Let me tell you how to conclude negotiations very effectively. You don’t have to use it when the other person is negotiating in good faith with you. You use it only when you feel that the other side is simply grinding away to get the last penny off your price. Or when you know that the other person wants to do business with you, but she’s thinking, “How much would I be making per hour, if I spent a little more time negotiating with this person?”
Let’s say that a group of friends got together and bought a cabin in the mountains to use for a vacation home. The friends got together on the investment and they’re sharing the use of it. One partner drops out of the syndication and your neighbor comes to you and tells you about the cabin in the mountains. Your initial reaction to this is, “This sounds fantastic. I’d love to do something like that.” However, you’re smart enough to play the Reluctant Buyer Gambit so you say, “I appreciate your telling me about that, but I just don’t think we’d be interested right now. I’m so busy I don’t think we’d have the time to get up there. But look, just to be fair to you, what is the very lowest price that you would sell a share in the home for?”
He’s been studying negotiating too, however, and he’s learned that you should never be the first one to name the price. So he says, “We have a committee that decides on the price and I don’t know what that price would be. I can take them a proposal, but I don’t know what the reaction would be.”
When you press him a little more, he finally says, “I’m pretty sure that they’re going to be asking $10,000.”
This is a lot less than you expected. You were willing to go to $15,000. So your initial reaction is to jump at it right away, but you’re smart enough to remember to flinch. You exclaim, “$10,000. Oh no, I could never go along with anything like that. That’s way too much. Tell you what, $8,000 might interest me. If they’re interested at $8,000, let me know and we’ll talk about it.”
The next day he comes back and has decided to bring you into line by using the Withdrawing the Offer Gambit. He says, “Am I embarrassed about this. I know that we were talking $10,000 yesterday, but the committee decided last night that they wouldn’t sell a share for less than $12,000.”
This is psychologically devastating to you for two reasons:
1. Because you feel that you created the problem-you say, “Boy, I wish I’d never run into that Roger Dawson and his Power Negotiating because if I hadn’t I would have nailed him down at $10,000 yesterday.”
2. You’ve made the mistake telling your family all about it They’re all excited about the home up in the mountains, and you’ve passed that critical point in the negotiations when you’re prepared to walk away.
You say, “Joe what are you talking about? You said $10,000 yesterday, $12,000 today, is it going to be $14,000 tomorrow? What’s going on here?”
He says, “I do feel bad, but that’s what the committee decided.”
You say, “Joe, come on.”
So he says, “Well I do feel bad about this. Tell you what, let me go back to them one more time, let me see what I can do for you with them. If I can get it for you for the $10,000, are you interested?”
And you say, “Of course I’m interested. I want it.” And he has sold you at full price and you may not have realized what he’s done to you until it’s too late.
Let me give you another example because it’s a very powerful negotiating Gambit. Let’s say that you sell widgets, and you quote the buyer a price of $1.80; the buyer offers you $1.60. You negotiate back and forth, and finally it looks as though he will agree to $1.72. What’s going through the buyer’s mind is, “I got him down from $1.80 to $1.72. I bet I can squeeze another penny out of him. I bet I can get this salesperson to $1.71.”
So he says, “Look, business is really tough right now, I just can’t do business with you on widgets unless you can bring the order in at $1.71.”
He may be only baiting you, just trying it to see if he can get you down. Don’t panic and feel you have to make the concession to stay in the game. The way to stop this grinding away process is to say, “I’m not sure if we can do that or not, but tell you what, if I can possibly get it for you I will. Let me go back, we’ll re-figure it and see if we can do it. I’ll get back to you tomorrow.”
The next day you come back and pretend to withdraw the concession that you made the day before. You say, “I’m really embarrassed about this, but we’ve been up all night re-figuring the price of widgets. Somebody, somewhere down the line, has made a mistake. We had an increase in the cost of raw materials that the estimator didn’t figure in. I know we were talking $1.72 yesterday, but we can’t even sell it to you for that -$1.73 is the lowest price that we could possibly offer you on widgets.”
What’s the buyer’s reaction? He’s going to get angry and say, “Hey, wait a minute buddy. We were talking $1.72 yesterday, and $1.72 is what I want.” And immediately the buyer forgets $1.71. The Withdrawing an Offer Gambit works well to stop the buyer grinding away on you.
Haven’t we all had an appliance or car salesperson, when we were trying to force the price a little lower, say, “Let me go to my sales manager, and I’ll see what I can do for you with him.” Then he comes back and he says, “Am I embarrassed about this. You know that advertised special we were talking about? I thought that ad was still in effect, but it went off last Saturday. I can’t even sell it to you at the price we were talking about.”
Immediately you forget future concessions and want to jump at the price you’d been talking about.
You can also employ this Gambit by withdrawing a feature of the offer, rather than raising the price. Here are some examples:
o The appliance salesperson says to you, “I know we were talking about waiving the installation charge, but my sales manager is now telling me that at this price we just can’t.”
o The air-conditioner salesperson says to you, “I understand that we were talking about including the cost of building permits, but at a price this low, my estimators are telling me we’d be crazy to do that.”
o You’re a sub-contractor, and you say to your general contractor, “I know you requested 60-day terms, but at this price, we’d need payment in 30 days.”
o You market computers, and you tell your customer, “Yes, I told you that we would waive the charge for training your people, but my people are saying that at this price, we’d have to charge.”
Don’t do it with something big because that could really antagonize the other person.
The Withdrawing an Offer Gambit is a gamble, but it will force a decision and usually make or break the deal. Whenever the other person uses this on you, don’t be afraid to counter by insisting that the other side resolve its internal problem first, so that you can then resume the real negotiation.
Key points to remember:
o Withdrawing an Offer is a gamble, so use it only on someone who is grinding away on you.
o You can do it by backing off your last price concession or by withdrawing an offer to include freight, installation, training, or extended terms.
o To avoid direct confrontation, make the Bad Guy a vague higher authority. Continue to position yourself as on the other person’s side.