Negotiations never come down to price

In courses we frequently get questions along the lines of “What do you do in negotiations where it just comes down to price?”

The answer is that negotiations never come down to price.

Today’s blog is available at INSEAD Knowledge.

Ask… then ask again!

The real world is very complex, and yet physicists can reduce complex interactions between objects into simple diagrams and formulas. Similarly, human interaction is tremendously complex – and in this domain it is the negotiator who will reduce what goes on into almost trivial simplicity. But don’t be fooled; these insights are still very powerful!

Let me illustrate. In the last few weeks I have had three very similar conversations. And while these have involved more complexity than I will capture here, I can actually summarise the key parts of each dialogue in just a few sentences.

See if you can spot the pattern (which I’ve hopefully made abundantly obvious!)

Dialogue 1:
Obstacle: “You can’t return the product for cash. You can only exchange it.”
Negotiator: “Really?”
Obstacle: “Yes.”
Negotiator: “Really?”
Obstacle: “Ok, ok, you can get your money back.”

Dialogue 2:
Obstacle: “We will will allocate just over half the funds you expected.”
Negotiator: “Really?”
Obstacle: “Yes.”
Negotiator: “Really?”
Obstacle: “Ok, you’ll get all the funds you expected.”

Dialogue 3:
Obstacle: “I’m sorry, but the price for our services is now three times higher than what you paid last year.”
Negotiator: “Really?”
Obstacle: “Yes.”
Negotiator: “Really?”
Obstacle: “Yes.”
Negotiator: “Really?”
Obstacle: “Ok, you can continue paying what you paid last year.”

I have of course cut out all the irrelevant noise. What is left is the following – a challenge. Not in a confrontational way. Not a counter proposal. Not even articulated as a specific question. Merely an indication that I’m not quite ready to accept what the other party is proposing. And in each of the scenarios this approach gave me exactly what I wanted.

There is a common saying in negotiations circles that goes like this: “if you don’t ask the answer is always no”. Based on these three mini-dialogues I would like to add: “…and if the answer is no – ask again!”

Removing the need for negotiation

“You pay $150 dolla!!”
“No, I’m not paying anything!”
“Your fault, you pay $150 dolla!”
“No, it was your fault. I’m not paying anything!”

I move over to the curb as my friend and an enraged taxi driver continue their dialogue in the middle of the street. Cars on either side are incessantly using their car horns to signal their frustration with the gridlock. Some try to slowly squeeze past in the small gap that is not taken up by the taxis. Meanwhile the line of cars is rapidly growing in length.

“You open door, you pay me $150 dolla!”
“Forget it. You’re the one who overtook us!

As my friend had exited our taxi, another taxi had overtaken us, resulting in a small collision. While our taxi was scratch free (well, no additional scratches from the collision), the side mirror assembly of the other car was now in pieces on the ground.

“You pay me $150 dolla!”
“Hey, there is no way that mirror costs $150 dollars!”

This move was a mistake. By engaging in the conversation about cost, my friend could be perceived as accepting responsibility for the accident and now the question is reduced to “how much will he pay”. The taxi driver quickly picked up on this.

“Ok, you pay me $120 dolla!”

How are they negotiating now? Yes, old-style bargaining over money. This battle of attrition continued for about 10 minutes. So please picture 10 minutes of standing in the middle of the road, emotions running high, and with cars passing within centimetres, in the dusty, hot and humid air of South East Asia.

Eventually my friend turns silent, disengages from the dialogue, walks up to the damaged taxi, leans forward, and picks up the pieces of the side mirror. While he slowly inspects the mirror, the taxi driver continues their negotiation:

“70 dolla. You pay me 70 dolla!”

And then we all hear a *CLICK*. Was that… Could it be… Yes, as I look over I see that my friend have successfully put the side-mirror back together.

“But it is not working. You pay me $70 dolla!”
“How do you know it’s not working? Try it!”

The taxi driver reluctantly tries the electric mirror control. And voila, it’s all working and no visible scratches!

What begun as a clumsy bargaining process was resolved using masterful negotiation. My friend had snapped out of the traditional “I’m right and you’re wrong” or “I want XYZ from you” mentality, and instead removed the need to have a negotiation altogether.

In our book we named this technique preventative options – options (or solutions) that allow us to prevent the need to have particularly difficult negotiations. While our example here was quite trivial, this technique becomes a very powerful option for values-based negotiations where parties will never change their mind or accept being “wrong” (e.g. on abortion, religion, global warming, gun control, etc).