PART II
Return to: Part I: Basic Negotiating Principles
Think in Real Money Terms but Talk Funny Money
There are all kinds of ways of describing the price of something.
If you went to the Boeing Aircraft Company and asked them what
it costs to fly a 747 coast to coast, they wouldn't tell you "Fifty-two
thousand dollars." They would tell you eleven cents per passenger
mile.
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Sales-people call that breaking it down to the ridiculous. Haven't
we all had a real estate salesperson say to us at one time or
another, "Do you realize you're talking 35? a day here?
You're not going to let 35? a day stand between you and your
dream home are you?" It probably didn't occur to you that
35? a day over the 30-year life of a real estate mortgage
is more than $7,000. Power Negotiators think in real money terms.
When that supplier tells you about a 5? increase on an item,
it may not seem important enough to spend much time on. Until
you start thinking of how many of those items you buy during a
year. Then you find that there's enough money sitting on the table
to make it well worth your while to do some Power Negotiating.
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I once dated a woman who had very expensive taste. One day she
took me to a linen store in Newport Beach because she wanted us
to buy a new set of sheets. They were beautiful sheets, but when
I found out that they were $1,400, I was astonished and told the
sales clerk that it was the kind of opulence that caused the peasants
to storm the palace gates.
She calmly looked at me and said, "Sir, I don't think you
understand. A fine set of sheets like this will last you at least
5 years, so you're really talking about only $280 a year."
Then she whipped out a pocket calculator and frantically started
punching in numbers. "That's only $5.38 a week. That's not
much for what is probably the finest set of sheets in the world."
I said, "That's ridiculous."
Without cracking a smile, she said, "I'm not through. With
a fine set of sheets like this, you obviously would never sleep
alone, so we're really talking only 38 cents per day, per person."
Now that's really breaking it down to the ridiculous.
Here are some other examples of funny money:
o Interest rates expressed as a percentage rather than a dollar
amount.
o The amount of the monthly payments being emphasized rather than
the true cost of the item.
o Cost per brick, tile, or square foot rather than the total cost
of materials.
o An hourly increase in pay per person rather than the annual
cost of the increase to the company.
o Insurance premiums as a monthly amount rather than an annual
cost.
o The price of land expressed as the monthly payment.
Businesses know that if you're not having to pull real money
out of your purse or pocket, you're inclined to spend more. It's
why casinos the world over have you convert your real money to
gaming chips. It's why restaurants are happy to let you use a
credit card although they have to pay a percentage to the credit
card company. When I worked for a department store chain, we were
constantly pushing our clerks to sign up customers for one of
our credit cards because we knew that credit card customers will
spend more and they will also buy better quality merchandise than
a cash customer. Our motivation wasn't entirely financial in pushing
credit cards. We also knew that because credit card customers
would buy better quality merchandise, it would satisfy them more,
and they would be more pleased with their purchases.
So, when you're negotiating break the investment down to the ridiculous
because it does sound like less money, but learn to think in real
money terms. Don't let people use the Funny Money Gambit on you.
Concentrate on the Issues
Power Negotiators know that they should always concentrate
on the issues and not be distracted by the actions of the other
negotiators. Have you ever watched tennis on television and seen
a highly emotional star like John McEnroe jumping up and down
at the other end of the court. You wonder to yourself, "How
on Earth can anybody play tennis against somebody like that? It's
such a game of concentration, it doesn't seem fair."
The answer is that good tennis players understand that only one
thing affects the outcome of the game of tennis. That's the movement
of the ball across the net. What the other player is doing doesn't
affect the outcome of the game at all, as long as you know what
the ball is doing. So in that way, tennis players learn to concentrate
on the ball, not on the other person.
When you're negotiating, the ball is the movement of the goal
concessions across the negotiating table. It's the only thing
that affects the outcome of the game; but it's so easy to be thrown
off by what the other people are doing, isn't it?
I remember once wanting to buy a large real estate project in
Signal Hill, California that comprised eighteen four-unit buildings.
I knew that I had to get the price far below the $1.8 million
that the sellers were asking for the property, which was owned
free and clear by a large group of real estate investors. A real
estate agent had brought it to my attention, so I felt obligated
to let him present the first offer, reserving the right to go
back and negotiate directly with the sellers if he wasn't able
to get my $1.2 million offer accepted.
The last thing in the world the agent wanted to do was present
an offer at $1.2 million-$600,000 below the asking price-but finally
I convinced him to try it and off he went to present the offer.
By doing that, he made a tactical error. He shouldn't have gone
to them; he should have had them come to him. You always have
more control when you're negotiating in your power base than if
you go to their power base.
He came back a few hours later, and I asked him, "How did
it go?"
"It was awful, just awful. I'm so embarrassed." He told
me. "I got into this large conference room, and all of the
principals had come in for the reading of the offer. They brought
with them their attorney, their CPA, and their real estate broker.
I was planning to do the silent close on them." (Which is
to read the offer and then be quiet. The next person who talks
loses in the negotiations.) "The problem was, there wasn't
any silence. I got down to the $1.2 million and they said, 'Wait
a minute. You're coming in $600,000 low? We're insulted."
Then they all got up and stormed out of the room.
I said, "Nothing else happened?"
He said, "Well, a couple of the principals stopped in the
doorway on their way out, and they said: 'We're not gonna come
down to a penny less than $1.5 million.' It was just awful. Please
don't ever ask me to present an offer that low again."
I said, "Wait a minute. You mean to tell me that, in five
minutes, you got them to come down $300,000, and you feel bad
about the way the negotiations went?"
See how easy it is to be thrown off by what the other people are
doing, rather than concentrating on the issues in a negotiation.
It's inconceivable that a full-time professional negotiator, say
an international negotiator, would walk out of negotiations because
he doesn't think the other people are fair. He may walk out, but
it's a specific negotiating tactic, not because he's upset.
Can you imagine a top arms negotiator showing up in the White
House, and the President saying, "What are you doing here?
I thought you were in Geneva negotiating with the Russians."
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"Well, yes, I was, Mr. President, but those guys are so unfair.
You can't trust them and they never keep their commitments. I
got so upset, I just walked out." Power Negotiators don't
do that. They concentrate on the issues, not on the personalities.
You should always be thinking, "Where are we now, compared
to where we were an hour ago or yesterday or last week?"
Secretary of State Warren Christopher said, "It's okay to
get upset when you're negotiating, as long as you're in control,
and you're doing it as a specific negotiating tactic." It's
when you're upset and out of control that you always lose.
That's why salespeople will have this happen to them. They lose
an account. They take it into their sales manager, and they say,
"Well, we lost this one. Don't waste any time trying to save
it. I did everything I could. If anybody could have saved it,
I would have saved it."
So, the sales manager says, "Well, just as a public relations
gesture, let me give the other side a call anyway." The sales
manager can hold it together, not necessarily because he's any
brighter or sharper than the salesperson, but because he hasn't
become emotionally involved with the people the way the salesperson
has. Don't do that. Learn to concentrate on the issues.
Always Congratulate The Other Side
When you're through negotiating, you should always congratulate
the other side. However poorly you think the other person may
have done in the negotiations, congratulate them. Say, "Wow-did
you do a fantastic job negotiating that. I realize that I didn't
get as good a deal as I could have done, but frankly, it was worth
it because I learned so much about negotiating. You were brilliant."
You want the other person to feel that he or she won in the negotiations.
One of my clients is a large magazine publishing company that
has me teach Power Negotiating to its sales force. When I was
telling the salespeople how they should never gloat in a negotiation,
the founder of the company jumped to his feet and said, "I
want to tell you a story about that." Very agitated, he went
on to tell the group, "My first magazine was about sailing,
and I sold it to a huge New York magazine publisher. I flew up
there to sign the final contract, and the moment I signed it and
thanked them, they said to me, 'If you'd have been a better negotiator,
we would have paid you a lot more.' That was 25 years ago and
it still burns me up when I think about it today. I told them
that if they had been better negotiators, I would have taken less."
Let me ask you something. If that magazine publisher wanted to
buy another one of his magazines, would he start by raising the
price on them? Of course he would. However harmless it may seem,
be sensitive to how you're reacting to the deal. Never gloat and
always congratulate.
When I published my first book on negotiating a newspaper reviewed
it and took exception to my saying that you should always congratulate,
saying that it was manipulative to congratulate the other side
when you didn't really think that they had won. I disagree. I
look upon it as the ultimate in courtesy for the conqueror to
congratulate the vanquished. When the British army and navy went
down the Atlantic to recapture the Falkland Islands from the Argentineans,
it was quite a rout. Within a few days, the Argentine navy lost
most of its ships and the victory for the English was absolute.
The evening after the Argentinean admiral surrendered, the English
admiral invited him on board to dine with his officers and congratulated
him on a splendid campaign.
Power Negotiators always want the other parties thinking that
they won in the negotiations.
It starts by asking for more than
you expect to get. It continues through all of the other Gambits
that are designed to service the perception that they're winning.
It ends with congratulating the other side.
If you let these five principles guide your conduct when you're
negotiating, they will serve you well and help you become a Power
Negotiator.
This article is excerpted in part from Roger Dawson's new
book-Secrets of Power Negotiating, published by Career Press
and on sale in bookstores everywhere for $24.99.
Return to: Part I: Basic Negotiating Principles
