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NEGOTIATE LIKE A PRO
Negotiating, Bargaining, Haggling
The topic of this article is the process of negotiating or bargaining and "haggling" which connotes the approach of someone who is out to extract the last penny out of a deal.
Many authorities say negotiating should be a win-win process for both parties to the bargain. Win-win is clearly best when the parties to the bargain are in a continuing relationship. An opportunistic approach to negotiations tends to damage the relationship between the parties. (Readers who are interested primarily in "haggling" may want to go directly to the article linked below entitled "For Champions of Haggling, No Price Tag is Sacred" by Alina Tugend.)
Second, how to bargain or negotiate or haggle may depend on what you are bargaining about--this can range from buying a curio in a bazaar in Mexico, to buying a used or new car, to buying a house, negotiating with an employer over the terms of a job offer, negotiating a complicated business contract or union agreement, negotiating nuclear de-proliferation or peace between Israel and Palestine. Nevertheless, here are a few suggestions based on my 30 years' experience as a negotiator for a major company with a strong union as well as a fair amount of bargaining over purchases in bazaars in several other countries.
Preparation is probably the most important part of the negotiation process. By that I mean gaining an understanding of the likely position of the other party, assessing the relative importance of each issue to the other party, and researching the product or issue(s) in advance to find out what other sources are charging for the product or service or for alternative products which will serve your purpose.
If possible, find out what the seller's cost for the item was. This is especially important for big ticket items such as cars, major appliances, houses, and the like. Your objective may be to get the seller down as close as possible to his cost for the item.
Timing is important. End-of-the-model-year pricing can be very significant when buying a new car. The same is true for gifts as Christmas approaches and, of course, between Christmas and New Years.
DON'T HESITATE TO BARGAIN OVER THE PRICE OF AN ITEM
When you find the item you're looking for and have been quoted a price, consider asking politely "Is there any flexibility in that price?" or "Would you consider an offer of 'X'?" Or, "Would you be able to match the Internet price of 'x.'?" (Which you have already determined by researching the product.) On big ticket items like cars or appliances where there is a salesman in the picture there is likely to be some flexibility in the price.
TERMS OF SALE
The terms of sale can make a difference. You may want to consider inquiring whether the seller is willing to give a discount for cash. Or, if you get points or rebates from your credit card you may wish to ask if you can charge the item on your credit card. I once persuaded a car dealer salesman to let me charge a car on my credit card. However, when the deal got to the controller for approval he balked, but the dealer, after strenuous objections from me, including a threat to kill the deal and go to another dealer, eventually lived up to the commitment. I tried the same thing recently when I bought a new car but was unsuccessful in getting the dealer to let me charge the car. However, I was able negotiate other significant price concessions.
ALTERNATIVE PRODUCTS OR SERVICES
Consider other alternatives to the product you are negotiating to buy or the issue you are negotiating. There may be other brands or products that may serve your purpose nearly as well or even better. And there may be workable alternatives to the other party's proposed solution. It can be helpful to set aside the other party's impractical or extreme proposal and examine the problem. This may lead to a practical solution to the problem satisfactory to both sides.
BOTTOM-LINE FINAL POSITION
Decide what your bottom-line price is, i.e., your final offer, which, if not accepted you are prepared to walk away from the deal or, in the case of union negotiations, take a strike over. Be patient in discussing all aspects of the deal and don't be in a hurry to blurt out your bottom line price. You may be surpised that the seller may himself make an even lower offer.
BARGAINING IN ANOTHER COUNTRY
I've had a fair amount of experience bargaining with vendors in Mexico, Brazil and other countries where "haggling" or bargaining is a fine art and expected by the vendors. Unwary tourists sometimes end up paying double the going price for their purchases. In these situations I've found it helpful to shop the merchandise and prices from several vendors and, after initially discussing the price, tell the vendor he's asking too much and walk away. When you return later, he may be willing to come closer to your price. Then you can make your final, final offer and be prepared to walk away if the seller doesn't meet it or come close.
In a foreign country, it can be very helpful to inquire of a native of the country about prices for local items and perhaps to request assistance in negotiating a good price. Local sellers often try to take advantage of tourists or people from other countries. Another technique is embodied in a saying from the old country, "If you want to buy a pig, ask first about the price of a chicken." In other words when you go into a shop expecting to bargain over the price, once you have found something you want to buy, ask about other items first, because if you give away your desire for a particular item, the price is sure to be higher than if you pretend you are interested in something else first and only later casually inquire about the item you really want to buy.
If you are negotiating a deal such as a contract which covers a number of issues, your preparation should include accurate cost estimates for each proposal or concession. You can use these estimates as building blocks for a contract which you can afford and which will meet the legitimate needs of the other party as well as your own. And when you are bargaining with the other party, your accurate knowledge of the costs and benefits can be very helpful in your plan for the negotiation.
When there are many issues it's common to assign many of them to subcommittees for discussion and tentative settlement. Commonly in automobile company negotiations there were several hundred demands which would have been impossible to discuss at the main bargaining table. Each subcommittee would discuss the demands and report periodically on their progress at meetings at the main bargaining table. Demands for wage increases and major benefit plan changes were discussed at the main bargaining table and privately in small meetings between the top representatives of the company and the union. Ordinarily, significant concessions would be discussed privately in small meetings before being revealed at the main table (where there were upwards of 30 or 40 representatives from each side.).
UNDERSTAND THE NEEDS AND CONCERNS OF THE OTHER PARTY
When you are bargaining a contract with several or many terms your preparation should include an effort to understand the position of the other party on each issue or proposal and which ones are most important to him or her and which ones less important. This will enable you to plan where you realistically are likely to end up and how you can best reach an agreement. Negotiators on the other side of the table are not likely to tell you directly what is most important to them and what is less important. You have to listen carefully to what they say and figure this out for yourself. As one union negotiator said "You have to watch for the pigeons flying across the room." By that he meant the other party should try to read between the lines of what the other party is saying or not saying and pick up the signals as to what is most and least important.
DEVELOP A NEGOTIATING PLAN
Armed with this information you can develop a plan for reaching a deal or a contract settlement. A useful technique often used is to hold back one or two concessions to use as "closers" as final moves or "gives" at the end of negotiations. Ideal closers are concessions that don't cost much or that you can live with but which are important to the other party. Sometimes a little acting on your part early in the negotiations can build up the value of your closers. That is, even though you may plan ultimately to make the concessions you can increase their value by arguing strongly against the other side's proposals on these issues, even to the point of belittling the reasoning of the other side. I've seen this work so well to the point where the other side became so obsessed with a "closer" issue that they forgot about other more costly issues in order to obtain a concession on the closer, which we had planned to concede from the beginning. This is called trading a Chihuahua for a Great Dane.
ESTABLISH GROUND RULES FOR NEGOTIATIONS
In formal negotiations, it's customary and essential at the outset to establish the ground rules for the conduct of the negotiations. The parties should agree on rules for public statements, a meeting schedule, use of subcommittees on specific issues. Agreement that understandings on specific issues are considered tentative and do not become final until all issues are resolved is common. As a settlement nears, an understanding that there will be a blackout on public statements by either party is common. Finally, post-settlement public comments or statements about the terms of agreements that are subject to approval or ratification by union members or legislative bodies should be made with care and consideration of their likely effect on the approval process.
REVIEW THE ISSUES AS NEGOTIATIONS PROGRESS
When negotiating a contract with many provisions a useful technique is to review the remaining issues periodically because in this process some of the issues may "fall off the table" without being explicitly withdrawn. When this happens, a cardinal sin is for someone on your side of the table to ask the other party about any issue not mentioned in the review of the open issues. You should just let them disappear silently into the air, never to be mentioned again by either party. Bringing up an issue which was omitted from a review of open issues is definitely frowned on in professional negotiations.
AUTHORITY OF NEGOTIATORS
When entering into negotiations you should have a clear understanding of the source and extent of the authority of the other party to make binding commitments. For example, car salesmen frequently have to consult with their sales manager before closing a deal which goes beyond certain limits. This can vary among dealers and among salesmen. Union contracts are usually subject to approval or ratification by a vote by union members. This can be a delicate process, perhaps a subject for another article. Some unions have been known to make an agreement with the knowledge or expectation that it won't be ratified by their members and then come back for a "second bite at the apple." This is not common, however. In my experience I've never seen that happen. The automobile worker's union (UAW) has been known to call a strike when there isn't sufficient support from their members for what they believe to be a reasonable offer. After three weeks or so "on the street" the members are usually more supportive of a reasonable agreement.
You must try to have a clear understanding of the bargaining power you and the other party have. In buying a car or a house your strongest card is your ability to walk away from the deal. A union's strong card is the willingness of its members to strike and their ability to shut down all or part of the employer's operations long enough to cause the employer to make a better offer. The union negotiators must try to assess the likelihood of significant concessions by the company after a short, medium or long strike. A long strike can even jeopardize the future viability of an employer's business and the jobs of its employees. Likewise, company negotiators must assess the likelihood of a strike over a particular issue or issues and it's own ability to withstand a strike if one should occur. [Note: Many a negotiator has to his chagrin found himself in the situation where the top management of the company has the attitude of "Settle but don't give 'em anything." But when faced with a strike, top management can hardly wait to start "throwing the bananas over the fence," cutting the legs off of its own negotiators.] The employer must try to convince the union of its ability and intention to resist unreasonable demands even if that means a two or three week or longer strike. Likewise the union must convince the employer of its ability and willingness to strike if what it considers its reasonable demands are not met; This applies in world diplomacy as well, as explained in one of the bibles of diplomacy, "Power and Diplomacy" by Dean Acheson.
In cases where the union members' expectations exceed what the employer believes to be a reasonable, affordable offer and which the union privately may believe is reasonable a strike may be required in order to cause the union members to moderate their expectations. This was the case in the 1970 negotiations between the UAW and General Motors which required a 69-day strike before the union felt confident that a reasonable agreement could be ratified. Fortunately, the need for such a long strike is unusual in order to get a reasonable, ratifiable settlement.
NEGOTIATIONS AS PROBLEM SOLVING
It's often the case that the proposal of one side or the other may be extreme or unworkable. Simply rejecting an unreasonable or extreme proposal usually is not a good approach. Instead, it's better to set the extreme proposal aside and examine and discuss the underlying problem that gave rise to the proposal and the actual extent of the problem (Sometimes union demands result from a single incident rather than a recurring problem. Pointing this out can often cause the demand to be withdrawn.)
Setting a demand aside and examining the problem can often lead to a workable solution that both sides to the bargain can live with. This approach when applied to an entire negotiations, sometimes with the help of a neutral facilitator, is known as collaborative negotiations as opposed to adversarial or position bargaining. Collaborative negotiations explicitly recognize the legitimacy of each party's interests; that they have more in common than in conflict; and that their mutual interest is to reach an agreement that serves the long-run interests of both parties. The negotiations in the U.S. automobile industry in 2007 and 2011 exhibited a high degree of collaboration and statesmanship on the part of the union and the managements.
EFFECT OF NEGOTIATIONS ON CONTINUING RELATIONSHIP OF PARTIES
A final consideration is the likelihood or importance of a continuing relationship between the parties. This is not a factor when a tourist bargains over a purchase in a bazaar, or shopping for a car or a home appliance, but conducting negotiations honestly and in good faith takes on considerable importance where there is a continuing relationship between a company and union and in diplomatic and trade relations among countries. In recognition of the importance of a continuing constructive and cooperative relationship, many agreements and treaties contain procedures for resolving issues that arise during the term of the contract or agreement. These procedures can take several forms such providing for fact finding, discussion at various levels, referral to an impartial neutral party for resolution and even for suspension or termination of the agreement or treaty in event of serious issues the parties are unable to resolve.
Well, the above are comments that occur to me off the top of my head. I'll devote some more thought to the question and perhaps revise or add to the hub. Comments and suggestions are welcome.
Getting to Yes by Fisher, Ury and Patton
3-27-10 NY Times--President Obama's Role in Nuclear Arms Control Negotiations
- President Obama Deeply Involved at Key Points in Nuclear Treaty Negotiations
Dmitri Trenin, of the Carnegie Moscow Center, said the Kremlin thought Obama would back down out of eagerness to finish the treaty before coming nuclear summit meetings. They believed Obama could be put under pressure and concessions extracted."
11-15-10NYTimes--Theodore W. Kheel, Noted Mediator Dies at 96
- Ted Kheel Top Mediator/Arbitrator Dies at 96, obit. by Steven Greenhouse
Theodore Kheel, who was New York Citys pre-eminent labor peacemaker from the 1950s through the 1980s, a mediator and arbitrator sought after by both City Hall and the White House to help avert or end strikes of crippling consequence, died on Friday.
Collaborative Negotiating Techniques
- Collaborative negotiation
Collaborative negotiation works on the basis that the relationship is important as well as the substance.