Power Negotiations (Part #9)

When You're Negotiating,Money Isn't As Important as You Think

Let me tell you about my pet subject: When you're selling your product or service, money is way down the list of things that are important to the other side.First, we'll talk about something that you may find hard to believe but it's something of which I've become convinced-that people want to spend more, not less, and that the price concerns salespeople more than the people to whom they sell.Then I'll teach you all the things that are more important to people than money.Finally, I'll teach you some techniques to find out how much they'll pay.

People Want To Pay More, Not Less After almost two decades of training salespeople, I have become convinced that price concerns salespeople more than it does the people to whom they sell. I'll go even further than that-I think that customers who may be asking you to cut your price are secretly wishing that they could pay more for your product. Hear me out before you dismiss this as being imbecilic.I was the merchandise manager at the Montgomery Ward store in Bakersfield, California back in 1971. Although Bakersfield was not a large town, the store ranked 13th in volume in a chain of more than 600 stores. Why did it do so well? In my opinion, it was because head office left us alone and allowed us to sell to the needs of the local population.

For example, we did a huge business in home air conditioners because of the outrageously hot summers. In Bakersfield, it's common for it to be 100 degrees at midnight. In those days an average blue-collar home in that city cost around $30,000. The air conditioners that we would install in these homes might cost $10,000 to 12,000. It was very hard for me to get new salespeople started selling in that department because they had a real resistance to selling something that cost more money than they had ever made in a year. They simply didn't believe that anybody would spend $12,000 to put an air conditioner in a $30,000 home. The customers were willing to pay it, as was illustrated by our huge sales volume, but the salespeople weren't willing to support these decisions because they thought it was outrageously expensive.However, if I could get salespeople started to where they began to make big money and they installed air conditioner son their own homes, suddenly they didn't think it was so outrageous any more, and they would dismiss the price objection as if it didn't exist.Beginning stockbrokers have the same problem. It's very hard for them to ask a client to invest $100,000 when they don't know where lunch money is coming from. Once they become affluent, their sales snowball.So I believe that price concerns salespeople more than it concerns any customer. This is demonstrated by the experience of one of my clients who is a designer and supplier of point-of-purchase sales aids and displays. He tells me that if three products are on a shelf in a store-let's say three toasters-and the features of each are described on the carton, the customers will most frequently select the highest price item-unless a salesperson comes along to assist them with the selection. When that happens, the salesperson, who is probably working for minimum wage, is unable to justify spending money on the best and manages to talk the customer down to the low-end or middle-of-the-line toaster.The important element here is the description on the carton.

You must give customers a reason for spending more money, but if you can do that, they want to spend more money, not less. I think that spending money is what Americans do best. We love to spend money. We spend six trillion dollars a year in this country, and if we could walk into a store and find a salesclerk who knew anything about the merchandise, we'd spend seven trillion dollars a year. And that's when we're spending our own hard-earned after-tax dollars. What if you're asking someone who works at a corporation to spend the company's money? There's only one thing better than spending your own money, and that's spending someone else's money. If that weren't enough, remember that corporate expenditures are tax deductible, so Uncle Sam is going to pick up 40 percent of the bill.So, I believe that we've had it all wrong for all these years. When we're trying to sell something to somebody, she doesn't want to spend less money; she wants to spend more.

However, you do have to do two things:
1. You must give her a reason for spending more.
2. You must convince her that she could not have gotten a better deal than the one you're offering her.
That second point is where Power Negotiating comes in because everything I teach is designed to convince the other people that they won the negotiation and that they couldn't have done better.
Let's face it, does what you pay for something really matter? If you're going to buy a new automobile, does it matter if you spend $20,000 or $21,000? Not really, because you'll soon forget what you paid for it, and the slight increase in payments is not going to affect your lifestyle.

What really matters is the feeling that you got the best possible deal.
You don't want to go to work the next morning and have everybody crowded around to admire your new car when somebody says, "How much did you get it for?"You say, "I worked out a terrific deal. I got them down to $21,000.""You paid what?" he replies. "My friend bought one of those, and he paid only $20,000. You should have gone to Main Street Auto Mall." That's what hurts-the feeling that you didn't get the best deal.The objection that every salesperson hears most is the price objection. "We'd love to do business with you, but your price is too high." Let me tell you something about that. It has nothing to do with your price. You could cut your prices 20 percent across the board and you'd still hear that objection. I trained the salespeople at the largest lawn mower factory in the world. You probably own one of their products because they manufacture most of the low-end private label lawn mowers that discount and chain stores sell. Nobody can undercut their production cost on lawn mowers. They have it down to such a science that if you bought one of their mowers at Home Depot and you tipped the kid who carries it to your car a dollar; the kid made more on the lawn mower than the factory did. That's how slim their profit margins are. However, when I asked them to tell me the number one complaint they hear from the buyers at stores, guess what they told me? You got it. "Your prices are too high."You hear that complaint all the time because the people you're selling to study negotiating skills too. They meet in groups at their conventions and sit around in the bars saying things like, "Do you want to have fun with salespeople? Just let them go through their entire presentation. Let them take all the time they want. Then when they finally tell you how much it costs, lean back in your chair, put your feet up on the desk and say, 'I'd love to do business with you, but your prices are too high.' Then try not to laugh as they stammer and stutter and don't know what to say next."Instead of letting this kind of thing work you up into a sweat, adopt the attitude that negotiating is a game.

You learn the rules of the game, you practice, practice, practice until you get good at it, and then you go out there and play the game with all the gusto you can muster.

Negotiating is a game that is fun to play when you know what you're doing and have the confidence to play it with vigor.

The next time you're trying to get somebody to spend money remember that they really want to spend more money with you, not less. All you have to do is give them a reason and convince them that there's no way they could get a better deal.

Things That Are More Important Than Money A reporter at a press conference once asked Astronaut Neil Armstrong to relate his thoughts as Apollo 11 approached the moon. He said, "All I could think of was that I was up there in a spaceship built by the lowest bidder." A cute line, but he was falling prey to a popular misconception that the government must do business with anybody who bids the lowest price. Of course, that's not true, but it's amazing how many people believe it.

I hear it all the time at my Secrets of Power Negotiating seminars: "What can we do when we have to deal with the government? They have to accept the lowest bid."I once found myself sitting next to a Pentagon procurement officer on a flight to the East Coast, and I raised this point with him. "All the time I hear that the government has to buy from the lowest bidder. Is that really true?""Heavens no," he told me. "We'd really be in trouble if that were true. Cost is far from the top of the list of what's important to us. We're far more concerned with a company's experience, the experience of the workers and the management team assigned to the product, and their ability to get the job done on time.

The rules say that we should buy from the lowest bidder who we feel is capable of meeting our specifications. If we know that a particular supplier is the best one for us, we simply write the specifications to favor that supplier."Of course, that is the key to selling to government agencies, whether it is the city, county, state, or federal government. If you want to do business with any level of government, you should become known as the most knowledgeable person in your industry, so that when the agency starts to prepare bid specifications, they welcome your advice on what they should specify. Fortunately, the trend is away from this type of direct bidding and toward the government agency hiring a private sector project manager to supervise the work. By inserting this middle person, they avoid the obligation to let bids and instead let the middle person negotiate the best deal.So even with the federal government, price is far from the most important thing.

When you're dealing with a company that doesn't have legal requirements to put out a request for bids, it's far from the top of the list.

Just for the fun of it, review the following list of things that are probably more important than price to buyers.

• The conviction that they are getting the best deal you're willing to offer.
• The quality of the product or service. This is an interesting one because I frequently hear from salespeople that they sell an item that has become a commodity, and it doesn't matter which source the buyer uses and that the buyer wants only the lowest price. Baloney. If that were true 90 percent of companies supplying such products or services would be out of business. If that were true, the only company that could exist in the market place would be the one offering the lowest price, and that's a nonsensical proposition.
• The terms that you offer. Many large companies make more on the financing of their product than they do the sale of the product. I recently leased a top-of-the-line luxury automobile and became convinced that making the car was only a small part of what this company did. The real money was in financing the lease or the purchase.
• The delivery schedule that you offer. Can you get it to them when they need it and be counted upon to keep on doing that? Do you offer a just-in-time delivery system? Are you willing to let them warehouse the product and bill them as they use it?
• The experience you have in delivering the product or service. Are you familiar with their type of company and the way they do business? Are you comfortable with that kind of relationship?
• The guarantees that you offer and, in general, how well you stand behind what you do. I once paid several hundred dollars to buy a product from a Sharper Image store. After a few months, a part on it broke, and I called their 800 number to see if they would take care of the problem. After listening to me only long enough to understand what the problem was, the operator said, "If you'll give me your address I'll FedEx a replacement part to you."I said, "Don't you need to know when and where I bought it? I'm not sure that I can find my receipt.""I don't need to know any of that," he told me. "I just want to be sure that you're happy with what you bought." When a company stands behind what they do to that extent, am I really going to worry about whether they have the lowest price or not? Of course not.
• Return privileges. Will you take it back if it doesn't sell? Will you inventory their stock and do that automatically for them?o Building a working partnership with you and your company. The old adversarial relationship between vendor and customers is disappearing as astute companies realize the value of developing a mutually beneficial partnership with their suppliers.
• Credit. A line of credit with your company may be more important than price, especially to a start-up company or in an industry where cash flow is cyclical, and you could take up the slack during the lean months.o Your staff. When the contract calls for something to be made (aerospace, construction) or a service to be performed (legal, audit or accounting work, computer services) other factors may be more important than price:
• The quality of the workers that you will assign to the job.The level of management that you will assign to oversee the work.
• The ability and willingness to tailor your product and packaging to their needs.
• The respect that you will give them. Many times a company will move from a large vendor to a smaller one because they want to be a substantial part of the vendor's business to have more leverage.
• Peace of mind. AT&T keeps my telephone business although they are more expensive than Sprint and MCI and have never pretended that they aren't. I stay with them because the service has been trouble free and simple to use for many years, and I have more important things concerning me than switching long distance companies to save a few pennies a call.
• Reliability. Can they trust that the quality of your product and service will stay high?
  Finding Out How Much a Seller Will TakeNow let's look at some techniques to find out the seller's lowest price. When you are buying, the negotiating range of the seller ranges from the wish price (what they're hoping you'll pay) all the way down to the walk-away price (at anything less that this they will not sell at all).

The same is true in reverse with the buyer. How do we uncover the seller's walk-away price? Let's say that your neighbor is asking $15,000 for his pick-up truck.

Here are some techniques you can use to uncover his lowest price.

• Ask. That may seem incredibly naive, but if he's not a good negotiator, he may just tell you what's on his mind. Of course, a Power Negotiator won't fall for that, but many people will. If he's a Power Negotiator, he will automatically turn the tables on you by saying, "I think $15,000 is a very fair price, but if you want to make me an offer somewhere close to that, I'll talk it over with my wife (Higher Authority-see Chapter 7). What is the best price you would offer me?"Of course, the way that you ask for his lowest price makes a big difference.
• Try these approaches:"I'm really interested only in a pick up truck for occasional use, not one as fine as yours. I'm looking at one that the owner's asking only $5,000 for. However, I thought I'd be fair to you and ask you what the least you'd take would be."Or the Reluctant Buyer approach (see Chapter 5): After spending a lot of time looking it over and asking questions you say, "I really appreciate all the time you've taken with me on this, but unfortunately its not what I was looking for. But I wish you the best of luck with it." Then, when you're halfway into your car to leave you say, "Look, I really want to be fair to you because you spent so much time with me, so just to be fair to you, what is the very lowest price you would let it go for?"
• Drop out of contention but tell him you have a friend who might be interested. You might say, "Thanks for showing it to me but it's really not what I'm looking for. However, I do have a friend who's looking for something like this, but he doesn't have much money. What's the very least you'd take?"
• Nibble for a finder's fee. "If my friend did buy it from you, would you give me a $500 finder's fee?"
• Offer something in return to see if it will cause them to lower the price. "Would you take less if I let you borrow it once in a while?"
• Have other people make super-low offers to lower the expectation of the seller. This is unethical of course, but I'll tell you about it so that you will recognize it when it's used against you. If the seller has high hopes of getting $15,000 for his truck, your offer of $10,000 may sound like an insult. However if he's had only two offers so far, one for $7,000 and the other for $8,000, when you come along and offer him $10,000, he may jump at it.
• Make a low offer subject to the approval of a higher authority. "My buddy and I are going in on this so I'll have to run this by him, but would you take $10,000?"

Now let's look at some techniques that a seller could use to find out how much a buyer is willing to pay. Let's say that you sell switches to computer manufacturers.

Here are some techniques you could use:

• Raise their top offer by hypothesizing what your higher authority might be willing to do. Perhaps they buy similar switches now for $1.50 and you're asking $2.00. You might say, "We both agree we have a better quality product. If I could get my boss down to $1.75, would that work for you?" Protected by Higher Authority, it doesn't mean that you have to sell them to him for $1.75. However, if he acknowledges that $1.75 might be workable, you have raised his negotiating range to $1.75 so that you're only 25¢ apart instead of 50¢.
• Determine their quality standards by offering a stripped down version. "We may be able to get down below $1.50 if you don't care about copper contacts. Would that work for you?" In this way you probably get them to acknowledge that price isn't their only concern. They do care about quality.
• Establish the most they can afford by offering a higher quality version. "We can add an exciting new feature to the switch, but it would put the cost in the $2.50 range." If the buyer shows some interest in the feature, you know that they could pay more. If he or she says, "I don't care if it's diamond plated. We can't go over $1.75," you know that fitting the product to a price bracket is a critical issue.
• Remove yourself as a possible vendor. This disarms the buyer and may cause him to reveal some information that he wouldn't if they thought you were still in the game. You say, "Joe, we love doing business with you, but this item is just not for us. Let's get together on something else later." Having disarmed Joe in this way, a little later, you can say, "I'm sorry we couldn't work with on the switches, but just between you and me what do you realistically think you can buy them for?" He may well say, "I realize that $1.50 is a lowball figure, but I think I'll get somebody to come down to around $1.80."

As you can see from all we've talked about here, there's a lot to be said about the subject of price.

Power Negotiators know not to exacerbate the price problem by assuming that price is uppermost in the other person's mind. Also it is ludicrous to say that what you sell is a commodity, and you have to sell for less than your competitor's price for you to get the sale.

Power Negotiations (Part #8)

Power Negotiators Understand the Importance of Gathering Information

Henry Kissinger was once asked if he already knew what the Soviets would propose at an upcoming summit meeting. He said, "Oh, absolutely-no question about it. It would be absolutely disastrous for us to go into a negotiation not knowing in advance what the other side was going to propose." Can you imagine the cost of getting that kind of information? The budget of the C.I.A. is top secret, but experts think it is almost $4 billion a year, even now that the Cold War is over. So, governments think it's important enough to spend that kind of money. Doesn't it make sense that we at least spend a little time to find out more about the other side, before we go into negotiations? Why do countries send spies into other countries? Why do professional football teams study the replays of their opponents' games? Because knowledge is power and the more knowledge one side is able to accumulate about the other, the better chance that side has for victory.If two countries go to war, the country that has the most intelligence about the other has the advantage. That was certainly true in the Persian Gulf War-the C.I.A. spies had photographed every building in Baghdad, and we were able to completely take out their communication systems in the first few bombing runs. If two companies are planning to merge, the company that knows the most will usually end up with the better deal. If two salespeople are vying for an account, the salesperson who knows more about the company and its representatives stands a better chance of being selected for the account.

Despite the obviousness of the important role that information plays in a negotiation, few people spend much time analyzing the other side before starting a negotiation. Even people who wouldn't dream of skiing or scuba diving without taking lessons will jump into a negotiation that could cost them thousands of dollars without spending adequate time gathering the information they should have.

Rule One: Don't be afraid to admit that you don't knowWhy are people reluctant to gather information? Because to find things out, you have to admit that you don't know, and most of us are extraordinarily reluctant to admit that we don't know.So the first rule for gathering information is: Don't be over confident. Admit that you don't know and admit that anything you do know may be wrong.

Rule Two: Don't be afraid to ask the questionI used to be afraid to ask questions for fear that the question would upset the other person. I was one of those people who say, "Would you mind if I asked you?" or "Would it embarrass you to tell me?" I don't do that any more. I ask them, "How much money did you make last year?" If they don't want to tell you, they won't. Even if they don't answer the question, you'll still be gathering information. Just before General Schwarzkopf sent our troops into Kuwait, Sam Donaldson asked him, "General, when are you going to start the land war?" Did he really think that the General was going to say, "Sam, I promised the President that I wouldn't tell any of the 500 reporters that keep asking me that question, but since you asked I'll tell you. At 2.00 AM on Tuesday we're going in"? Of course, Schwarzkopf wasn't going to answer that question, but a good reporter asks anyway. It might put pressure on the other person or annoy him so that he blurts out something he didn't intend to. Just judging the other person's reaction to the question might tell you a great deal.If you want to learn about another person, nothing will work better than the direct question. In my own experience-now that I'm no longer afraid to ask-I've met only a few people who were seriously averse to answering even the most personal questions.
For example, how many people get offended when you ask them, "Why were you in hospital?" Not very many.It's a strange fact of human nature that we're very willing to talk about ourselves, yet we're reticent when it comes to asking others about themselves. We fear the nasty look and the rebuff to a personal question. We refrain from asking because we expect the response, "That's none of your business." Yet how often do we respond that way to others?When you get over your inhibitions about asking people, the number of people willing to help you will surprise you. When I wanted to become a professional speaker, I called up a speaker I admired, Danny Cox, and asked him if I could buy him lunch. Over lunch, he willingly gave me a $5,000 seminar on how to be successful as a speaker. Whenever I see him today, I remind him of how easy it would have been for him to talk me out of the idea. Instead, though, he was very encouraging. It still astounds me how people who have spent a lifetime accumulating knowledge in a particular area are more than willing to share that information with me without any thought of compensation.It seems even more incredible that these experts are very rarely asked to share their expertise. Most people find experts intimidating, so the deep knowledge that they have to offer is never fully used. What a senseless waste of a valuable resource-all because of an irrational fear.

Rule Three: Ask open-ended questionsPower Negotiators understand the importance of asking and of taking the time to do it properly. What's the best way to ask? Rudyard Kipling talked about his six honest serving men. He said, I keep six honest serving-men. (They taught me all I knew); Their names are What and Why and When and How and Where and Who. Of Kipling's six honest serving men, I like Why the least. Why can easily be seen as accusatory. "Why did you do that?" implies criticism. "What did you do next?" doesn't imply any criticism. If you really need to know why, soften it by rephrasing the question using what instead: "You probably had a good reason for doing that. What was it?" Learn to use Kipling's six honest serving men to find out what you need to know.

You'll get even more information if you learn how to ask open-ended questions. Close-ended questions can be answered with a yes or a no or a specific answer. For example, "How old are you?" is a closed-end question. You'll get a number and that's it. "How do you feel about being your age?" is an open-ended question. It invites more than just a specific answer response. "When must the work be finished by?" is a closed-ended question. "Tell me about the time limitations on the job," is an open-ended request for information.

Rule Four: Where you ask the question makes a big differencePower Negotiators also know that the location where you do the asking can make a big difference. If you meet with people at their corporate headquarters, surrounded by their trappings of power and authority and their formality of doing business, it's the least likely place for you to get information.People in their work environment are always surrounded by invisible chains of protocol-what they feel they should be talking about and what they feel they shouldn't. That applies to an executive in her office, it applies to a salesperson on a sales call, and it applies to a plumber fixing a pipe in your basement. When people are in their work environments, they're cautious about sharing information. Get them away from their work environments and information flows much more freely. And it doesn't take much. Sometimes all that it takes is to get that vice-president down the hall to his company lunchroom for a cup of coffee. Often that's all it takes to relax the tensions of the negotiation and get information flowing. And if you meet for lunch at your country club, surrounded by your trappings of power and authority, where he's psychologically obligated to you because you're buying the lunch, then that's even better.

Rule Five: Ask other people-not the person with whom you will negotiateIf you go into a negotiation knowing only what the other side has chosen to tell you, you are very vulnerable. Others will tell you things that the other side won't, and they will also be able to verify what the other side has told you.Start by asking people who've done business with the other side already. I think it will amaze you-even if you thought of them as competition-how much they're willing to share with you. Be prepared to horse trade information. Don't reveal anything that you don't want them to know, but the easiest way to get people to open up is to offer information in return. People who have done business with the other side can be especially helpful in revealing the character of the people with whom you'll be negotiating. Can you trust them? Do they bluff a great deal in negotiations or are they straightforward in their dealings? Will they stand behind their verbal agreements or do you need an attorney to read the fine print in the contracts?Next, ask people further down the corporate ladder than the person with whom you plan to deal. Let's say you're going to be negotiating with someone at the main office of a nationwide retail chain. You might call up one of the branch offices and get an appointment to stop by and see the local manager. Do some preliminary negotiating with that person. He will tell you a lot, even though he can't negotiate the deal, about how the company makes a decision, why one supplier is accepted over another, the specification factors considered, the profit margins expected, the way the company normally pays, and so on. Be sure that you're "reading between the lines" in that kind of conversation. Without you knowing it, the negotiations may have already begun. For example, the Branch Manager may tell you, "They never work with less than a 40 percent markup," when that may not be the case at all. And never tell the Branch Manager anything you wouldn't say to the people at his head office. Take the precaution of assuming anything you say will get back to them.Next, take advantage of peer-group sharing. This refers to the fact that people have a natural tendency to share information with their peers. At a cocktail party, you'll find attorneys talking about their cases to other attorneys, when they wouldn't consider it ethical to share that information with anyone outside their industry. Doctors will talk about their patients to other doctors, but not outside their profession.Power Negotiators know how to use this phenomenon because it applies to all occupations, not just in the professions. Engineers, controllers, foremen, and truck drivers; all have allegiances to their occupations, as well as their employers. Put them together with each other and information will flow that you couldn't get any other way.If you're thinking of buying a used piece of equipment, have your driver or equipment supervisor meet with his counterpart at the seller's company.If you're thinking of buying another company, have your controller take their bookkeeper out to lunch.You can take an engineer from your company with you to visit another company and let your engineer mix with their engineers. You'll find out that unlike top management-the level at which you may be negotiating-engineers have a common bond that spreads throughout their profession, rather than just a vertical loyalty to the company for which they currently work. So all kinds of information will pass between these two. Naturally, you have to watch out that your person doesn't give away information that could be damaging to you. So be sure you pick the right person. Caution her carefully about what you're willing to tell the other side and what you're not willing to tell-the difference between the open agenda and your hidden agenda. Then let her go to it, challenging her to see how much she can find out. Peer-group information gathering is very effective.

Power Negotiators always accept complete responsibility for what happens in the negotiations.
Poor negotiators blame the other side for the way they conducted themselves.

Many years ago, I was conducting a negotiating seminar in the San Fernando Valley, and comedian Slappy White was in the audience. During the break, I told him how much I admired comedians. "It must be fun to be successful like you," I told him, "but coming up through those comedy clubs with all their hostile audiences must be sheer hell.""Roger," he told me, "I've never had a bad audience.""Oh, come on, Slappy," I replied, "When you were starting out, you must have had some awful audiences.""I've never had a bad audience," he repeated. "I've only had audiences that I didn't know enough about."As a professional speaker, I accept that there is no such thing as a bad audience, there are only audiences about whom the speaker doesn't know enough. I've built my reputation on the planning and research that I do before I'll get up in front of an audience.As a negotiator, I accept that there's no such thing as a bad negotiation. There are only negotiations in which we don't know enough about the other side.

Information gathering is the most important thing we can do to assure that the negotiations go smoothly.

Power Negotiations (Part #7)

How to Negotiate
When the Other Person Tells You That They Don't Have the Authority to Decide

One of the most frustrating situations you can run into is trying to negotiate with the person who claims that he or she doesn't have the authority to make a final decision. Unless you realize that this is simply a negotiating tactic that's being used on you, you have the feeling that you'll never get to talk to the real decision-maker. When I was president of the real estate company in California, I used to have salespeople coming in to sell me things all the time: advertising, photocopy machines, computer equipment, and so on. I would always negotiate the very lowest price that I could, and then I would say to them, "This looks fine. I do just have to run it by my board of directors, but I'll get back to you tomorrow with the final okay."The next day I could get back to them and say, "Boy, are they tough to deal with right now. I felt sure I could sell it to them, but they just won't go along with it unless you can shave another couple of hundred dollars off the price." And I would get it. There was no approval needed by the board of directors, and it never occurred to me that this deception was underhanded. I and the people with whom you deal see it as well within the rules by which one plays the game of negotiating.So when the other person says to you that they have to take it to the committee, or the legal department, it's probably not true, but it is a very effective negotiating tactic that they're using on you. Fortunately, Power Negotiators know how to handle this challenge smoothly and effectively.Your first approach should be trying to remove the other person's resort to higher authority before the negotiations even start, by getting him to admit that he could make a decision if the proposal was irresistible. This is exactly the same thing that I taught my real estate agents to say to the buyers before putting them in the car, "Let me be sure I understand, if we find exactly the right property for you today, is there any reason why you wouldn't make a decision today?" It's exactly the same thing that the car dealer will do to you when, before he lets you take it for a test drive, he says, "Let me be sure I understand, if you like this car as much as I know you're going to like it, is there any reason why you wouldn't make a decision today?" Because they know that if they don't remove the resort to higher authority up front, then there's a danger that under the pressure of asking for a decision, the other person will invent a higher authority as a delaying tactic. Such as, "Look, I'd love to give you a decision today, but I can't because my father-in-law has to look at the property (or the car), or Uncle Joe is helping us with the down payment and we need to talk to him first." One of the most frustrating things that you encounter is taking your proposal to the other person and having her say to you, "Well, that's fine. Thanks for bringing me the proposal. I'll talk to our committee (or our attorney or the owners) about it and if it interests us we'll get back to you." Where do you go from there? If you're smart enough to counter the Higher Authority Gambit before you start, you can remove yourself from that dangerous situation. So before you present your proposal to the other person, before you even get it out of your briefcase, you should casually say, "Let me be sure I understand. If this proposal meets all of your needs (That's as broad as any statement can be, isn't it?), is there any reason why you wouldn't give me a decision today?" It's a harmless thing for the other person to agree to because the other person is thinking, "If it meets all of my needs? No problem, there's loads of wriggle room there." However, look at what you've accomplished if you can get them to respond with, "Well, sure if it meets all of my needs, I'll give you an okay right now." Look at what you've accomplished:1. You've eliminated their right to tell you that they want to want to think it over. If they say that, you say, "Well, let me go over it one more time. There must be something I didn't cover clearly enough because you did indicate to me earlier that you were willing to make a decision today." 2. You've eliminated their right to refer it to a higher authority. You've eliminated their right to say, "I want our legal department to see it, or the purchasing committee to take a look at it."

What if you're not able to remove their resort to higher authority? I'm sure that many times you'll say, "If this proposal meets all of your needs is there any reason why you wouldn't give me a decision today?" and the other person will reply, "I'm sorry, but on a project of this size, everything has to get approved by the specifications committee. I'll have to refer it to them for a final decision."

Here are the three steps that Power Negotiators take when they're not able to remove the other side's resort to higher authority:

Step number one-appeal to their ego. With a smile on your face you say, "But they always follow your recommendations, don't they?" With some personality styles that's enough of an appeal to his ego, that he'll say, "Well, I guess you're right. If I like it, then you can count on it." But often they'll still say, "Yes, they usually follow my recommendations but I can't give you a decision until I've taken it to the committee." If you realize that you're dealing with egotistical people, try preempting their resort to higher authority early in your presentation, by saying, "Do you think that if you took this to your supervisor, she'd approve it?" Often an ego-driven person will make the mistake of proudly telling you that he doesn't have to get any body's approval.

The second step is to get their commitment that they'll take it to the committee with a positive recommendation. So you say, "But you will recommend it to them-won't you?" There are only two things that can happen at this point. Either she'll say, yes, she will recommend it to them, or she'll say, no she won't-because . . . Either way you've won. Hopefully, you'll get a response similar to, "Yes, it looks good to me, I'll go to bat for you with them." But if that doesn't happen, and instead they tell you that they won't recommend it because, you're still ahead, because any time you can draw out an objection you should say, "Hallelujah" because objections are buying signals. For example, nobody will object to your price unless buying from you interests them. If buying from you doesn't interest them, they don't care how high you price your product or service.For a while I dated a woman who was really into interior decorating. One day she excitedly dragged me down to the Orange County Design Center to show me a couch covered in kidskin. The leather was as soft and as supple as anything I'd ever felt. As I sat there, she said, "Isn't that a wonderful couch?"I said, "No question about it, this is a wonderful couch."She said, "And it's only $12,000."I said, "Isn't that amazing? How can they do it for only $12,000?"She said, "You don't have a problem with the price?""I don't have a problem with the price at all." Why didn't I have a problem with the price? Right. Because I had absolutely no intention of paying $12,000 for a couch, regardless of what they covered it with. Let me ask you this: If buying the couch interested me, would I have a problem with the price? Oh, you had better believe I'd have a problem with the price!Objections are buying signals. We knew in real estate that if we were showing property, and the people were "Ooooing and aaahing" all over the place, if they loved everything about the property, they weren't going to buy. The serious buyers were the ones who were saying, "Well the kitchen's not as big as we like. Hate that wallpaper. We'd probably end up knocking out that wall." Those were the ones who would buy.If you're in sales, think about it. Have you ever in your life made a big sale where the person loved your price up front? Of course not. All serious buyers complain about the price.Your biggest problem is not an objection, it's indifference. I would rather they said to you, "I wouldn't buy widgets from your company, if you were the last widget vendor in the world, because . . ." than have them say to you, "I've been using the same source on widgets for 10 years, and he does fine. I'm just not interested in taking the time to talk about making a change." Indifference is your problem, not objections. Let me prove this to you. Give me the opposite of the word love. If you said hate, think again. As long as they're throwing plates at you, you have something there you can work with. It's indifference that's the opposite of love. When they're saying to you, like Rhett Butler in Gone With the Wind, "Quite frankly, my dear, I don't give a damn." -that's when you know the movie is about over. Indifference is your problem, not objections. Objections are buying signals.So when you say to them, "You will recommend it to them, won't you?" they can either say, yes they will, or no they won't. Either way you've won. Then you can move to step three:

Step Three: The qualified "subject to" close. The "subject to" close is the same one that your life insurance agent uses on you when he or she says, "Quite frankly, I don't know if we can get this much insurance on someone your age. It would be "subject to" you passing the physical anyway, so why don't we just write up the paper work "subject to" you passing the physical?" The life insurance agent knows that if you can fog a mirror during that physical, he or she can get you that insurance. But it doesn't sound as though you're making as important a decision as you really are. The qualified "subject to" close in this instance would be: "Let's just write up the paper work 'subject to' the right of your specifications committee to reject the proposal within a 24-hour period for any specifications reason." Or, "Let's just write up the paper work 'subject to' the right of your legal department to reject the proposal within a 24-hour period for any legal reason."Notice that you're not saying subject to their acceptance. You're saying subject to their right to decline it for a specific reason. If they were going to refer it to an attorney, it would be a legal reason. If they were going to refer it to their CPA, it would be a tax reason and so on. But try to get it nailed down to a specific reason.

So the three steps to take if you're not able to get the other person to waive his or her resort to higher authority are:
1. Appeal to the other person's ego.
2. Get the other person's commitment that he'll recommend it to the higher authority.
3. Use the qualified subject-to close.

Being able to use and handle the resort to higher authority is critical to you when you're Power Negotiating. Always maintain your own resort to higher authority. Always try to remove the other person's resort to a higher authority.

Key points to remember:

• Attempt to get the other person to admit that he could approve your proposal if it meets all of his needs. If that fails, go through the three counter gambits:
• Appeal to his ego.
• Get his commitment that he'll recommend to his higher authority.
• Go to a qualified subject-to close.
• If they are forcing you to make a decision before you're ready to do so, offer to decide but let them know that the answer will be no, unless they give you time to check with your people.
• If they're using escalating authority on you, revert to your opening position at each level and introduce your own levels of escalating authority.

Power Negotiations (Part #6)

If You Need to Put Negotiating Pressure on the Other Side, Try Good Guy/Bad Guy


Good Guy/Bad Guy is one of the best known negotiating gambits.
Charles Dickens first wrote about it in his book Great Expectations. In the opening scene of the story, the young hero Pip is in the graveyard when out of the sinister mist comes a large, very frightening man. This man is a convict, and he has chains around his legs. He asks Pip to go into the village and bring back food and a file, so he can remove the chains. The convict has a dilemma, however. He wants to scare the child into doing as he's asked, yet he mustn't put so much pressure on Pip that he'll be frozen in place or bolt into town to tell the policeman.The solution to the convict's problem is to use the Good Guy/Bad Guy Gambit. Taking some liberty with the original work, what the convict says in effect, is "You know, Pip, I like you, and I would never do anything to hurt you But I have to tell you that waiting out here in the mist is a friend of mine and he can be violent and I'm the only one who can control him. If I don't get these chains off-if you don't help me get them off-then my friend might come after you. So, you have to help me. Do you understand?" Good Guy/Bad Guy is a very effective way of putting pressure on people, without confrontation.

I'm sure you've seen Good Guy/Bad Guy used in the old police movies. Officers bring a suspect into the police station for questioning, and the first detective to interrogate him is a rough, tough, mean-looking guy. He threatens the suspect with all kinds of things that they're going to do to him. Then he's mysteriously called away to take a phone call, and the second detective, who's brought in to look after the prisoner while the first detective is away, is the warmest, nicest guy in the entire world. He sits down and makes friends with the prisoner. He gives him a cigarette and says, "Listen kid, it's really not as bad as all that. I've taken a liking to you. I know the ropes around here. Why don't you let me see what I can do for you?" It's a real temptation to think that the Good Guy's on your side when, of course, he really isn't. Then the Good Guy would go ahead and close on what salespeople would recognize as a minor point close. "All I think the detectives really need to know," he tells the prisoner, "is where did you buy the gun?" What he really wants to know is, "Where did you hide the body?" Starting out with a minor point like that and then working up from there, works very well, doesn't it? The car salesperson says to you, "If you did invest in this car would you get the blue or the gray?" "Would you want the vinyl upholstery or the leather?" Little decisions lead to big ones. The real estate salesperson who says, "If you did invest in this home, how would you arrange the furniture in the living room?" Or, "Which of these bedrooms would be the nursery for your new baby?" Little decisions grow to big decisions.

People use Good Guy/Bad Guy on you much more than you might believe. Look out for it anytime you find yourself dealing with two people. Chances are you'll see it being used on you, in one form or another. For example, you may sell corporate health insurance plans for an HMO and have made an appointment to meet with the Vice-President of Human Resources at a company that manufactures lawn mowers. When the secretary leads you in to meet with the vice president, you find to your surprise that the president of the company wants to sit in and listen in on your presentation.That's negotiating two on one, which is not good, but you go ahead and everything appears to be going along fine. You feel that you have a good chance of closing the sale, until the president suddenly starts getting irritated. Eventually he says to his vice president, "Look, I don't think these people are interested in making a serious proposal to us. I'm sorry, but I've got things to do." Then he storms out of the room. This really shakes you up if you're not used to negotiating. Then the vice-president says, "Wow. Sometimes he gets that way, but I really like the plan that you presented, and I think we can still work this out. If you could be a little more flexible on your price, then I think we can still put it together. Tell you what-why don't you let me see what I can do for you with him?" If you don't realize what they're doing to you, you'll hear yourself say something like, "What do you think the president would agree to?" Then it won't be long before you'll have the vice-president negotiating for you-and he or she is not even on your side.

If you think I'm exaggerating on this one, consider this: Haven't you, at one time or another, said to a car salesperson, "What do you think you could get your sales manager to agree to?" As if the salesperson is on your side, not on theirs? Haven't we all at one time been buying real estate and have found the property we want to buy, so we say to the agent that has been helping us find the property, "What do you think the sellers would take?" Let me ask you something. Who is your agent working for? Who is paying her? It's not you, is it? She is working for the seller and yet she has effectively played Good Guy/Bad Guy with us. So, look out for it, because you run into it a lot.

Power Negotiators use several Counter-Gambits to Good Guy/Bad Guy:o The first Counter-Gambit is simply to identify the Gambit. Although there are many other ways to handle the problem, this one is so effective that it's probably the only one you need to know. Good Guy/Bad Guy is so well known that it embarrasses people when they get caught using it. When you notice the other person using it you should smile and say, "Oh, come on-you aren't going to play Good Guy/Bad Guy with me are you? Come on, sit down, let's work this thing out." Usually their embarrassment will cause them to retreat from the position. o You could respond by creating a bad guy of your own. Tell them that you'd love to do what they want, but you have people back in the head office who are obsessed with sticking to the program. You can always make a fictitious bad guy appear more unyielding than a bad guy who is present at the negotiation.o You could go over their heads to their supervisor. For example, if you're dealing with a buyer and head buyer at a distributorship, you might call the owner of the distributorship and say, "Your people were playing Good Guy/Bad Guy with me. You don't approve of that kind of thing, do you?" (Always be cautious about going over someone's head. The strategy can easily backfire because of the bad feelings it can cause.)o Sometimes just letting the bad guy talk resolves the problem, especially if he's being obnoxious. Eventually his own people will get tired of hearing it and tell him to knock it off.o You can counter Good Guy/Bad Guy by saying to the Good Guy, "Look, I understand what you two are doing to me. From now on anything that he says, I'm going to attribute to you also." Now you have two bad guys to deal with, so it diffuses the Gambit. Sometimes just identifying them both in your own mind as bad guys will handle it, without you having to come out and accuse them.o If the other side shows up with an attorney or controller who is clearly there to play bad guy, jump right in and forestall their role. Say to them, "I'm sure you're here to play bad guy, but let's not take that approach. I'm as eager to find a solution to this situation as you are, so why don't we all take a win-win approach. Fair enough?" This really takes the wind out of their sails.

This Gambit is very, very effective even when everybody knows what's going on. It was how Presidents Carter and Reagan got the hostages out of Iran, wasn't it? You remember that? Carter had lost the election. He was very eager to do something about the Iranian hostage situation before he left the White House and Reagan could take credit for their release. So, he started playing Good Guy/Bad Guy with the Ayatollah. He said to him, "If I were you, I'd settle this thing with me. Don't take a chance on this new team coming into office in January. My goodness, have you taken a look at these guys? The President's a former cowboy actor. The Vice President is the former head of the C.I.A. The Secretary of State is Alexander Haig. These guys are crazier than Englishmen. There's no telling what they might do." Reagan, playing along with it, said, "Hey, if I were you, I'd settle with Carter. He's a nice guy. You're definitely not going to like what I'll have to say about it, when I get into the White House." And sure enough, we saw the hostages being released on the morning of Reagan's inauguration. Of course, the Iranians were aware of Good Guy/Bad Guy, but they didn't want to take a chance that Reagan would follow through with his threats. It demonstrated that these Gambits work even when the other side knows what you're doing. In 1994, Jimmy Carter was again called upon to play the Good Guy when he and Colen Powell went to Haiti to see if they could get General Cedras to give up power without a fight. Powell was there to impress the might of the armed forces upon Cedras. Carter was there to cozy up the dictator, even suggesting he come to Plains, Georgia, and teach a class in Sunday School when the crisis was over.

KEY POINTS TO REMEMBER:

• People use Good Guy/Bad Guy on you much more than you might believe. Look out for it whenever you're negotiating with two or more people.
• It is a very effective way of putting pressure on the other person without creating confrontation.
• Counter it by identifying it. It's such a well-known tactic that when you catch them using it, they get embarrassed and back off.
• Don't be concerned that the other side knows what you're doing.

Even if they do it can still be a powerful tactic. In fact, when you're Power Negotiating with someone who understands all of these Gambits, it becomes more fun. It's like playing chess with a person of equal skill rather than someone whom you can easily outsmart.

Power Negotiations (Part #5)

What To Watch For When the Talking is Over and It's Time to Get the Deal in Writing


Most people think of negotiating as the verbal give and take that takes people from their different wants and needs to a point of agreement. That, of course, is the heart of negotiating but just as important is the transition to the written contract that formalizes the verbal agreement.

Here are the things that Power Negotiators look for as they move toward the written contract:
Don't Let the Other Side Write the ContractIn a typical negotiation, you verbally negotiate the details, then put it into writing later for both parties to review and approve. I've yet to run across a situation where we covered every detail in the verbal negotiation. There are always points that we overlooked when we were verbally negotiating that we must detail in writing. Then we have to get the other side to approve or negotiate the points when we sit down to sign the written agreement-that's when the side that writes the contract has a tremendous advantage over the side that doesn't. Chances are that the person writing the agreement will think of at least half-dozen things that did not come up during the verbal negotiations. That person can then write the clarification of that point to his or her advantage, leaving the other side to negotiate a change in the agreement when asked to sign it.Don't let the other side write the contract because it puts you at a disadvantage.This applies to brief counter proposals just as much as it does to agreements that are hundreds of pages long. For example, a real estate agent may be presenting an offer to the sellers of an apartment building. The seller agrees to the general terms of the offer, but wants the price to be $5,000 higher. At that point either the listing agent who represents the seller or the selling agent who represents the buyer could pull a counter-proposal form out of his or her briefcase and write out a brief counter-offer for the seller to sign. Then the selling agent will present to the buyer for approval. It doesn't have to be complicated: "Offer accepted except that price is to be $598,000," will suffice.If the listing agent writes the counter-offer, however, he or she might think of some things that would benefit her seller. She might write, "Offer accepted except that price to be $598,000. Additional $5,000 to be deposited in escrow upon acceptance. Counter-offer to be accepted upon presentation and within 24 hours."If the selling agent were to write the counter-offer, he might write, "Offer accepted except that price is to be $598,000. Additional $5,000 to be added to the note that the seller is carrying back."These additions are probably not big enough to be challenged by either a seller or a buyer who is eager to complete the transaction; however, they substantially benefit the side who wrote the brief counter-offer. If the person who writes a one-paragraph counter-offer can affect it so much, think how much that person could affect a multi-page contract.Remember that this may not just be a matter of taking advantage of the other side. Both sides may genuinely think that they had reached agreement on a point whereas their interpretations may be substantially different when they write it out.

A classic example of this is the Camp David accord, signed by President Carter, President Anwar Sadat of Egypt, and Prime Minister Menachem Begin of Israel. After 13 frustrating days of negotiating at Camp David where they all felt until the last moment that their efforts were futile, they reached what they thought was a breakthrough to agreement. Excitedly they flew helicopters to Washington and with massive publicity signed the accord. In the East Room, the normally unemotional Menachem Begin turned to his wife and said, "Mama, we'll go down in the history books tonight." That may be so, but the truth is that many years later, hardly any of the elements of the agreement had gone into effect. Their enthusiasm led each of them to think that they had reached agreement when they really hadn't.If you are to be the one writing the contract, it's a good idea to keep notes throughout the negotiation and put a check mark in the margin against any point that will be part of the final agreement.

This does two things:
1. It reminds you to include all the points that you wanted.
2. When you write the contract, you may be reluctant to include a point in the agreement unless you can specifically recall the other side agreeing to it.

Your notes will give you the confidence to include it even if you don't remember it clearly.If you have been team negotiating, be sure to have all the other members of your team review the contract before you present it to the other side. You may have overlooked a point that you should have included or you may have misinterpreted a point. It's common for the lead negotiator to let her enthusiasm overwhelm her to a point that she feels that the other side agreed to something when it was less than clear to more independent observers.I'm not a big believer in having attorneys conduct a negotiation for you because so few of them are good negotiators. They tend to be confrontational negotiators because they're used to threatening the other side into submission, and they are seldom open to creative solutions because their first obligation is to keep you out of trouble, not make you money. Remember that in law school, they are not taught how to make deals, only how to break deals. In our litigious society there isn't much point in making an agreement that won't hold up in court, however, so it's a good idea to have the agreement approved by your attorney before you have it signed. In a complicated agreement what you prepare and have the other side sign may be no more than a letter of intent. Have the attorneys work on it later to make it a legal document. It's better that you devote your energy to reaching agreement.If you have prepared an agreement that you think the other side may be reluctant to sign, you may be smart to include the expression "Subject to your attorney's approval," to encourage them to sign it.Once the verbal negotiations are over, get a memorandum of agreement signed as quickly as possible. The longer you give them before they see it in writing, the greater the chances that they'll forget what they agreed to and question what you've prepared.Also, make sure they understand the agreement. Don't be tempted to have them sign something when you know they're not clear on the implications. If they don't understand and something goes wrong, they will always blame you. They will never accept responsibility. I find it helpful to write out the agreement I want before I go into the negotiations. I don't show it to the other side, but I find it helpful to compare it to the agreement that we eventually reach, so that I can see how well I did. Sometimes it's easy to get excited because the other side is making concessions that you didn't expect to get. Then your enthusiasm carries you forward and you agree to what you feel is a fantastic deal. It may be a good deal, but unless you have clearly established your criteria up front, it may not be the deal that you hoped to get.Power Negotiators know that you should always try to be the one that writes the contract. When the verbal negotiations are over, it's time for someone to put everything in writing, and the person who gets to put it in writing has definite power in the negotiations. There are bound to be little details that you didn't think of when you were verbally negotiating that need to be specified in the written contract. If you're the one who gets to write the contract, you can write those to your favor. Then it's up to the other person to negotiate them out when it comes to signing the contract. So, try to be the one who writes the contract. I'll say to the other people, "Look, we need to put this down in writing. But let's not go to a lot of expense on this. I have an attorney on retainer, it won't cost either one of us anything for me to have my attorney do it." Even if I had to pay the attorney to do it, I still think I'd be better off to be the one who is writing the contract.

Read the Contract Every TimeIn this age of computer-generated contracts, it's a sad fact that you have to reread a contract every time it comes across your desk.In the old days, when contracts were typewritten, both sides would go through it and write in any changes, and then each negotiator would initial the change. You could glance through the contract and quickly review any change that you had made or to which you had agreed. Nowadays with computer generated contracts we're more likely to go back to the computer, make the change, and print out a new contract. Here's the danger. You may have refused to sign a clause in a contract. The other side agrees to change it and says they'll send you a corrected contract for your signature. When it comes across your desk, you're busy, so you quickly review it to see that they made the change you wanted and then turn to the back page and sign it. Unfortunately, because you didn't take the time to reread the entire contract, you didn't realize that they had also changed something else. Perhaps it was something blatant such as changing "F.O.B. factory" to "F.O.B. job site." Or it may be such a minor change in wording that you don't discover it until years later when something goes wrong, and you need the contract to enforce some action. By then, you may not even remember what you agreed to, and you can only assume that because you signed it you must have agreed to it.Yes, I agree with you-you have a wonderful case for a lawsuit that the other side defrauded you-but why expose yourself to that kind of trouble? In this age of computer-generated contracts, you should read the contract all the way through, every time it comes across your desk for signature.

People Believe What They See In WritingThe printed word has great power over people. Most people believe what they see in writing, even if they won't believe it when they just hear about it. The Candid Camera people did a stunt to prove that a number of years ago -- you may remember seeing it on television. They posted a sign on a road next to a golf course in Delaware that said, "Delaware Closed." Allen Fount stood by the sign in a rented trooper's uniform. He wasn't allowed to speak to the people as they came up, only point up at the sign. What happened amazed me. People were coming to a screeching halt and saying things like, "How long is it going to be closed for? My wife and kids are inside." People believe what they see in writing. That's why I'm such a big believer in presentation binders. When you sit down with someone, you open the presentation binder, and it says, "My company is the greatest widget manufacturer in the world." Then you turn another page and it says, "Our workers are the greatest craftsmen in the business." You turn another page and start showing them reference letters from all your previous jobs.They find it believable even when they know you just came from the print shop with it. This is how hotels are able to get people to check out of the rooms on time. Holiday Inns used to have a terrible time getting people to check out of their rooms at 12 noon, until they learned the art of the printed word and posted those little signs on the back of the door.

Now 97 percent of the guests check out of their rooms on time, without any question at all, because the written word is so believable. Recognize this when you're negotiating with people. In our litigious society, it's essential to eventually get your agreement into writing. As regrettable as it may seen, it doesn't make much sense to verbally negotiate an agreement unless the other side is willing to attest to it in writing somewhere down the line.

Power negotiators know that it's important to wean the other side onto seeing in writing what they are agreeing to verbally.So every chance you get put things in writing.

Take the time during the verbal negotiations to say, "Let me be sure that I understand what you're proposing." Then stop to write down your understanding of the point that you were discussing. Show it to the other side, but you don't have to have them sign it at this point. All you're doing is getting them used to seeing it in writing. This subliminally confirms what, up to that point, has only bee a verbal understanding. If you don this at intervals during the discussion, you'll have much less trouble getting them to sign the final written contract.It's important to realize that, at every point of the negotiation, the other side is more persuaded by what they see in writing.

For example, if you have salespeople selling for you and you have to put a price change into effect, be sure that they have it in writing. Because there's a world of difference between them sitting with a potential customer and saying, "We're having a price increase at the start of next month, so you should make a commitment now," and them saying, "Look at this letter I just got from my boss. It indicates that we're having a price increase on July 1st."

Always show it to people in writing whenever you can. If you're negotiating by telephone, back up what you're saying by also faxing them the information.

If you sell big-ticket items and don't have a method of creating computer-generated proposals, I'd suggest that you stop everything and go get a computer system right now. It'll pay for itself on the first job. Many years ago I was in Australia on a lecture tour and a fire broke out on the second floor of my home in California. When I returned I had three contractors bid on repairing the damage. Two of them scrawled out bids by hand. They both bid around $24,000. The third contractor prepared a very comprehensive bid by computer. Every little detail was spelled out in detail. But his bid was $49,000-more than twice as much. I accepted the higher bid because the Power of the Printed Word was so great that I just didn't trust the hand-written bids.

What's the bottom line? Because people don't question what they see in writing, you should always present written backup evidence to support your proposal. If the negotiation includes expectations that the other side will meet certain requirements, it also helps to confirm those requirements in writing.

The transition from a verbal negotiation to a written contract can be a delicate one, but Power Negotiators known how to set it up so that it doesn't become a traumatic experience.

Power Negotiations (Part #4)

Want to Get More at the Bargaining Table? Learn to Flinch at Proposals

Power Negotiators know that you should always flinch-react with shock and surprise at the other side's proposals.

Let's say that you are in a resort area and stop to watch one of those charcoal sketch artists. He doesn't have the price posted, and he has the shill sitting on the stool. You ask him how much he charges, and he tells you $15. If that doesn't appear to shock you, his next words will be, "And $5 extra for color." If you still don't appear shocked, he will say, "And we have these shipping cartons here, you'll need one of these too."

Perhaps you are married to someone who would never flinch like that because it's beneath his or her dignity. My first wife was like that. We would walk into a store, and she would say to the clerk, "How much is the coat?"

The clerk would respond, "$2,000."

My wife would say, "That's not bad!" I would be having a heart attack in the background.

I know it sounds dumb and I know it sounds ridiculous, but the truth of the matter is that when people make a proposal to you, they are watching for your reaction. They may not think for a moment that you'll go along with their request. They've just thrown it out to see what your reaction will be.

For example:

o You sell computers and the buyer asks you to include an extended warranty.
o You're buying a car and the dealer offers you only a few hundred dollars for your trade-in.
o You sell contractor supplies and the buyer asks you to deliver it to the job site at no extra charge.
o You're selling your house and the buyer wants to move in two weeks before the transaction closes.
In each of these situations, the other side may not have thought for a moment that you would go along with the request, but if you don't flinch, he or she will automatically think, "Maybe I will get them to go along with that. I didn't think they would, but I think I'll be a tough negotiator and see how far I can get them to go.

It's very interesting to observe a negotiation when you know what both sides are thinking. Wouldn't that be fascinating for you? Wouldn't you love to know what's going on in the other person's mind when you're negotiating with her? When I conduct the one or two day Secrets of Power Negotiating seminars, we break up into groups and do some negotiating to practice the principles that I teach. I create a workshop and customize it to the industry in which the participants are involved. If they are medical equipment salespeople, they may find themselves negotiating the sale of laser surgery equipment to a hospital. If they are owners of print shops, the workshop may involve the acquisition of a smaller printing company in an outlying town.

I break the audience up into buyers, sellers, and referees. The referees are in a very interesting position because they have been in on the planning sessions of both the buyers and the sellers. They know each side's negotiating range. They know what the opening offer is going to be, and they know how far each side will go. So the sellers of the printing company would go as low as $700,000, but they may start as high as $2 million. The buyers may start at $400,000, but they're prepared to go to $1.5 million if they have to. So the negotiating range is $400,000 to $2 million, but the acceptance range is $700,000 to $1.5 million. The acceptance range embraces the price levels at which the buyers' and the sellers' negotiating ranges overlap. If they do overlap and there is an acceptance range, it's almost certain that the final price to which they agree will fall within this range. If the top of the buyers' negotiating range is lower than the bottom of the sellers' negotiating range, then one or both sides will have to compromise their objectives.

The negotiation starts with each side trying to get the other side to put their offer on the table first. After a while someone has to break the ice, so the sellers may suggest the $2 million (which is the top of their negotiating range). They believe $2 million is ridiculously high, and they barely have the nerve to propose it. They think they're going to be laughed out of the room the minute they do.

However, to their surprise, the buyers don't appear to be that shocked. The sellers expect the buyers to say, "You want us to do what? You must be out of your minds." What they actually respond with is much milder, perhaps, "We don't think we'd be prepared to go that high." In an instant, the negotiation changes. A moment ago, the $2 million had seemed to be an impossible goal. Now the sellers are thinking that perhaps they're not as far apart as they thought they were. Now they're thinking, "Let's hang in. Let's be tough negotiators. Maybe we will get this much."

Flinching is critical because most people believe more what they see than what they hear. The visual overrides the auditory in most people. It's safe for you to assume that at least 70 percent of the people with whom you negotiate will be visuals. What they see is more important than what they hear. I'm sure you've been exposed to some neuro-linguistic programming. You know that people are either visual, auditory or kinesthetic (what they feel is paramount). There are a few gustatory (taste) and olfactory (smell) people around, but not many and they're usually chefs or perfume blenders.

If you'd like to know what you are, close your eyes for ten seconds and think of the house in which you lived when you were ten years old. You probably saw the house in your mind, so you're a visual. Perhaps you didn't get a good visual picture, but you heard what was going on, perhaps trains passing by or children playing. That means you're auditory. Auditories tend to be very auditory. Neil Berman is a psychotherapist friend of mine in Santa Fe, New Mexico. He can remember every conversation he's ever had with a patient, but if he meets them in the supermarket, he doesn't remember them. The minute they say good morning to him, he thinks, "Oh yes that's the bi-polar personality with anti-social tendencies." The third possibility is that you didn't so much see the house or hear what was going on, but you just got a feeling for what it was like when you were ten. That makes you a kinesthetic.

Assume that people are visual unless you have something else to go on. Assume that what they see has more impact than what they hear. That's why it's so important to respond with a flinch to a proposal from the other side.

Don't dismiss flinching as childish or too theatrical until you'd had a chance to see how effective it can be. It's so effective that it usually surprises my students when they first use it. A woman told me that she flinched when selecting a bottle of wine in one of Boston's finest restaurants and the wine steward immediately dropped the price by five dollars. A man told me that a simple flinch caused the salesperson to take $2,000 of the price of a Corvette.

A speaker friend of mine attended my seminar in Orange County, California, and decided to see if he could use it to get his speaking fees up. At the time he was just getting started and was charging $1,500. He went to a company and proposed that they hire him to do some in house training. The training director said, "We might be interested in having you work for us, but the most we can pay you is $1,500."
In the past he would have said, "That's what I charge." But now he gasped in surprise and said, "$1,500? I couldn't afford to do it for just $1,500."

The training director frowned thoughtfully. "Well," he said, "the most we've ever offered any speaker is $2,500, so that's the very best we can do." That meant $1,000 in additional bottom line profit dollars per speech to my friend and it took him only 15 seconds to do. Not bad pay.

Key points to remember:

o Flinch in reaction to a proposal from the other side. They may not expect to get what they're asking for, but if you don't show surprise you're communicating that it's a possibility.
o A concession often follows a flinch. If you don't flinch, it makes the other person a tougher negotiator.
o Assume that the other person is a visual unless you have something else on which to go.
o Even if you're not face to face with the other person you should still gasp in shock and surprise. Telephone flinches can be very effective also.

Power Negotiations (Part #3)

The Value of a Service Goes Down Quickly

The value of a service always appears to go down quickly as soon as those services have been performed. The value of any material object you buy may go up in value over the years, but the value of services always appears to decline rapidly after you have performed those services.

Power Negotiators know that any time you make a concession to the other side in a negotiation you should ask for a reciprocal concession right away. The favor that you did the other side loses value very quickly. Two hours from now the value of it will have diminished rapidly.

Real estate salespeople are very familiar with the principle of the declining value of services. When a seller has a problem getting rid of a property, and the real estate salesperson offers to solve that problem for a 6 percent listing fee, it doesn't sound as though it's an enormous amount of money. However, the minute the Realtor® has performed the service by finding the buyer, then suddenly that six- percent starts to sound like a tremendous amount of money. "Six percent. That's $12,000!" the seller is saying. "For what? What did they do? All they did was put it in a multiple listing service." The Realtor® did much more than that to market the property and negotiate the contract but remember the principle: The value of a service always appears to diminish rapidly after you have performed that service.
I'm sure you've experienced that, haven't you? A person with whom you do a small amount of business has called you. He's in a state of panic because the supplier from whom they get the bulk of their business has let them down on a shipment. Now their entire assembly line has to shut down tomorrow unless you can work miracles and get a shipment to them first thing in the morning. Sound familiar? So you work all day and through the night, re-scheduling shipments all over the place. Against all odds, you're able to get a shipment there just in time for the assembly line to keep operating. You even show up at their plant and personally supervise the unloading of the shipment, and the buyer loves you for it. He comes down to the dock, where you are triumphantly wiping the dirt off your hands and says, "I can't believe you were able to do that for me. That is unbelievable service. You are absolutely incredible. Love you, love you, love you."

So, you say, "Happy to do it for you, Joe. That's the kind of service we can give when we have to. Don't you think it's time we looked at my company being your main supplier?"

He replies, "That does sound good, but I don't have time to talk about it now because I've got to get over to the assembly line and be sure that it's running smoothly. Come to my office Monday morning at 10 o'clock and we'll go over it. Better yet, come by at noon and I'll buy you lunch. I really appreciate what you did for me. You are fantastic. Love you, love you, love you."

So all weekend long, you think to yourself, "Boy. Have I gotten this one made. Does he owe me." Monday rolls around, however, and negotiating with him is just as hard as ever. What went wrong? The declining value of services came into play. The value of a service always appears to decline rapidly after you have performed the service.
If you make a concession during a negotiation, get a reciprocal concession right away. Don't wait. Don't be sitting there thinking that because you did them a favor, they owe you and that they will make it up to you later. With all the goodwill in the world, the value of what you did goes down rapidly in their mind.


For the same reason, consultants know that you should always negotiate your fee up front, not afterward.

Plumbers know this, don't they? They know that the time to negotiate with you is before they do the work, not after. I had a plumber out to the house. After looking at the problem he slowly shook his head and said, "Mr. Dawson, I have identified the problem, and I can fix it for you. It will cost you $150."
I said, "Fine, go ahead."

You know how long it took him to do the work? Five minutes. I said, "Now wait a minute. You're going to charge me $150 for five minutes work? I'm a nationally known speaker, and I don't make that kind of money."

He replied, "I didn't make that kind of money either-when I was a nationally known speaker."

Key points to remember:
The value of a material object may go up, but the value of services always appears to go down.
Don't make a concession and trust that the other side will make it up to you later.
Negotiate your fee before you do the work.

Power Negotiations (Part #2)

To be a Better Bargainer, Bracket Your Objective

Whether you're bargaining in your favorite antique store, negotiating for an increase in pay, or trying to get the rock-bottom price for a new car, you'll do better if you use a technique that negotiators call Bracketing. This means that your initial proposal should be an equal distance on the other side of your objective as their proposal.

Let me give you some simple examples:
The antique dealer is asking $1200 for that antique desk that would be perfect in the corner of your living room. You are willing to pay $1000. You should offer him $800.

You hope that your boss will give you a 10 percent increase in pay. You should ask him for 20 percent.

The car dealer is asking $25,000 for the car. You want to buy it for $22,000. You should make an opening offer of $19,000.

Of course it's not always true that you'll end up in the middle, but that is a good assumption to make if you don't have anything else on which to base your opening position. Assume that you'll end up in the middle, mid-way between the two opening negotiating positions. If you track that, I think that how often it happens will amaze you. In little things and in big things.

In little things. Your son comes to you and says he needs $20 for a fishing trip he's going to take this weekend. You say, "No way. I'm not going to give you $20. Do you realize that when I was your age I got 50 cents a week allowance and I had to work for that? I'll give you $10 and not a penny more."
Your son says, "I can't do it for $10, dad."
Now you have established the negotiating range. He's asking for $20. You're willing to pay $10. See how often you end up at $15. In our culture, splitting the difference seems fair.

In big things. In 1982, we were negotiating the pay-off of a huge international loan with the government of Mexico. They were about to default on an $82 billion dollar loan. Their chief negotiator was Jesus Herzog, their finance minister. Treasury Secretary Donald Regan and Federal Reserve Board Chairman Paul Volcker represented our side. In a creative solution, we asked Mexico to contribute huge amounts of petroleum to our strategic petroleum reserve, which Herzog agreed to do. That didn't settle it all, however. We proposed to the Mexicans that they pay us a $100 million dollar negotiating fee, which was a politically acceptable way for them to pay us accrued interest. When President Lopez Portillo heard what we were asking for, he went ballistic. He said the equivalent of: You tell Ronald Reagan to drop dead. We're not paying the United States a negotiating fee. Not one peso.
So now we had the negotiating range established. We asked for $100 million dollars. They're offering zero. Guess what they ended up paying us? That's right. $50 million dollars.

So often, in little things and in big things, we end up splitting the difference. With bracketing, Power Negotiators are assured that if that happens, they still get what they want.

To bracket, you must get the other person to state his position first. If the other person can get you to state your position first, then he can bracket you so that, if you end up splitting the difference as so often happens, he ends up getting what he wanted. That's an underlying principle of negotiating: Get the other person to state his position first. It may not be as bad as you fear, and it's the only way you can bracket his proposal.

Conversely, don't let the other person trick you into committing first. If the status quo is fine with you, and there is no pressure on you to make a move, be bold enough to say to the other person, "You're the one who approached me. The way things are satisfies me. If you want to do this, you'll have to make a proposal to me."
Another benefit of bracketing is that it tells you how big your concessions can be as the negotiation progresses. Let's take a look at how this would work with the three situations I described earlier:
The antique dealer who is asking $1200 for that antique. You are willing to pay $1000. You offer him $800. He comes down to $1150, which means that you can raise your offer to $850, and still have your objective mid-way between the two proposals that are on the table.

You hope that your boss will give you a 10 percent increase in pay, so you asked him for 20 percent. He offers you 5 percent, so you can now lower your demand to 15 percent.

The car dealer who is asking $25,000 for the car. You want to buy it for $22,000. You made an opening offer of $19,000. Then if the dealer comes down to $24,500, you can go up to $19,500 and you will still have your objective bracketed. If the dealer's next move is to $24,200, you can also shift your position by $300 and go to $19,800.

There's a danger here, however. You should not become so predictable with your responses that the other side cannot detect your pattern of concessions. I illustrated this with mathematically computed concessions to make my point clear, but you should vary your moves slightly so that your reason for making a move cannot easily be determined.

About five years ago, I bought one hundred acres of land in Eatonville, Washington, a beautiful little town located just west of Mount Rainier. The seller of the land was asking $185,000. I decided that it would be a super buy if I could get it for $150,000, so I Bracketed my objective and offered $115,000. To my astonishment, the seller accepted my offer, but had we have ended up negotiating further and ended up in the middle between our two opening negotiating positions, I still would have made my objective of $150,000. Inexperienced negotiators get into trouble because they don't have the courage to start that low. Someone who didn't understand Bracketing might offer $140,000 for the land, hoping that the seller will come down from his asking price of $185,000 to the buyer's objective of $150,000. That's hard to do. It's hard to get the other side to come down $35,000, when you're only willing to go up $10,000. Or worse yet, the buyer is so uncomfortable with negotiating that he offers the seller $150,000 with a take-it-or-leave-it attitude. That's almost impossible to do. It's virtually impossible to get the seller to keep on making concessions to you, when you are not willing to make any reciprocal concessions-even if selling for $150,000 would be the right thing for the seller to do.

If you want to be a better bargainer, take a tip from the professional negotiators. Get the other side committed to a position first, and then bracket your objective. You're far more likely to end up with what you want.

Power Negotiations (Part #1)

Ask for More Than You Expect to Get

One of the cardinal rules of Power Negotiating is that you should ask the other side for more than you expect to get. Henry Kissinger went so far as to say, "Effectiveness at the conference table depends upon overstating one's demands." Think of some reasons why you should do this:o Why should you ask the store for a bigger discount than you think you have a chance of getting?o Why should you ask your boss for an executive suite although you think you'll be lucky to get a private office?o If you're applying for a job, why should you ask for more money and benefits than you think they'll give you?o If you're dissatisfied with a meal in a restaurant, why should you ask the captain to cancel the entire bill, even though you think they will take off only the charge for the offending item?

If you're a salesperson:o Why, if you are convinced that the buyer wants to spread the business around, should you still ask for it all? o Why should you ask for full list price even if you know it's higher than the buyer is paying now? o Why should you ask the other person to invest in the top of the line even when you're convinced they're so budget conscious that they'll never spend that much?o Why should you assume that they'd want to buy your extended service warranty even though you know they've never done that in the past?

If you thought about this, you probably came up with a few good reasons to ask for more than you expect to get. The obvious answer is that it gives you some negotiating room. If you're selling, you can always come down, but you can never go up on price. If you're buying, you can always go up, but you can never come down. What you should be asking for is your MPP-your maximum plausible position. This is the most that you can ask for and still have the other side see some plausibility in your position.

The less you know about the other side, the higher your initial position should be, for two reasons:1. You may be off in your assumptions. If you don't know the other person or his needs well, he may be willing to pay more than you think. If he's selling, he may be willing to take far less than you think. 2. If this is a new relationship, you will appear much more cooperative if you're able to make larger concessions. The better you know the other person and his needs, the more you can modify your position. Conversely, if the other side doesn't know you, their initial demands may be more outrageous.

If you're asking for far more than your maximum plausible position, imply some flexibility. If your initial position seems outrageous to the other person and your attitude is "take it or leave it," you may not even get the negotiations started. The other person's response may simply be, "Then we don't have anything to talk about." You can get away with an outrageous opening position if you imply some flexibility. If you're buying real estate directly from the seller, you might say, "I realize that you're asking $200,000 for the property and based on everything you know that may seem like a fair price to you. So perhaps you know something that I don't know, but based on all the research that I've done, it seems to me that we should be talking something closer to $160,000." At that the seller may be thinking, "That's ridiculous. I'll never sell it for that, but he does seem to be sincere, so what do I have to lose if I spend some time negotiating with him, just to see how high I can get him to go?"If you're a salesperson you might say to the buyer, "We may be able to modify this position once we know your needs more precisely, but based on what we know so far about the quantities you'd be ordering, the quality of the packaging and not needing just-in-time inventory, our best price would be in the region of $2.25 per widget." At that the other person will probably be thinking, "That's outrageous, but there does seem to be some flexibility there, so I think I'll invest some time negotiating with her and see how low I can get her to go."

Unless you're already an experienced negotiator, here's the problem you will have with this. Your real MPP is probably much higher than you think it is. We all fear being ridiculed by the other. So, we're all reluctant to take a position that will cause the other person to laugh at us or put us down. Because of this intimidation, you will probably feel like modifying your MPP to the point where you're asking for less than the maximum amount that the other person would think is plausible.Another reason for asking for more than you expect to get will be obvious to you if you're a positive thinker: You might just get it. You don't know how the universe is aligned that day. Perhaps your patron saint is leaning over a cloud looking down at you and thinking, "Wow, look at that nice person. She's been working so hard for so long now, let's just give her a break." So you might just get what you ask for and the only way you'll find out is to ask for it.In addition, asking for more than you expect to get increases the perceived value of what you are offering. If you're applying for a job and asking for more money than you expect to get, you implant in the personnel director's mind the thought that you are worth that much. If you're selling a car and asking for more than you expect to get, it positions the buyer into believing that the car is worth more.

Another advantage of asking for more than you expect to get is that it prevents the negotiation from deadlocking. Take a look at the Persian Gulf War. What were we asking Saddam Hussein to do? (Perhaps asking is not exactly the right word.) President George Bush, in his state of the Union address used a beautiful piece of alliteration, probably written by Peggy Noonan, to describe our opening negotiating position. He said, "I'm not bragging, I'm not bluffing and I'm not bullying. There are three things this man has to do. He has to get out of Kuwait. He has to restore the legitimate government of Kuwait (don't do what the Soviets did in Afghanistan and install a puppet government). And he has to make reparations for the damage that he's done." That was a very clear and precise opening negotiating position. The problem was that this was also our bottom line. It was also the least for which we were prepared to settle. No wonder the situation deadlocked. It had to deadlock because we didn't give Saddam Hussein room to have a win. If we'd have said, "Okay. We want you and all your cronies exiled. We want a non-Arab neutral government installed in Baghdad. We want United Nations supervision of the removal of all military equipment. In addition, we want you out of Kuwait, the legitimate Kuwaiti government restored and reparation for the damages that you did." Then we could have gotten what we wanted and still given Saddam Hussein a win.I know what you're thinking. You're thinking, "Roger, Saddam Hussein was not on my Christmas card list last year. He's not the kind of guy I want to give a win to." I agree with that. However, it creates a problem in negotiation. It creates deadlocks.From the Persian Gulf scenario, you could draw one of two conclusions. The first (and this is what Ross Perot might say) is that our State Department negotiators are complete, blithering idiots. What's the second possibility? Right. That this was a situation where we wanted to create a deadlock, because it served our purpose. We had absolutely no intention of settling for just the three things that George Bush demanded in his state of the Union address. General Schwarzkopf in his biography It Doesn't Take a Hero said, "The minute we got there, we understood that anything less than a military victory was a defeat for the United States." We couldn't let Saddam Hussein pull 600,000 troops back across the border, leaving us wondering when he would choose to do it again. We had to have a reason to go in and take care of him militarily.

So, that was a situation where it served our purpose to create a deadlock. What concerns me is that when you're involved in a negotiation, you are inadvertently creating deadlocks, because you don't have the courage to ask for more than you expect to get.

A final reason-and it's the reason Power Negotiators say that you should ask for more than you expect to get-is that it's the only way you can create a climate where the other person feels that he or she won. If you go in with your best offer up front, there's no way that you can negotiate with the other side and leave them feeling that they won.o These are the inexperienced negotiators always wanting to start with their best offer. o This is the job applicant who is thinking, "This is a tight job market and if I ask for too much money, they won't even consider me." o This is the person who's selling a house or a car and thinking, "If I ask too much, they'll just laugh at me." o This is the salesperson who is saying to her sales manager, "I'm going out on this big proposal today, and I know that it's going to be competitive. I know that they're getting bids from people all over town. Let me cut the price up front or we won't stand a chance of getting the order."
Power Negotiators know the value of asking for more than you expect to get. It's the only way that you can create a climate in which the other side feels that he or she won.

Let's recap the five reasons for asking for more than you expect to get:
1. You might just get it.
2. It gives you some negotiating room.
3. It raises the perceived value of what you're offering.
4. It prevents the negotiation from deadlocking.
5. It creates a climate in which the other side feels that he or she won.

In highly publicized negotiations, such as when the football players or airline pilots go on strike, the initial demands that both sides make are absolutely outlandish. I remember being involved in a union negotiation where the initial demands were unbelievably outrageous. The union's demand was to triple the employees' wages. The company's opening was to make it an open shop-in other words, a voluntary union that would effectively destroy the union's power at that location. Power Negotiators know that the initial demands in these types of negotiations are always extreme, however, so they don't let it bother them.

Power Negotiators know that as the negotiations progress, they will work their way toward the middle where they will find a solution that both sides can accept. Then they can both call a press conference and announce that they won in the negotiations.

An attorney friend of mine, John Broadfoot from Amarillo, Texas, tested this theory for me. He was representing a buyer of a piece of real estate, and even though he had a good deal worked out, he thought, "I'll see how Roger's rule of 'Asking for More Than You Expect to Get,' works." So, he dreamt up 23 paragraphs of requests to make of the seller. Some of them were absolutely ridiculous. He felt sure that at least half of them would be thrown out right away. To his amazement, he found that the seller of the property took strong objection to only one of the sentences in one of the paragraphs.

Even then John, as I had taught him, didn't give in right away. He held out for a couple of days before he finally and reluctantly conceded. Although he had given away only one sentence in 23 paragraphs of requests, the seller still felt that he had won in the negotiation. So always leave some room to let the other person have a win.

Power Negotiators always ask for more than they expect to get.