Ever bought something expensive that you really wanted on sale at a massive discount? Or walked out of car dealership with a new (or used…er, previously-owned) car that you got for WAY below the asking price? That feeling is what drives sales people (of course, they tend to be on the other side of the equation, but the feeling is the same). Today, I got that feeling.
I didn’t get a new car or something expensive that I had been pining for. What I got was a discount on OEM hardware. Well, the truth is that I didn’t just get the discount…I negotiated it.
As a Product Manager, I am tasked with lots of negotiation, but for the most part, it’s largely non-monetary. I have to negotiate with Engineering to get a certain amount of features built into a release in a given release window. I have to negotiate with Support on what they see as the key bugs and enhancements and their priority. I have to negotiate with Sales on when the new features that will help them close “their biggest customer, ever” will make in into the product.
In actuality, the Product Manager spends a LOT of time negotiating, but since there is no money exchanging hands, that kind of negotiation seemed different than what I had to do with our OEM partner. It was much more nerve-wracking. I worried about what my counter-part on the opposite side of the equation would think about me. I worried that I wasn’t going to get the deal. That’s what makes getting the deal feel so good!
Contract negotiation is really a lot like gambling (and Poker in particular). Each player knows what cards they have, but they don’t know what cards the other players have and they don’t know what cards will come up from the deck. With Poker, you know that there are a finite number of combinations and to some degree, you can use statistical analysis and your gut instinct to know whether you are likely to have a good hand, but there is another element that you can use, too. The bluff.
Bluffing in Poker can turn a worthless hand into a winner. All you have to do is lie. Not in a bad way, like when you are shopping with a friend and you tell him or her that a shirt/jacket/sweater/pair of shoes look good, when in reality you are embarrassed just to be in the same timezone as them. It’s more of an omission, like when you were a kid and one of your parents (or a friend’s parents) asked you if you did something (e.g., stick your finger into your sibling’s birthday cake and scoop out some frosting…before the party started) and you said no (which was true), but you didn’t tell them who did , even though you knew (cousin Kenny, of course).
Bluffing makes your hand appear stronger and appearances are everything during negotiation. So I used a bluff to make my position vs. the OEM hardware vendor look stronger to them.
I told them that the original price and the subsequent discount that they offered was insufficient for me to commit to the deal. If they would meet my asking price at the volume I wanted, I would make sure the deal happened. If not, then I was prepared to walk away (that was the bluff). In reality, I needed the hardware and was willing to pay the price that they had originally proposed, but they didn’t know that.
But be careful…bluffing doesn’t always get you what you want and sometimes there are unintended consequences. It’s better not to have to bluff, because that losing hand that you have could stay a loser, and if it does you may lose credibility or leverage with the vendor for the next time you have to negotiate.
In this case, in the end, I got the pricing and volume that I wanted and they got the deal, so everybody wins.
Popularity: 34% [?]
Tags: bluff, contract, deal, discount, hardware, negotiation, OEM, pricing, Sales, sales people, volume
Entries (RSS)
The other thing about bluffing is that if you have a long-term relationship with the other party and they call your bluff you are in a bad spot. They’ll know you bluffed and you’ll pay for it in future negotiations.
I think the other important point about negotiation is that it’s important once the deal is done to reiterate to the other party that they got a really good deal so that they don’t get buyer’s remorse or wonder if they’ve been had. There is nothing worse than walking away from a negotiation and having a sinking feeling that you might have gotten a better deal if you had pushed a little harder.
The best book I ever read was “You can negotiate anything” by Herb Cohen. His techniques even work on my teenagers.
Brian Lawley
http://www.280group.com
@Brian: You are right, it’s much easier to play hard ball and bluff with parties where there is no long-term relationship. Everyone walks away and is either happy or bummed about the outcome.
Both sides have to be careful not to alienate, even if there is no future sale involved, especially in a world where there are so many ways for others to find out about your “reputation.” Burning one person can end up having a much bigger impact on you and your business in the long run than the great deal you got by getting the low-ball offer approved.
I’ll have to take a look at your book recommendation, too. I don’t have teenagers, but it’s probably not a bad idea to start prepping for them now!