All right.
So in reality, I shouldn't even be
teaching a chapter on bargaining because if you listen
to everything else, you've negotiated great,
and you're not going to need to bargain.
The deal will have made itself.
In those instances, we do need to get down
to brass tacks bargaining.
Here's some techniques.
[MUSIC PLAYING]
The Ackerman System is a bargaining model
attributed to a gentleman named Mike Ackerman.
I was taught this bargaining model
when I was doing kidnapping negotiations with the FBI.
And they laid out basically, you have a target price
you want to come to.
Once you've picked out your target price,
you're going to come in at 65% of that price.
You're going to plan on making three raises to get
to the price that you wanted.
And the first raise is going to be 20% raise,
the next raise is going to be 10%,
the last raise is going to be 5%.
Each one of your raises are decreasing increments by half.
And then when you get to the very last number,
you make sure you throw out an odd number,
and you also throw in some non-monetary object
that you know the other side doesn't want,
but it makes them feel like they've really tapped you out.
They've taken every last dime.
You know, they've fought you tooth and nail.
They've felt the decreases in increments.
They still feel like they're winning.
You come in with the last number.
It's an odd number.
It seems like that you scratched for every penny.
And consequently, they worked so hard to get there
that they want to cut the deal.
They're not going to renege.
All right, so I'm trying to buy a coffee table for $100.
And that's what I want to pay.
They're asking $150, they're asking $200.
They might be asking $250.
It doesn't matter.
I'm going to see what their reaction is when I throw out
my initial price.
So I'm going to come in at 65% of where I want to end up.
So I'm going to say, look, you know, I got a price.
I'll give you the price, but you're not going to like it.
I mean, it's going to be low.
It's really going to be low.
And I got a feeling that when I give you this price,
it's going to make you really angry,
and the last thing I want to do is offend you.
So I'm scared to give you the price.
Well, you're getting their permission, you know.
You're giving them some emotional anchoring.
What they're thinking, like, this guy wants
a coffee table for nothing?
What's he going to give me, $5.00 for the coffee table?
They're going to imagine something
that's worse than what you would ever throw out.
So you finally give me permission
to give you the price.
And I say, no, it's going to make you angry.
You know, I'm scared.
I'm afraid to give you this number.
And they'll almost beg you to give them the number.
And then very apologetically, you gotta say, $65.00.
Now they're not going to be happy with that price,
but they asked you for it.
They're not going to get angry because you told them
they were going to get angry, and that diffused it.
And you were deferential the whole time.
I mean, they feel powerful.
You know, they feel bad for you.
But after you throw your number, then your next move
has got to be tactical empathy.
It's got to be the application of empathy.
It's got to be apology.
They're going to say, well, you know,
that's not what I had in mind.
You gotta do better than that.
I mean, that's ridiculous.
If they're a seasoned negotiator,
they're give you the flinch.
They're gonna go, oh my god, it's ridiculous.
It's horrible.
And that's where you gotta ply them, say, you know,
I'm so sorry.
You know, it's horrible.
I can see that I've offended you.
And you're asking a reasonable price,
and I'm being ridiculous.
And you just gotta continue to hit them
with versions of empathy.
And you gauge their reaction.
You know, you've got to push them every step of the way
because when you get to the number that you've settled at,
you need them to execute.
You need them to be happy with that number.
So the next point is you're not budging off
your number until they come off their number.
Whatever amount of money they come off of their number,
then you've got to be grateful.
Oh, you know, thank you.
That was generous.
You gotta enhance the positive emotions.
You know, they feel like they've given in.
You don't want them to regret giving in.
You tell them that you appreciate
that they were generous and congratulate him on that.
Now your next number is going to be $85.
They're going to feel like that's still not where they
want to be, but they're going to feel a sense of accomplishment
that you've come from $65 to $85.
And again, you gotta apologize.
I'd like to give you another number.
I mean, I've worked really hard at this.
It's been difficult for me to get to this.
You know, as a matter of fact, I gotta
go back and check my finances before I get this number.
I gotta check with the people.
I'm not sure I can cover this.
So you've thrown out your $85.
They're still fairly disappointed,
but they feel like now they're hungry.
They're making progress.
You know, they feel that the process with you
is making progress.
And as long as people are making progress,
it enhances their ability to stay in the deal.
Now your next move is at $95.
Now they're going to feel a sense of accomplishment.
But they're going to know that that last move that you made
was smaller than the first one.
Always increase by decreasing increments.
Always.
You've got to manage the raises.
Your next raise at $95.
Now you go through the whole scenario again,
you know, the whole dramatic scenario.
The application of empathy, the recognition
that they were generous, the recognition that you're
probably making them angry.
After $95, your last move's at the number
that you're going to give.
The number's gotta be an odd number.
Everybody likes odd numbers.
It's got to come out reluctantly.
If you had planned on spending $100,
then you really need to come in at $97.43.
If you have the opportunity, ask them
for a piece of paper and a pencil
and start writing numbers down.
It doesn't matter what you write down.
Write down your birthday.
Write down today's date.
Write down how much you weigh.
You know, make a show that you're working really hard.
You're tapping the resources, where
they're going to feel like they worked really hard for it.
They're going to feel like they've
tapped into your last dime.
They're probably going to try to take one more
move at you to get you off that number,
and that's when you go, like, ah, you know, ah, you know,
I've got a really nice jacket.
Would you like my jacket?
Would you like the shirt off my back?
Effectively that's what you're doing, you know.
But you're playing into the human nature aspects
here, which is a little bit of drama play.
I realize but these are people with emotions
on the other side.
Even sociopaths have emotions.
So whoever's on the other side, you
need to make them feel a sense of accomplishment
that this was a victory, a hard won victory.
They got you there every step of the way.
They felt the brakes coming on the situation when
each move was less, until finally
that odd number came out there, and then the shirt
off your back, whatever it is.
And if they're going to make the deal,
they'll make it there because they worked so hard for it.
[MUSIC PLAYING]
A lot of people are told go first and go high.
I think that's a bad idea because it's
forgoing the opportunity to gather information first.
I'm going to want to know where you're coming from.
When you throw a price out and how you throw out,
it's he's going to give me a lot of information about you.
And that's information that I want.
I love information.
Every bit of information I get in a negotiation
makes me smarter every step of the way.
So if you go first, I get information on you.
You haven't gotten any information on me .
If somebody is really pushing you to go first,
it's also an opportunity to pivot the terms.
You can say, all right, so I'll be happy to give you a number.
Let's set that aside for a few minutes
and let's talk about what it's going
to take to make a great deal.
I mean, what looks like a great deal to you?
What else do you have to have in order
to make any price that I give you a good price?
It's always good to prepare some things beforehand so
that you're not caught off guard in the moment trying to think
of what those things might be.
And when you start to prepare that list beforehand,
realize that it's really a brainstorming list.
It's to trigger some thoughts.
You really want to engage in brainstorming
with the other side because nearly every circumstance, even
in a one off negotiation, there's
going to be some stuff that they could throw in that you
might not know that they have.
And if you engage in a collaborative brainstorming
session, between the two of you, you
may come up with some ideas, again, to make a great deal.
Yeah, you can use this when you're buying your car.
You can set the price off to the side for the moment
because there's always going to be other inducements that they
want to add and to get you to make that deal.
You know, what kind of follow-up service do you want?
What are they willing to throw in at this point in time
to try to get their price?
They're probably going to be a lot more
flexible on the other terms, on the follow-up service.
Free car when you come in for its routine maintenance.
Do you get a rental car to drive around while you've
got your car in their shop?
What are the other maintenance add-ons
that they might be willing to throw in to make the deal?
And that's actually a really good move
because people can get so focused
on price that they forget that it's going to be the terms that
make the deal.
The price will break the deal, but the deal
is made on the strict terms.
[MUSIC PLAYING]
Well, setting a range is a great way
to not exactly name price first also.
You can do a range of what's going on in the market.
You can do a range of what you might be willing to pay.
Understand that whenever you throw out a range,
the other side is going to settle on the end
that most favors them.
Then I gotta compromise and meet you
in the middle of that range.
You threw out a range hoping they
come in and pick the number in the middle
because they're trying to be nice.
That's not going to happen.
They're going to pick the end on that range that favors them.
You better be willing to accept that.
If you come off of that, then they're
going to be able to accuse you of bad faith
bargaining for good reason because you
gave the impression if you threw that number, that you'd
take it.
But a range is going to be dictated
by two things, what's going on in the market
and what you can pay.
What you can pay may not line up with what's
going on in the market.
And there's always a possibility that other terms still
might make your number work.
And that's why the brainstorming with your counterpart
is extremely important because there may be something really
valuable that you could do that's not
reflected in the market.
Great collaboration, it creates success
for both sides in the future is always valuable.
So understand what your ranges are,
what the market ranges are, and then go out
and try to make a great deal.
[MUSIC PLAYING]
An anchor is a price that you throw out
that's quite some distance from where you expect to land.
So if you want to pay $100 for something,
I may throw out right off the bat that I can pay $20.
I'm going to throw something out that's quite some distance,
gives me a lot of room to maneuver.
Makes you feel like you won when you get me to my actual price.
So you're going to get a lot of advice
that you should anchor extreme.
You should go high, you should go low.
And people are going to tell you over and over again that's
going to give you better deals.
What it's really going to do is make a lot of deals go away.
The terms make the deal.
Make great deals, don't extreme anchor,
and you're going to go a lot farther and have
a lot more people doing business with you,
and you will not drive deals away from the table.
I'm more concerned with the emotional anchor,
the emotional reaction to my price.
If I go with a high price with no warning,
the emotional reaction from you is going to be negative.
Negative reactions leave a toxic residue
that, by and large, long term, are bad for relationships.
Now on the other hand, I will characterize my number
before I throw it out because I want you to actually
be relieved when I give you my number.
So I'm going to say, look my number is high.
Don't expect anything other than that to be high.
It's going to be higher than you expect, probably more
than you plan to pay, maybe more than you have.
Now by the time I drop that number,
you're not going to overreact to the number.
It may still be more than you plan to pay,
but you're not going to be mad about it.