Two Secret Ways to Break Down Firm Prices During a Negotiation

When I was younger, I always liked to read those stories that had a knight in shining armor showing up at just the right time, dueling with the fire-breathing dragon, winning, and then riding off into the sunset with the princess. As I became older, I learned that there are no more knights, that there are far too few princesses, but that dragons still do exist. In sales negotiations we encounter them quite often – today’s dragons go by a different name: fixed prices. It turns out that with a little guidance from knights of yore, we can still find ways to defeat them…

Powerful Technique #1: Higher Authority

There is no such thing as a fixed price that can’t be moved. That’s always been my philosophy and I’m sticking with it. The next time that you bump into one of these “dragons” during a sales negotiation, do some preliminary exploring with the other side of the table.

You’re going to discover one of two things: either the price is not really a fixed price (yea!) or yes indeed it really is fixed. In the case that you discover that the other side is committed to not changing their price, you need to take a different course of action.

As scary as it might be, this is the time to push the “talk to a higher authority” button. Since the other side of the table is not budging, you really have nothing to lose by going over their head. When you do this, amazing things can happen.

Not to make any concessions on the firm fixed price may have been orders that were given to the other side of the table that you were negotiating with. There may have been very little reasoning behind this instruction – it was just seen as a set of good criteria for the other side to follow.

By moving the discussion up the chain of command, you may be able to open the door to more pricing flexibility.

Negotiation and the Forget-You Response

Manny Ramirez is considered by a consensus of fans and sportswriters one of the best hitters in baseball, and unless he takes steroids or bets on games, he is expected to be a shoo-in for the Hall of Fame, when he hangs up his cleats.

Having said that, why is it taking so long for this king of the batter’s box to sign a rewarding contract for the 2009 season?

Spring training begins in something like three weeks!

The official word is that the Dodgers offered a two year contract and Manny wants a minimum of four. It also appears no other club is in contention for his services, which are so impactful that having Manny in the lineup can make the difference in reaching the post-season, as the Dodgers did in 2008, or warming the couch in October. I believe both sides are saying, “Forget You!” or what is known as the debilitating F-You response in negotiating. This sort of deadlocking happens all the time when amateurs square off to bargain.

Recently, Bill and his wife went out looking for beach houses to rent. A suitable castle on the sand was listed about $750 over market, according to Bill, who had done an exhaustive competitive analysis, so he offered precisely the listing price, less $750, explaining in detail how he had arrived at the figure.

The owner, who had been spoiled by higher rents when the economy was roaring, refused to lower his price by even one cent. He told the property management company, “Either they’re willing to pay my price, or forget them.”

The owner decided, at least tacitly, that he would prefer to watch the place stay empty, at a cost to him, personally, of thousands per month, than “give it away” for less than what it was worth, at least in his mind.

Playing the negotiation game the Forget-You way creates lose-lose outcomes; nobody wins.

Negotiation – The One-Bite-At-The-Apple Threat

The Dodgers and agent Scott Boras seem to be at an impasse.

They are negotiating Manny Ramirez’ 2009 major league baseball contract.

The team has offered a two-year deal, while Manny’s agent asserts it will take four or more to tango.

Dodgers General Manager Ned Colletti is trying to avoid what is called, “negotiating against oneself.” If you’re the only or top bidder for something, the traditional negotiating playbook says:

(1) Wait for a counteroffer before sweetening your original offer.

(2) If you receive silence in return instead of a counteroffer, the other party will blink. If he has received no better offer than yours from a third party, he’ll have to deal with you, sooner or later, and accept yours.

(3) If you succumb to your impatience, or buckle under the pressure brought on by the approach of a deadline, such as the slated start of spring training, and you offer a better deal before receiving a counteroffer, you’ll make concessions for nothing.

In that case, you are bidding against yourself, and throwing away money.

Boras has heard all of this, and yet he’s acting as if he’s oblivious to the merit of Colletti’s position.

What Boras is tacitly threatening is this:

If the Dodgers do not sweeten the deal on their own, Ramirez will play for the first team that does improve on that offer, or for the highest bidder.

In other words, the Dodgers will have had one bite at the apple, and they may be denied a second chance to improve their offer, later.

But is that completely rational?

Not really, but who said negotiation is ever 100% reasonable, or predictable?

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