Why Getting to the Best Deal off the Bat is Impossible, Part I
Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant
Editor’s note: this is Part I of a two part series. Both Part I and Part II deal with practical negotiation advice for buyers and sellers.
How would you answer this question that a buyer might pose: “Why not just eliminate all the negotiation nonsense and just get right down to the best deal?”
Well, you can, but only about as often as you get married. Skipping negotiation means trashing the communication and investigation process by which buyer and seller build a relationship. Without a time tested courtship history, we almost guarantee a poor outcome. Trust, like credit, must be earned. Trust is merely a form of credit.
Self-protection is required until trust is established. We protect ourselves by always asking for more than we want. We propose High Initial Demands (HID). HID is the device that preserves the relationship until trust makes it unnecessary. Here are some of the FAQ on HID.
Q) Isn’t asking for more than I want with HID being dishonest?
A) No, on the contrary, it is cautious. Asking for more than we want, whether price, delivery time, quality level, etc, allows us to build in concessions. HID trains the other side in how to treat us, as well as sets expectation. HID is mandatory in negotiations.
Q) Since the buyer or seller already knows this, are we just wasting time and effort?
A) This fault of logic is what lawyers call “assuming facts not in evidence”. Therefore, all assumptions must be proven before accepted. Who says the buyer knows about HID? Who says he is not using his own form of HID? If the buyer does indeed know, then he or she deserves our respect and admiration as a cautious business professional.
Q) What is meant by setting expectations?
A) In the canned vegetable aisle of the grocery store, find 15oz cans of peas. The national name brand prices out at 89¢ and the store brand at 69¢. Does this mean the price difference is quality? Horse feathers! While some incremental marketing and advertising costs raise the price by a few pennies, HID probably accounts for the balance of the price premium.
Buyers make the subconscious assumption that the store has its own brand of low cost peas. Isn’t it much more likely that this private brand merchandise is the very same product with a different label?
Q) How does HID relate to our final offer?
A) They are opposite ends of the concession scale. Visualize your settlement range as a line with upper and lower limits. The HID is the highest we could get, and the final offer is the lowest we will accept. Between these extremes is a settlement range.