Monthly Archives: August 2015

Three Keys to a Killer First Offer

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Most of us own something we don’t really want. Maybe we’re riding the train and no longer need a car. Maybe we’re moving and can’t haul the couch. Maybe our fancy bike eliminated the need for a Schwinn.

Opportunities to sell are everywhere. But how to pick a price? I’ve previously suggested setting your first offer as a function of your target. But if you’re like most people, you’re still not sure EXACTLY what figure to propose.

Selecting the number for your first offer is tough. But it’s negotiable! In this post, I’ll offer three strategies that can help you home in on a killer first offer.

For the purpose of this post, imagine that you’re moving into a furnished apartment across the country, thus eliminating the need for your beloved couch “Bessie.” Imagine, further, that your cat hasn’t destroyed your beloved couch, as he has mine. Finally, imagine that $750 is the aggressive yet attainable figure that you have chosen as your target.

That’s all fine and well. But now that you’re standing in front of a prospective buyer, nervously extolling Bessie’s virtues, you’re still not sure exactly what number to offer. Here are three strategies for selecting a figure:

  • Be aggressive, not outrageous: If you’re confident that $750 is aggressive yet reasonable, a first offer in the $775-$825 range would probably work well. A first offer in the $1275-$1325 range would not, as research clearly shows that first offers far outside the realm of reason don’t lead to good deals. They lead the other party to bolt before you can say “Bessie.” So offer something somewhat above your target, but don’t offer something outrageous.
  • Be precise, not round: If you’re considering a first offer of $800, consider a first offer of $807 instead. Why? Other interesting research shows that precise first offers are more persuasive than round first offers because they suggest that you’ve done your homework. $800 sounds like a dream; $807 sounds like a carefully researched and clearly justified calculation. But don’t overdo it. Don’t offer $807.34, as the same authors have suggested that you then sound like a slimy salesperson. So try to be moderately precise, then extoll Bessie’s virtues when your counterpart probes the underlying calculations.
  • Be exact, not wishy-washy: If you’re considering a first offer of $807, say “$807.” Don’t say “about $807,” and don’t say “between $787 and $807.” Your goal is to give your first offer the aura of legitimacy and finality. If you say “about,” the other party hears an opportunity to negotiate. If you say a range, the other party hears the part of the range they like—$787—and your hopes of $807 are gone forever. So do your homework, understand through and through why your beloved Bessie might be worth your first offer (whatever it is). Then advance that offer with confidence, as if it’s the only obvious number that any reasonable purveyor of used couches named Bessie would offer.

These three tips still won’t give you an EXACT answer about what number to offer. In matters of human behavior, exact answers are few and far between. But hopefully they do offer a useful yardstick for calibrating your figure and advancing a first offer with confidence.

What do you think of these strategies?

Don’t let them sell you! Disarming the aggressive salesperson through ratification

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Do you remember the last 24-hour period in which no one tried to sell you something? Can’t say that I do. From ever-cheaper utilities to ever-faster Wi-Fi, it seems that everyone is selling. And while slamming the door or ending the call is often the obvious option, uncomfortable instances remain when—thanks to the salesperson’s guile or our own curiosity about the product—we allow the selling process to proceed.

Putting up with pushy salespeople is unpleasant…but negotiable!

Today I’ll describe a simple yet effective antidote to the aggressive seller. Ironically, it’s one of their own secret weapons: a strategy called ratification.

Consider the following situation. Eating your dinner in peace, a friendly neighbor knocks on the door. At least you think it’s a friendly neighbor until you find a slick man with enough cologne to wilt your flowers outside. “Hi there, I’m Ted,” he says before you can slam the door. “Would you like to save 25% on your electricity bill RIGHT NOW?” Caught off guard and still reeling from your last electric bill, you can’t help blurting out a “Maybe.” Well, now Ted’s off to the races. He has plan upon plan, each with illustrative figures and glowing testimonials from beautiful people. He has your current electricity usage in RED, next to a large GREEN number indicating your potential savings. He has a long list of sign-ups—allegedly from your neighbors, though you can’t read their handwriting. Most importantly, he has a pen in his sweaty palm and a dotted line on his clipboard, just waiting for your signature. Oh no, and now he’s smiling at you…

Now there’s no supercomputer on earth that could’ve processed all those figures and statistics in the time that Ted allowed, and you certainly couldn’t either. So you’re not really sure what he’s offering. But the red number DOES look pretty bad, and green number DOES sound pretty good. What should you do?

WAIT. And make Ted wait. Until you understand what you’re signing, there’s no way you should agree to his plan. Does that seem obvious? Maybe so, but decades of research on compliance suggest that relatively few of us will do it. More to the point here, even if we know not to sign, it’s not particularly clear how to resist Ted’s guile. This Ted’s a wily one, and telling him you’ve got to “think about it” probably won’t cut it. He’s likely to inform you that the deal “expires today” or some such gobbleygook, at which point you may be tempted to begrudgingly take the pen. So instead of telling Ted you’ve got to think about it, tell Ted that you have to check with X. Now X could be your spouse, your roommate, your landlord—whomever: 1) might actually have to approve such a deal before you sign it, and 2) is not actually present. Now, Ted may still insist that the deal expires today. But having publicly declared yourself incapable of deciding without a non-present party, you cannot credibly sign, and he cannot credibly protest.

This is a well-documented strategy called ratification. You’ve probably been on the receiving end at a car dealer. “You’ve sold me,” the dealer says, “but I’ve gotta check with the boss in back.” The truth is, it’s a tactic. They don’t usually “check with the boss,” say students with experience in car dealers. They grab a coffee, check the Orioles’ score, or use the bathroom. If they do talk to their boss, it’s probably about the Orioles’ score. Likewise, you don’t have to check with your spouse, your roommate, or your landlord (though in the case of your spouse, you’re strongly advised to). The point is to find an escape valve that Ted’s tactics cannot easily disarm. Only then, without his cologne poisoning your bloodstream, will you have the willpower to say yes if it’s a good deal and no if it’s not. So if you’re actually interested in Ted’s offerings, by all means take his card and check with X. As to Ted’s claim that the deal is expiring today? You can rest assured that if he’s that eager to sell it, it won’t disappear tomorrow (though you may have to ask for it).

Have you ever used this strategy to disarm an aggressive salesperson? Has an aggressive salesperson used it on you?

 

 

Getting a great deal on Craigslist: Strategic concessions

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If you’ve ever used Craigslist, you know that costly transactions with complete strangers are now totally normal. From cars, to boats, to diamonds, even luxury items are now transacted online. Yet, ubiquity does not imply simplicity, as intransigent online parties often make unreasonable demands, then fail to find common ground.

Online deals are difficult, but negotiable!

To make them negotiable, however, is to make concessions. Distasteful as Donald Trump may find them, concessions are the best negotiators’ best friend. And online, in the absence of any other basis for trust, they are nothing short of essential. So the key to (online) negotiations is not to resist concessions; it’s to make them strategically.

To illustrate, let’s imagine that you’re selling your beloved Bonneville on Craigslist. (Yes, I had one in high school and am still blogging about it in 2015). And let’s imagine that you’ve done everything I’ve advised so far—defined your alternatives, used them to determine your bottom line, set a target, made a first offer, and made it aggressively (say $15,000, i.e., 1000 times the car’s MPG). Shortly after posting this figure on Craigslist, some presumptuous “bigbuyer216” had the nerve to email you an offer of $5,000! Maybe you don’t even want to deal with such a jerk. But what if the days roll by without any other offers, and what if you really need the cash? Looks like you’ll have to deal with bigbuyer216, and looks like both of you will have to make concessions. So, without further ado, here are five ways to make them wisely:

  1. Make your first concession your biggest concession: Supposing your bottom line is $10,000 (the horror!), start with a big concession like $2,500, bringing the price down to $12,500. Then progressively reduce the size of your concessions. Perhaps the second is more like $1,000. Even the dense bigdealer216 will interpret your shrinking concessions as a sign that you’re nearing your bottom line, meaning he’d better get serious if he wants your beautiful Bonneville.
  2. But don’t make a huge first concession: What happens if you go from $15,000 all the way down to $10,000? First, any credibility surrounding your initial offer will disappear. Second, bigdealer216, seeing himself $5,000 better off at the drop of a hat, will greedily want more. But since you’ve already reached your bottom line, you can’t offer anything more. Frustrated at your seeming intransigence, bigdealer216 will probably try to satisfy his Bonneville fix elsewhere.
  3. And don’t make unilateral concessions. If you’re willing to offer $12,500, don’t say “$12,500,” as there’s nothing stopping bigdealer216 from replying “No thanks, $5,000.” Then you might be tempted to say “$11,000,” at which point bigdealer216 will just repeat himself, at which point you might be tempted to offer your bottom line of $10,000. You’ve just negotiated against yourself. Instead, tie each of your concessions to their concessions. For example, you might say: “I’m willing to offer you $12,500 if you pay cash.” By making all concessions reciprocal concessions, you avoid the risk of being the only enlightened person at the table.
  4. Offer a reason for your concessions. People like to feel that they and the people around them are acting for good reasons—even when they aren’t. So your concession will seem more convincing if you not only offer $12,500 and ask them for cash, but also explain that you are making the concession because you are sincerely motivated to reach a deal with the admirable bigdealer216.
  5. Don’t say “final offer.” Few phrases are more tempting or less helpful in a negotiation. We usually say “final offer” not because it is, but because we can’t think of anything better to say. The main effect of saying so, however, is to box yourself into a corner. There’s nothing stopping bigdealer216 from continuing to negotiate or explore creative options, but you’ve just eliminated any hope of doing so yourself. So if you’re tempted to say “final offer,” just repeat your last offer instead.

These five rules are helpful for making concessions in any negotiation. But they are essential for online negotiations, in which both parties are tempted to make outrageous offers, then hide behind their computers.

Have you had any success making concessions online?

Bedtime bargaining: Getting your child to sleep without sacrificing your sanity

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Children are remarkable bargainers, especially as their bedtime approaches. And the outcome is critical indeed, as a bad bedtime bargain not only guarantees a crabby morning; it also leaves parents frustrated in the face of their own weakness.

Willing an unwilling child to bed is tough. But it’s negotiable!

Today I’ll discuss a seemingly trivial but actually essential strategy for any negotiation: managing the focus of your attention. So imagine that tomorrow’s a big day at preschool. To be fresh, you’d love Suzie to snooze by 7:30 (your target); to be honest, you’re willing to settle for 8:00 (your reservation price). Most nights, Suzie’s reasonably cooperative; tonight, she must have downed a Red Bull.

We’ve already talked about making the first offer, and making it a little more aggressively than your target. So you might tell Suzie that 7:15 is the right time to drift into dreamland. But the question is what time you THINK about—in your own head—as the bedtime bargaining unfolds. Do you focus on your target or your reservation price?

If that seems trivial, consider negotiation research suggesting that it’s anything but—that the number in your head is actually a great predictor of the number that you ultimately obtain. So what do you think (quite literally) in the bedtime negotiation—should you focus on your target (7:30) or your reservation price (8:00) while Suzie pleads her case?

Definitely your target. Research shows that negotiators who think about their target are much more likely to achieve it than negotiators who let their mind wander back to their bottom line. So despite Suzie’s protestations, and despite any concessions you might make to appease her, you should continue to imagine a giant, neon, flashing 7:30 sign in your head—focusing on that time and trying to attain it. File away that other, later time—whatever it was—in the back of your brain.

But don’t forget it! Because there comes a point when remembering your reservation price is crucial: at the end of the negotiation. To see why, imagine that Suzie’s hard bargaining has resulted in a final offer of 7:45. Is that an offer you can accept? Without comparing it against your reservation price, there’s no way to know. Being earlier than 8:00, 7:45 sounds acceptable (if not ideal).

But there’s another, equally critical reason to recall your reservation price: to evaluate how you’ve done. Sitting on the sofa, with Suzie thankfully asleep, how would you evaluate a 7:45 agreement? Quite negatively, if you were comparing it against your target, but very positively if you were comparing it against your reservation price. So it’s also important to remember your reservation price AFTER the negotiation, in order to relish in the additional 15 minutes that your own hard bargaining attained.

So the general point is this: Before a negotiation, define your reservation price and target. During a negotiation, focus on your target and temporarily forget your reservation price. Only when evaluating a potential final agreement or an actual final agreement should you recall your reservation price, forgetting your target and focusing on the future.

What do you “think” about this strategy?

Getting them out the door on time: How to make the first offer

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If you’re anything like me, you have a need (even a compulsion) to be on time. But if you’re uncannily like me, you’re frequently frustrated by a friend or family member who, when accompanying you to your appointments, sees no particular difference between 10:30 and 11:00. The nerve!

How can you possibly convince them to get out the door on time? With the right strategy, it’s negotiable.

In this post, I’ll talk about a simple technique for departing on schedule. And when I say simple, I mean REALLY simple. Let me anticipate the possible critiques by being clear: this post contains a distinct lack of rocket science; indeed, you might already use the technique I’ll describe. So why describe it at all? Because it highlights a principle you must understand to succeed in any negotiation, including this one: HOW to make the first offer.

You may recall that a previous post on toddlers advised you to make the first offer. That’s all fine and well until you go about implementing this advice, at which point you’ll find that you still need to know what to say. What kind of offer should you make (first)?

To discuss this issue, in general and in the context of lateness, imagine that you have an important meeting at 11:00 am. You hope to leave home at 10:30, but you absolutely NEED to leave by 10:45. Accompanying you to this important meeting is a perennially-late family member; let’s call him Joe. Looking up from his dilly-dallying around 10:00, Joe asks you what time you want to leave. This is a golden opportunity to make the first offer! But what time to say? Please pick your favorite:

  • 10:15
  • 10:30
  • No later than 10:45

Let’s meander to the best answer by thinking about this situation in the terms already discussed on this blog. Your goal (target) is to leave at 10:30; your bottom line (reservation price) is 10:45. What happens if you ask Joe to be ready no later than 10:45? Dilly-dallying as he still is at 10:00, and perennially-late as you know him to be, you’ll be lucky to get out the door by 11:00. So don’t make a first offer that’s equivalent to your bottom line.

But what about your goal – what if you ask Joe to be ready at 10:30? Well, that’s better than stating your bottom line, but what time will Joe actually be ready? If he sticks to his bad habits, chances are he will show up at the front door about 10:45, allowing you to get out said door at the VERY last moment you can. Unless you like the feeling of mounting anxiety, mixed with simmering irritation, 10:30’s not a very good option either.

So the best answer is probably 10:15 – a number slightly more aggressive than your goal. What happens if you say 10:15? Joe hopefully drops his dilly-dallying right away and finds his way upstairs to get ready, then out the door by 10:30. Voila! You’ve achieved your goal of 10:30.

But won’t Joe get offended by such an aggressive first offer? Well, if you read the post on negotiating with the cable company, you know that targets are optimistic numbers, not ridiculous numbers. In other words, when you set a target (e.g., 10:30), you pick a number that is achievable in addition to hopeful. Thus, when Joe hears 10:15, he may look at you with surprise. But he’s unlikely to glare at you in anger because he knows that 10:15 is in the same zip code as the reasonable 10:30.

So the general principle is this: When you make a first offer, and make it you often should, don’t choose a number that’s equivalent to your reservation price or goal. Choose a number that’s slightly more aggressive than your goal, which is hopeful but achievable. By doing so, you leave yourself room to actually reach your goal. Without doing so, your goal will almost certainly go unmet.

Do you have a perennially-late friend or family member? Have you tried this technique?