CHAPTER 09: Bargain Hard

Summary

• The narrator is obsessed with buying a red Toyota 4Runner, but finds that there is only one dealer in the area that has it.
• The narrator strategizes how to negotiate with the salesman, Stan, in order to lower the price from $36,000.
• The narrator's approach is to start with a low offer of $30,000 and gradually work their way up through counter offers.
• The salesman's initial response is rejection, but he goes back to his manager to negotiate and eventually agrees to $32,500.
• The narrator continues to decline the offer and the salesman finally agrees to $31,000, which the narrator accepts.
• There are three main negotiating styles: cooperative, assertive, and analytical.
• A study of American lawyer-negotiators found that 65% used a cooperative style and only 24% were truly assertive. More than 75% of the effective group were cooperative and only 12% were assertive.
• Blunt assertion is usually counterproductive.
• Negotiating style is not a straitjacket, most people have the capacity to use elements from different styles.
• To be successful, you have to learn to be yourself at the bargaining table and add to your strengths, not replace them.
• Analysts are methodical and diligent, they believe that time is of little consequence as long as they are working towards the best result in a thorough and systematic way.
• They prefer to work on their own, rarely deviate from their goals, and are rarely emotional.
• They pride themselves on not missing any details in their extensive preparation and hate surprises.
• They are reserved problem solvers and information aggregators, and are hypersensitive to reciprocity.
• With them, it's vital to be prepared, use clear data to drive your reason, don't ad-lib, use data comparisons to disagree and focus on the facts, warn them of issues early, and avoid surprises.
• Silence to them is an opportunity to think. Apologies have little value to them. They respond well to labels, but not to calibrated questions or closed-ended questions with a "yes" answer.
• There are three main styles of negotiation: Accommodators, Assertives, and Analysts.
• Accommodators value relationships and are willing to sacrifice their own goals for the sake of preserving relationships.
• Assertives value time as money and are willing to walk away from a deal if it is taking too long.
• Analysts value preparation and are willing to take as much time as necessary to get the best deal.
• Each style has its own strengths and weaknesses, and it is important to understand your own style as well as the style of your counterpart.
• The "I am normal" paradox is the belief that others see the world in the same way you do. This can lead to projecting your own style onto others and not understanding their perspective.
• Negotiations are not always rational and emotionless. Experienced negotiators may use extreme anchors or other tactics to gain an advantage.
• Being prepared and understanding your counterpart's style is key to handling these tactics and coming out ahead in negotiations.
• The speaker discusses a situation in which he successfully negotiated for funding by being assertive and knowing what he wanted.
• He notes that while it may be difficult for those who are naturally more accommodating to assert themselves, anyone can learn tools to be more effective at it.
• He suggests that real anger can be effective in negotiations, but it must be controlled and directed towards the proposal, not the person.
• He also mentions the use of "strategic umbrage", which is taking offense in a calculated way to wake up your counterpart to the problem.
• He advises against using "why" questions, as they tend to make people defensive, but suggests a different way of using "why" to get your counterpart to defend your position.
• The Ackerman model is an offer-counteroffer method that is an effective system for beating the usual lackluster bargaining dynamic, which has the predictable result of meeting in the middle.
• The systematized and easy-to-remember process has only four steps:
• 1. Set your target price (your goal).
• 2. Set your first offer at 65 percent of your target price.
• 3. Calculate three raises of decreasing increments (to 85, 95, and 100 percent).
• 4. Use lots of empathy and different ways of saying “No” to get the other side to counter before you increase your offer.
• 5. When calculating the final amount, use precise, nonround numbers like, say, $37,893 rather than $38,000. It gives the number credibility and weight.
• 6. On your final number, throw in a nonmonetary item (that they probably don’t want) to show you’re at your limit.
• The genius of this system is that it incorporates the psychological tactics without you needing to think about them.
• The original offer of 65 percent of your target price will set an extreme anchor, a big slap in the face that might bring your counterpart right to their price limit.
• The progressive offer increases to 85, 95, and 100 percent of the target price play on the norm of reciprocity, inspire your counterpart to make a concession, too.
• The diminishing size of the increases convinces your counterpart that he’s squeezing you to the point of breaking.
• The power of nonround numbers is that it works on human nature.
• The Ackerman model is an offer-counteroffer method that is effective for beating the usual lackluster bargaining dynamic, which has the predictable result of meeting in the middle.
• The systematized and easy-to-remember process has only four steps:
• 1. Set your target price (your goal).
• 2. Set your first offer at 65 percent of your target price.
• 3. Calculate three raises of decreasing increments (to 85, 95, and 100 percent).
• 4. Use lots of empathy and different ways of saying “No” to get the other side to counter before you increase your offer.
• 5. When calculating the final amount, use precise, nonround numbers
• 6. On your final number, throw in a nonmonetary item (that they probably don’t want) to show you’re at your limit.
• The genius of this system is that it incorporates the psychological tactics such as reciprocity, extreme anchors, loss aversion, and so on without you needing to think about them.
• When push comes to shove, you’re going to find yourself sitting across the table from a bare-knuckle negotiator. Top negotiators know that conflict is often the path to great deals.
• Identify your counterpart’s negotiating style. Once you know whether they are Accommodator, Assertive, or Analyst, you’ll know the correct way to approach them.
• Prepare, prepare, prepare. When the pressure is on, you don’t rise to the occasion; you fall to your highest level of preparation.
• Get ready to take a punch. Kick-ass negotiators usually lead with an extreme anchor to knock you off your game. If you’re not ready, you’ll flee to your maximum without a fight. So prepare your dodging tactics to avoid getting sucked into the compromise trap.
• Prepare an Ackerman plan. Before you head into the weeds of bargaining, you’ll need a plan of extreme anchor, calibrated questions, and well-defined offers.
• Remember: 65, 85, 95, 100 percent. Decreasing raises and ending on nonround numbers will get your counterpart to believe that he’s squeezing you for all you’re worth when you’re really getting to the number you want.