Tuesday, April 21, 2009

Sales Negotiating Gambits - Use Bracketing Technique during Early Negotiation Stage.

In negotiation, If you're asking for more than you expect to get, how much more than you expect to get should you ask for? The answer is that you should bracket your objective. Your initial proposal should be an equal distance on the other side of your objective as their proposal.

Let me give you a simple example of that. The buyer is offering you $1.60 for your widgets. You can live with $1.70. Bracketing tells you that you should start at $1.80. Then if you end up in the middle, you'll still make your objective. Of course it's not always true that you'll end up in the middle, but that is a good assumption to make if you don't have anything to go on. Assume that you'll end up in the middle, mid-way between the two opening negotiating positions. If you track that, you will be amazed how often it happens—in little things and in big things.

In little things. Your son comes to you and says he needs $20 for a fishing trip he's going to take this weekend. You say, "No way! I'm not going to give you $20. Do you realize that when I was your age I got 50 cents a week allowance, and I had to work for that? I'll give you $10 and not a penny more." Your son says, "I can't do it for $10!"
Now you have established the negotiating range. He's asking for $20. You're willing to pay $10. See how often you end up at $15! In our culture, splitting the difference always seems fair.

In big things. In 1982, Treasury Secretary Donald Regan and Federal Reserve Board Chairman Paul Volcker were negotiating the pay off of a huge international loan with the government of Mexico. Mexico was about to default on an $82-billion dollar loan. Their chief negotiator was Jesus Herzog, their finance minister. In a creative solution, they agreed to contribute huge amounts of petroleum to our strategic petroleum reserve. However, that didn't settle it all. We proposed to the Mexicans that they pay us a $100-million dollar negotiating fee, which was a politically acceptable way for them to pay us accrued interest. When President Lopez Portillo heard what we were asking for, he went ballistic. He said the equivalent of: You tell Ronald Reagan to drop dead. We're not paying the United States a negotiating fee. Not one peso! Nada!

So, here we have the negotiating range established. We're asking for $100 million dollars. They're offering zero. Guess what they ended up paying us? That's right. Fifty million dollars. Often, in little things and in big things, we end up splitting the difference.

Bracketing assumes one thing: that you can get the other side to state his or her position first. If buyers get you to state your position first, they can bracket you so that if you end up splitting the difference, as so often happens, the buyers end up getting what they want. That's an underlying principle of negotiating. Get the other side to state a position first. This is necessary so that you can bracket that proposal.
Don't let the other side trick you into committing first. If the status quo is fine with you, and there is no pressure on you to make a move, be bold enough to say to the other side, "You're the one who approached me. The way things are satisfies me. If you want to do this, you'll have to make a proposal to me."

After your buyer states a position, you can bracket your position on the high side of your objective—it's best to do this with implied flexibility. Your price may be high but when you indicate a willingness to negotiate, the buyer has a tendency to think, "It sounds as though we can get her down from that. Why don't I spend some time and see if I can get her down to a lower price than I'm paying now." It's a good way to get the negotiations started.

Key points to remember
 Bracket a proposal so that if you end up splitting the difference, you still get what you want.
 You can only bracket if you get the buyer to state his or her position first.
 Continue bracketing as you zero in on your objective with concessions.



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