Don't Forget the String!
I still recall the scene vividly. August 2007, hazy weather in Tiananmen Square Beijing. A wise-looking Chinese man selling kites, fluttering gently in the breeze above his head. And me, a professional negotiator, determined to practice my deal-making “street skills” on foreign soil.
And then three minutes later, me walking away with a kite for each of my daughters, with a big grin on my face after having my ass handed to me.
I was reminded of three important lessons that day…
Before I get to the lessons, you probably want to know how I got my ass handed to me. Well… I was able to negotiate some really great prices on the kites - I mean really great. I almost felt bad for my kite selling friend, that’s how good the deal was. But after he handed me the kites, he told me the string needed to be purchased separate. Oops. As you can imagine, I didn’t get as good of a deal on the string as I did the kites.
Now the three lessons...
Do your homework
Sadly, just like in high school, you can’t get around this. Know the market and your counterpart well enough to know what a good deal is, before you start negotiating.
You’re buying a car. What does the Kelly Blue Book tell you? Do you know how the salesperson gets paid? Is there a base? What % of gross profit do they earn? How is the “back end” (financing and add-ones) commissioned? If you can chat to a friend or colleague who normally sits on the other side of the table, that type of information can prove enormously helpful in establishing what’s possible.
What about local cultural factors? Most travelers to Asia and the Middle East know, for example, that there is a greater cultural tendency to “open high” and move significantly, but fewer people know that the amount varies enormously by country. Even within one country or province, there is a dramatic difference between, say, the “haggle factor” in tourist areas and those off the beaten track where locals predominate. Local knowledge can be critical in establishing what a credible first bid looks like.
Establish the full scope early
“Does the kite include string?” That simple question was obvious to me - after the deal. Shame on me. It was just a bit of fun, and who cares about a couple of kites and $10, but it reminded me of the importance of preparing some questions to clearly establishing scope up-front.
Price often dominates in deals large and small, but what terms and conditions go along with that price? If you’ve ever been shocked at the final cost when you’ve rented a car (insurance costs, daily e-toll processing fees and the “driving in the rain” fee – no I wouldn’t be surprised) you’ll know what I’m talking about.
Trade concessions in pieces
Think carefully about your flexibility, and don’t dump it all on the table at once.
If you’re buying, this typically means volume and contract length. If you need to buy 100 widgets, establish a price for 10, get a breakdown of this costing, which allows you to propose a lower price for 20, 50 or 100. If you can “walk the seller” up the stairs to the final volume and take a price break on each step. You’re much more likely to get a better price than attempting one big step to 100.
If you’re selling, this flexibility typically means price, and value-adds. If under pressure, your first movement goes straight to your limit position, you’re exposed in two serious ways:
Our advice: Open realistically, move modestly, and make every movement conditional on you getting something back in return (volume, contract length or reduced risk, for example).
(Back in 2007 in Tiananmen Square, my trade in return for paying extra for string was his permission for me to take his photo – there’s always something else to negotiate!)
And finally, remember…
Whether we realize it or not, most of us negotiate all day, every day - for project deadlines, resources, access to people, our goals, territory, time and, of course, money. It’s not just about career advancement – it’s a life skill.
Go and practice, daily. Negotiate the little stuff, even if it’s just for fun. Next time you check into a hotel, aim for a free room upgrade. Go to China and buy kites off the street. Take coaching from experts wherever you can get it. And negotiate funding to get yourself some quality training.
Negotiation is a muscle – don’t wait for that large critical deal to start exercising it.
And don’t forget to ask about the string…
About the author:
Simon manages Scotwork’s North American business and is a Partner in Scotwork's Australian business. He brings over 20 years of international negotiating and executive leadership experience within the IT, health, retail, defense and professional services markets.