DEALING ON THE EDGE (PART FOUR)
In our last installment of this series, we covered the pitfalls of negotiating from “the outside.” Classic outsiders are ferocious, adversarial, price bargainers. Driven to get the best possible deal for themselves, they don’t really care about who they’re alienating in the process, or how they could be poisoning their long-term business relationships.
In real life, however, the number-one complaint among managers is just the opposite. They say their people are too reticent to negotiate assertively, or even to negotiate at all. In these cases, our instinctive desire to be “on the inside” and avoid conflict leaves us vulnerable to manipulation, conscious or otherwise, by the other party. We fall prey to tactics that play to our desire for partnership and belonging. We want that feeling of sympatico: We’re on the same side here.
But when we gravitate toward a “partner” prematurely, before the relationship warrants it, it can cost us a lot of money. We’re so quick to seek agreement that we forget to bargain in our own best interests.
Charm and Disarm
Just as toddlers must crawl before they walk, and couples court before they marry, negotiators should engage in competitive bargaining before moving to more collaborative modes. Here’s a cautionary tale: Eva was a graphic designer who attended our seminar in New York. Her team had designed a brochure she was about to take to their printer. I asked her, “What does a piece like that cost to make?”
Eva said, “I’m going to get it done for $4,500.”
“What was their starting quote?”
And she said, “Well, $4,500.”
“Did you try to negotiate with the guy?”
Oh no, Eva said, she couldn’t possibly bargain with him: “He’s my favorite printer, and he does really good work.” I found out that Howie—they were on a first-name basis—had even had her over to dinner to meet his wife and kids. He was a charming guy and a terrific salesman. Whenever Eva came to him for a proposal, he’d tell her, “I worked out a special price for you.”
In negotiating, regardless of the scale or context, information is power. When I asked Eva how much business her company did with Howie, she had no idea. She checked with her accounting people and discovered it was a lot of business—about $300,000 a year. For a one-man band like Howie, that figured to be at least a third of his revenue.
I said, “I think you’ve got a little leverage with this guy.” I told Eva to get two competitive quotes—something she’d never done before—and then to get back to me by end of day. The first printer she called came in at $4,200. The second printer, without prompting, bid $3,900. Howie’s price was “special,” all right. Eva was paying him a 13 percent premium for the privilege of staying on the “inside” of their relationship. (Howie’s stratagem inspired a new label for an age-old tactic: “Charm and disarm.”)
“Here’s what I want you to do,” I told Eva. “Call Howie and tell him the market for the job seems to be around $4,000. Then ask him if he can do anything for you.”
“What if he doesn’t come down?”
“Then you say, ‘Why don’t we split the difference?’”
“But what if he won’t split it?”
“Then you tell him, ‘Look, I just need you to take $100 off and we can go ahead with the job.’ I guarantee you he’ll come down that far. If he doesn’t, I’ll pay you the hundred dollars. But you’ve got to give it a shot.”
I could tell Eva felt uncomfortable, but she took a deep breath and forged ahead.
The next day, she called me and said, “Well, he’s going to do the job.”
“For how much?”
It was a ten-second negotiation.
Once Howie realized that Eva had done her homework, he was happy to match the market rate and keep a big customer satisfied. And by taking one small step to “the edge of the inside,” by treating Howie as neither an enemy nor a member of her family, Eva saved her company five hundred bucks. Their relationship became a little more distant and a lot more balanced—as it should have been in the first place.
Next time: We’ll conclude this series with a look at how long-term, strategic negotiating partners can sustain their position on the edge of the inside.