trust that you will give me a good price.”

2.    Suggest an offer based on the information they give

When you start discussing the issues with the other party, you are both revealing information about your interests and concerns. You can try to suggest an offer even if they do not explicitly state one.

“If I hear you correctly, the best price you are willing to give is about $600 000?”

“Are you trying to suggest that if i get 20 of this, you are willing to let it go around $200 each?”

“You mentioned that you are unhappy with the after-sales service. Does that mean that you are willing to pay higher if we do something to improve in that area?”

If the other party is not agreeable to what you suggested, they might try to open with something. Note that you are not opening in this case. You are merely suggesting an offer the other party might make. Always try to start with a range and not a single number.

3.   Start by suggesting something

“I was looking at the bluebook. If i’m not wrong, people are selling your car around the range of $40 000 to $70 000.”

“I saw similar mp3players around, they are all around the range of $200. Is this particular model in that range?”

If you mention that the range is something you “read/heard”, it does not mean you are giving an offer. Give him a chance to correct your range. When the other party comes up with a counter-offer, you will roughly know the range to start negotiating. This will also prevent opening with an offer that is totally out of range and offending the person you are negotiating with.

I can already hear some screams. Don’t panic!

Didn’t I say we should not be the first to open? Yes.

Didn’t I say there’s risk involved in being the first to open? Yes.

So what’s happening? Should we open first? Yes? No?

It all depends.

Note this:

Whether you should open or not, depends on the amount of information you have at hand

As a general rule of thumb, if you have no idea on the value of the things you are negotiating, never open. But if you have done your research or you are an expert in that industry, go ahead and open. There are many good reasons for opening.

Recall the experience I shared with you on my shopping trip in Thailand. Suppose I wanted to buy a hat. I will almost never buy at the first stall. Instead, I will shop around, bargain with a few stall-owners. After a few rounds of sweaty and bloody negotiations, I will have a good feel of their bottom-line. Armed with this information, I can now walk into any stall selling the same hat, and open with much confidence.

Opening first has the “anchoring effect”. Anchoring is a term coined by social psychologists.

According to Wikipedia, “anchoring and adjustment” is a psychological heuristic which influences the way people intuitively assess probabilities.

In layman’s term (negotiation setting), you will tend to negotiate around the range that was first opened. Opening first gives you the opportunity to anchor, allowing you to fix the range. Suppose I want to buy the hat at $30, I will open with a number that’s close to $30. Should you let the stall-owner first, he might open with an astronomical figure such as $50. With that, the whole negotiation will be fixed around the range of $50 and it’s harder to bring it down to $30.

Before you decide if you should open, think through if you have good knowledge of the value. Never rush to open. Preparation plays a huge part in opening.

In the next post, I will cover on HOW should you open.

There are plenty of negotiation experts who will tell you NEVER to open first. The main reason for not opening first is that the person you are negotiating with, might open with something that is above your expectation. There is always risk involved when you do open first. Many expert negotiators will scream “Just shutup!”. Let the other side open first then you can slowly correct his range.

How do you correct him? Let’s learn from the stall-owners in Thailand.

I was shopping at a flea market in Thailand, Bangkok. Whenever I try to open a price (be it too high or too low), the stall-owners will always give the same kind of response. They will immediately give a long “noooo…..”, complete with the shaking of head to indicate that the price is not right. Should you do the same? Yes! (but not in such a dramatic way)

In a negotiation, you should never be too agreeable to the initial opening of the person you are negotiating with. There are many reasons for this and its mainly psychological. If you agree too early in the negotiation, your target will feel that he’s being ripped off or that you stand to gain too much. He will definitely try to hit back using other channels.

Never say “Yes!” too early, and never open!

In the meantime, think about when is a good opportunity to open? Can you be in an advantageous position if you open first?