Negotiations 101 - Quick Tips for Successful Negotiating

December 21, 2008

Car Salesman

If you’re like most people, the thought of taking on a used car salesman is not your idea of fun. I hope I can help change that.

Risk

As a kid, I always enjoyed playing RISK, you know the game that has you trying to take over the world. One of the key strategies of the game is negotiating treaties and picking your fights. It turns out as I learned the hard way, it can also sour friendships when you treat negotiating into a win-lose proposition. One of the successful strategies to winning is to play the “Switzerland” in the game and constantly looking for win-win strategies with your opponents so they are not incentivized to come after you rather they choose to go after your other opponents. My first tip in negotiations is to view the negotiations as a Game and that it is Fun.

Negotiations as a Game

It’s a mental thing, if you can convince yourself that this is human interaction game with rules (ethics) and you can get a deal that most people can’t, it’s FUN! Try to play the game as often as you can so you get comfortable with it. I’ve tried negotiating at retail stores (you’d be surprised if you talk to the GM, you can get all kinds of discounts including employee discounts as they are trying to make their quotas), restaurants, health clubs, phone service, cable bills, even movie theaters. Not all of them will work with you, but if you never try, you’ll never win. I’m also not saying that all negotiations should be win-win, there are *some* negotiations that need to be win-lose and I’d love to hear your opinions on that in the notes below.

Now, let’s take the used car salesperson as an example. I’ve bought all my cars used primarily because I’m cheap and I hate losing 10-20% of my car value as soon as I drive off the lot. So, I end up in the used car lots on several occasions and I do help friends and family negotiate. The second tip is PREPARATION. The used car salesperson, let’s call him Hank. Hank has a leg up on you, he has a lot more information about the cars, the market, what he bought the car for, and successful negotiating tactics. You, on the other hand, have none of these. The most prepared person always wins, hands down. He knows when to walk away and when to deal, emotion is generally taken out. So, what do you do to counteract this and have an advantage? Prepare. Know everything you can about the car you want before you step on the lot, know the blue book price, know the craigslist price, know the new car price, set an alternative so that you can walk away. Never negotiate in the dark! Your alternative keeps you from making a bad impulse buy, if your alternative is better than what they are offering you walk. Build that in.

My last tip for today is make the playing field LARGER. What I mean is that often times we focus on price as the only variable in negotiations and it often leads to an unsuccessful negotiations. You say $15,000 for the car and Hank says not a dollar lower than $16,100 and you both are stuck. Imagine that instead of focusing on price, you had asked Hank what else is important to him and how does he get compensated? Hank replies that he also gets paid a commission on add-ons like a warranty, protective paint, floor mats, financing through their preferred lender. You quickly realize that you were planning on buying the warranty and you were planning on financing through him anyways, but you use them as bargaining chips to allow him to reach his targeted compensation. He agrees to the $15,000 price if you finance through him and you purchase a warranty. Deal done. Ask more questions upfront than your negotiating partner and you’ll discover new ways to make a deal work on your terms. I’ve had tremendous success with this tip negotiating with software vendors who are willing to give on price for a case study or a steady reference. I’ve also had success with service companies like caterers assisting them with scheduling such that they could double-book in a single evening and getting a discount in return.

There are several other tips that I have, but I’ll save it for another post. Let me know about some of your success stories and share some of your tips in the comments below!

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37 Comments »

Comment by john andrews
2009-01-06 00:53:59

Here’s one I’ve enjoyed… for catering, go after new upcoming caterers and show them who your attendees are… yes, name drop the board members! Then add as much value as you can. Offer to post a sign announcing that new caterer in town. Offer to distribute flyers/promo cards to the meeting attendees in their info packet. Make it EASY for your meeting participants to use that caterer for the next meeting they plan somewhere else in town. In short, treat the caterer like a busines partner (for that meeting) and in return get it at cost PLUS their best execution.

Thanks for the inspiring blog… I look forward to reading.

Comment by Andy
2009-01-06 01:23:53

Thanks John for reading and the comment! That’s a great point and one I’ll use for the future as well:)

 
 
Comment by Luis Benavides
2009-01-06 04:38:47

Excellent Blog Andy! You now make part of my must-read blogs!

Comment by Andy
2009-01-06 22:33:24

You rock Luis -thanks!

 
 
Comment by Zsolt Balla Subscribed to comments via email
2009-01-06 05:33:00

In my experiences, those, who are more likely to walk away will always win. Most times, you’ll need a better alternative for this, of course, but at times bluffs can work, too. As you say, it’s a game of two (or more).
If you manage to turn one-way businesses to mutual ones (like the way John suggested or in any other ways), you’ll surely be better off.

looking forward to part 2

cheers,
Zsolt

Comment by Andy
2009-01-06 22:34:49

Zsolt - good point. One thing I always like to say - “don’t fall in love with the deal” - always be willing to walk, there are plenty more deals to be had.

 
 
Comment by Brent Lamborn Subscribed to comments via email
2009-01-06 15:01:58

Andy -

I read about your new blog at dellanave.com and shoemoney.com. I read a few of your posts throughout the day and I’m already subscribed.

I’m in the process of building a new site/startup with some friends. This post and your others are/will be much appreciated!

Thanks!
Brent

Comment by Andy
2009-01-06 22:35:31

brent - welcome to the club! good luck and be sure to let us know how you’re doing.

 
 
Comment by ej-web-development
2009-01-06 17:10:53

Great post!

Negotiation is a tricky thing but a lot of it has to do with who holds the most chips.

Comment by Andy
2009-01-06 22:38:25

Right! Who has the most leverage (chips) these days? Cash is king, if you have cash, you’re the one with leverage. It’s suddenly much more valuable these days - happy hunting!

 
 
Comment by AJ Kumar
2009-01-06 20:20:36

Negotiations can be very fun, as long as you have the upper hand :) My approach would be definitely be similar, but with a few additions (but wait there’s more!)

These can also be in one of your later posts: Build rapport with them. Find out if they are visual, auditory, or kinesthetic.
Find out their personality type: analytical, amiable, expressive, or driver
After knowing this, walk, talk, and act like they do in order for them to feel comfortable with you. They would give a friend a better deal than a stranger wouldn’t they?

And mainly, use leverage, like how Andy explained above.

Salesmen use these techniques on you all the time, most of the time, subconsciously. If you learn this and take advantage, you’ll be able to persuade them into the price you want.

Comment by Andy
2009-01-06 22:41:13

AJ - great point and good thoughts for another post. Understanding your negotiating partner goes a long ways in finding positive dialogue and building a successful outcome. Also, keeping a positive tone will enable future opportunities should this deal not happen with the other party.

 
 
Comment by Vik Dulat
2009-01-06 21:15:32

The key to successful negotiating is that you need the power to be able to walk away. If you dot have this power, you will not get far in negotiating a better price.

Comment by Andy
2009-01-06 22:41:51

right - you can’t afford to fall in love with the deal!

 
 
Comment by Franki Nguyen
2009-01-06 23:59:37

Also, with all things being equal - trust your instincts. If your gut says no nor matter how good the deal is, listen to it - or vise versa. Price isn’t everything, and may cost you a lot more later if you’re determined to squeeze the otherside dry.

Personally when i negotiate, I’m looking for a FAIR deal for both parties, otherwise it will end up lose-win, and what goes around will come around to bite you in the big time.

Comment by Andy
2009-01-07 23:38:48

good point frank. another thing is don’t compromise your integrity for a deal, that is smart long-term negotiating even if the other party is unethical.

 
 
Comment by jtGraphic
2009-01-07 00:26:55

Good suggestions. Adding to the advice: a lot of times you just need to say the right thing to get a lot of things for free. For instance, at the last trade show I attended, I was able to provide free cookies from an AWESOME bakery in town. The bakery gave me the cookies for free in return for putting up a sign at the trade show. Win win for both of us. It was an awesome experience. I also won the “Best Giveaway” award.

Comment by Andy
2009-01-07 23:39:09

love it.

 
 
Comment by Adam T.
2009-01-07 00:28:02

Risk, what a great game!

Depending on the scenerio, (lets use your car purchase example) I really like to start with the top person on the lot. I have called the car dealership in advance and asked the receptionist who the sales manager is (I had quickly learned that they have the most ‘room’ to negotiate on the price). I then try and be as up front as possible with “Hank’s Boss” (lets call him Rick). I would say something like “Rick, I understand and appreciate the sales business and the negotiation process and want to be as up front with you as possible. I know the typical range of markups on the vehicle I am looking at and want to let you know that I want you to make some money but I assure you that I have done my homework and would hope that you would start off with the bottom line price to eliminate the back and fourth process.” Something to that effect has proven to be successful for me as it quickly identifies you as someone who wants to cut to the chase but realizes they are there to make a buck too!

Comment by Andy
2009-01-07 23:39:42

Adam - that’s a great point to remember. don’t negotiate with someone who can’t make the decisions.

 
 
Comment by Custom T-Shirts Guy Subscribed to comments via email
2009-01-07 11:23:43

Well I’m not one for conversations because I like the win-win situations. However I am aware that there are times that you need a win-lose situation, and sometimes loosing right away is the best option especially if you take your time you will loose even more. However there is one last option, the lose-lose option when walking away is the best option other wise the lost is too great to handle.

Comment by Andy
2009-01-07 23:40:43

it’s funny - i agree, although i think a win-win outcome can be no deal:)

 
 
Comment by Raja Kamil
2009-01-07 21:45:00

I love read the “preparation” part. Well, when bargaining this is important.
I have some experience deal with and without “preparation”.
Results are different.

 
Comment by Glenn Kelman
2009-01-08 08:49:56

I agree with Raja, that preparation is most important. Most people think that negotiations are a test of wills or personality, and just haven’t thought through what they’re willing to accept and what they really need.

I also like the advice of Time Warner’s CEO, Dick Parsons, that both sides have to feel like they have won something.

Comment by Andy
2009-01-10 21:30:20

great point - the goal is not to take every last cent from the other side, make sure they have upside as well. it goes a long way especially if you have to work with them, but even if you don’t, you learn to flex that muscle of being able to do that effectively in the future. more deals will come your way.

 
 
Comment by Jeff Yestrumskas
2009-01-09 22:21:55

Some of my favorites:

* Keep emotion out but keep the passion for the deal in
* Do not eliminate the relationship

 
Comment by Andy
2009-01-10 21:22:39

totally agree.

 
Comment by Jessica Subscribed to comments via email
2009-01-14 09:55:38

I took my automotive negotiations in a different direction. As a young single woman looking for a car I knew I was the equivalent of raw meat to a hungry dog. After doing my research, I knew exactly what I wanted and how much I should pay- so I emailed the dealerships that had the car I wanted. With a simple explanation that I was very busy, and a description of what I wanted along with a lowball price, I got back some res ponces. Though a few dealers insisted I come see them, most were willing to work with me. I did all my negotiations via email, which gave me time to think and reflect before responding. I ended up with the exact car I wanted, for the price I wanted with free window tint and oil changes for a year. The best part, once we reached an agreement, all I had to do was go down, test drive and sign the papers. I was in and out in an hour and a half. No stress and no wasting time.

Comment by Article Spinning
2009-01-24 22:26:03

Ha ha ha, inspiring, Jessica. You took control of the negotiating situation and got what you wanted. I like the email part. That gave you time to decide how best to response all the time. Thanks for sharing.

 
 
Comment by Enlargement
2009-01-17 21:51:14

I am amazed with it. It is a good thing for my research. Thanks

 
Comment by Natural
2009-01-19 08:22:52

I think you are thinking like sukrat, but I think you should cover the other side of the topic in the post too…

 
Comment by Harnish
2009-01-26 16:30:25

Good one on negotiation. I negotiated a $5500 discount on my new Solara 3 years ago because I was armed with the KBB and the edmunds price and I negotiated with car dealers over the web pitting them one against the other.

 
Comment by Article Spinning
2009-01-26 21:31:55

It’s becoming increasingly difficult for anyone to succeed at anything without a good grasp of negotiation skills. Thanks for showing how anyone can improve their negotiating skills with this wonderful piece.

 
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