Friday, December 18, 2009

Learning from people who piss you off

In a post a couple of weeks ago ("How not to negotiate"), I mentioned a potential vendor who had pissed me off. As I noted in a later comment on that post, in retrospect I had handled our interaction poorly. I knew the right negotiating tack (as I've used it successfully before) and took the wrong one instead. The right response when asked by a potential vendor what your budget is is to say, as I have on previous occasions,

I prefer not to specify a budget ahead of time, so as not to prejudice your estimate.

Instead, for some reason I took the bait and made a low ball offer. In a post yesterday on her Atlantic blog ("The Naive Negotiator"), Megan McCardle explained the problem with low ball offers:

There is a zone of possible agreement (known to those who study this sort of thing as the ZOPA). You can't negotiate your way out of that zone no matter where you start. Nor does starting from a more aggressive bargaining point always mean that you will do better in the negotiation. It can often mean you do worse, because you poison the process.

My mother used to sell real estate, and you'd see this a lot with stupid buyers, particularly men using newbie agents: they'd submit an unrealistically low bid on the notion that this would force the buyer to bargain down. What it actually did was convince the buyer that it was a waste of time to negotiate with you, and/or make them angry.


Mark Essel said...

This is certainly an excellent post and is applicable to the wondrously wide world of negotiation.

"I prefer not to specify a budget ahead of time, so as not to prejudice your estimate."

Capturing the proper value of a service is essential to fair rewards and quality work. But it's not always an easy thing to nail down.

Maybe you can offer a range of details on the job, the nuances that would make it well worth a client's time/money, versus the bare bones cheapest cost.

Something to keep in the back of mind for my ever distracted value vision. I can't spend enough time thinking and talking about value, it's unique to each person but our world and society needs it to be boiled down to an exchange rate.

Besides the core values that many of us hold dear, there are abstract values. How much value does a value product have? It's total created value? Some fraction of that based on the time and effort to properly market/utilize it?

DaveinHackensack said...

You definitely don't need to be the cheapest to present the most compelling value. One example is the attorney I hired off of Elance for Short Screen and the next subscription-based financial site. His bid was twice my limit, and the highest of any other attorney who responded. But he also had the most relevant experience, and offered to handle a particular contingency, if it came up, for no additional fee.