AN UNCOMMON GOAL

What, then, is a reasonable goal? What kind of goal can result in both parties walking away from the table with even more value than they expected going into the negotiation? Stop for a moment and think about this as a possible goal: to create joint value and divide it given concerns for fairness in the ongoing relationship.

If you’re like most of our clients, at this point you’re likely to say something like, “Get real! My clients don’t do business that way!” or “Buyers are not interested in creating value, much less in being fair!” Or as the top salesperson for one of our Japanese clients once said to us: “You don’t understand; the Japanese buyer is like God. We don’t have any say; he dictates what we do. And all he cares about is price!” So if that’s what you’re thinking, it’s not surprising.

The fact is, though, that we have convinced some of the top selling and purchasing organizations in the world to adopt the goal we’ve suggested above in their negotiations. And we’ve been able to do so for one very good reason: it works. When you create joint value and divide it given concerns for fairness in the ongoing relationship, both sides benefit.

Let’s say, for example, that you’re trying to sell your product to a customer whose main concern is price. The customer can look at this negotiation in essentially two ways. He can say, “My goal is to get the product for less,” and accordingly simply demand a lower price. If you, as the salesperson, accede to his demands, he’ll be happy because he’ll have gotten what he wants, but you’ll be less happy because you won’t be making as much money as you’d hoped or—perhaps—expected to.

What if, however, the customer considers his goal to be “to create joint value and divide it given concerns for fairness in the ongoing relationship”? If he’s thinking along those lines, he may still suggest that you give him a deeper discount than you’re offering, but in return he might offer to agree to a longer-term commitment or higher volume, or to provide you with access to other divisions of his company, none of which would actually cost him anything. In a situation like this, you’d be much more likely to offer a better discount because you’d be getting more of his business. In fact, you would both come out of the negotiation with more than you anticipated going into it. And perhaps even more important, you would have established a positive relationship that’s likely to bring you even more business in the future.

“It sounds all right in theory,” I hear you say, “but does it really work in practice?” The fact is that it does. Although this is a theoretical situation, it’s actually based on a real-life one. My colleagues and I were negotiating with a buyer from an international company who was looking to purchase negotiation training for the company’s North American division when we ran into a problem. The customer was asking us for a discount of 20 percent from our normal rates, but we didn’t want to concede. He pounded us and pounded us on it until, finally, we made him understand that we just couldn’t do it. Moreover, because the demand for our services was high (that is, our Consequences of No Agreement was good), there was also no reason why we should concede.

But the customer had something else we were interested in; in addition to the North American operation, the company had a division in Asia. We’d been trying to break into the Asian market for some time and wanted access to the customer’s operation there. But the customer considered us too risky because we hadn’t had any experience in that part of the world. So aiming to “create joint value and divide it given concerns for fairness in the ongoing relationship,” we made a counteroffer. If, we said, the customer would agree to broaden the consulting contract to include its Asian division as well as the North American one, we would give them the 20 percent discount they were asking for in North America plus another 5 percent when we worked in Asia. We did, however, make it clear that the additional 5 percent in Asia was available only for the first year, and that once we’d proved that our process worked, we would return to our normal pricing. Thus, the customer would pay less than it expected to for our services, and we would get more of its business.

Perhaps not surprisingly, they agreed. In fact, having seen the process in action and realizing how well it worked, the customer subsequently began using our process in negotiations with all its suppliers. The deal was enormously advantageous from our perspective as well. We got our foot in the door in Asia, which led to other Asian customers and, ultimately, higher revenue streams. In fact, because of those new revenue streams, the benefit of this trade far outweighed the cost of providing it.

Thus, aiming to “create joint value and divide it given concerns for fairness in the ongoing relationship” changes the very nature of the negotiation in a variety of positive ways. One of these is helping you create and negotiate larger, rather than smaller, deals because it leads to tactics that are more likely to yield larger deals. As a result, even if it doesn’t work every time, in the end you make more money because the individual deals themselves are larger. Another benefit is the positive effect on the atmosphere and tone of the negotiation as a result of sharing the goal with your customers. Of course, those on the other side of the table, not surprisingly, tend to be very skeptical at first. But once you’ve proved that you mean what you’re offering over the course of several negotiations, your sincerity not only makes individual negotiations easier and more productive, it has a positive impact on the ongoing relationship between you and your customer.

I saw very clearly how this works some time ago with one of my tenants. I own, and live in, a building that has several rental apartments. This particular tenant was an actor and, like most young and struggling actors, was always looking for ways to feed himself while he pursued his acting career. One of those ways was a part-time job power washing and sealing patio decks. Every time he had a job to do, though, he had to rent a power washer from Home Depot for about $70 a day. As it happened, I had always wanted a power washer for several home improvement projects but couldn’t justify the $400 purchase. So I made a deal with the tenant: I would buy a power washer and rent it to him each time he used it for $35, half of what he was paying. Moreover, he could store it at his house so he wouldn’t have to go to Home Depot, wait in lines, or fill out forms, thus saving himself both time and effort. The deal would, however, also be good for me in that his rental payments would be paying off the cost of the power washer. Eventually, I would own it and, even better, have gotten it for free. The deal would actually create $35 of value for each of us every time he used the power washer.

But when I suggested my idea to him, he looked at me suspiciously and said, “How did you come up with a deal like that?” Even though it would clearly benefit both of us, he didn’t trust the deal because we’ve all been conditioned to believe that negotiation is about determining who gets what rather than creating joint value. Despite my tenant’s wariness, he agreed to go ahead with it. Not surprisingly, he soon realized exactly how much the deal was benefiting both of us and was delighted with it. Perhaps even more important, because we were both happy with the deal, it helped us establish a relationship that enabled us to subsequently make several similar deals.