(This is a repost from Filip’s original blog)
It is two days before Christmas, and I realize that my fridge is empty. I take a trip to the supermarket to get just enough groceries to get me by until Christmas (by which time my girlfriend and her family will feed me).
When I get to the fresh fruit and vegetables section I observe two older women frenetically checking each of the scraps of available red capsicums (or “ peppers” in American English) on display. Each capsicum is picked up, inspected from all angles, squeezed, and then put back into the crate. Eventually both women eye the one capsicum that is clearly the nicest of the bunch. After a bit of a scuffle, one of the women ends up the clear winner. I sense tension and bitterness in the air.
I thought this scenario was a b-e-a-u-t-i-f-u-l analogy of how most of us approach negotiation. Specifically, the story clearly illustrates the process by which we establish our success criteria. This is one of the earliest points where we can identify whether negotiations will go off track – and most of us will take the wrong turn.
Let me explain. Did either woman establish for herself what a desirable, or even acceptable quality capsicum would look like prior to going to the supermarket? E.g.: “This size, this hue, and no more than X number of spots” ? No, instead both women showed up with the intention of getting “the best available deal” (B.A.D.), whatever that deal was.
We think in this manner all the time. How do we decide what is a fair price for a car? Well, most people will estimate what the average price is, treat that as “fair”, and then decide that “success” is getting something that is better than “fair”. Now, replace “car” or (“capsicum”) with anything else, and there is a good chance that we follow exactly the same process.
Note that this way of determining success has nothing to do with what we actually want, and everything to do with wanting to feel good about getting a better deal compared to what others get. For negotiators, knowing what we (or our clients) want is critical. Unfortunately we all suffer from cognitive biases and mental traps that interfere with logic. (Yes, all of us. That means you as well.) The mental trap we are discussing today is called “relative valuation”, and is one of 30 covered in my upcoming book.
It is a simple as that. And this is why buying a business suit at 50% off feels so good, because we are convinced that a bunch of suckers out there paid twice what we paid! So our deal must be good. Of course, it is possible that this particular suit has never been sold at 100% of the list price. And, as soon as we see that same suit advertised at 60% off we suddenly don’t feel very good about our 50% off deal anymore.
Ironically, this is exactly what happened to the two older women. As soon as the women started to walk away from the fresh fruit and vegetables section, a store employee arrived to top up the crate… with new, fresh, luscious capsicums.
Of course, neither woman stopped to appreciate and reflect on the inherent irony, and instead launched straight back into checking each and every new capsicum in search of “the best available deal”.